Thursday, February 26, 2009

Privatization Myths - Reagan's Mistake

I want to talk about what I feel is the largest misconception regarding the operation of government. That's right, privatization is in large part a myth. Ronald Reagan's disaster of leadership can be summed up in this one word, privatization. Reagan didn't invent it. It's probably been around for centuries, at least that was one story I read. What Reagan did was to move this issue to the front burner, because he felt that government was the problem. He created a commission to study the ways that government could be downsized by turning over jobs to the private sector.

I started preparing public budgets in the 1980s and I vividly remember the time when privatization was the answer to all of the country's ills. I used to fight for a 4 or 5% increase in my budget each year and I would be livid when I was told, you're only getting 3%. How could I make ends meet? As privatization became the rage, I noticed something quite different; now I was told you have to cut your budget 10%. That would be difficult if it happened one year; funny thing though, it kept on happening, year after year after year.

Why do people believe that private business can do it cheaper? We just went through a period when we saw story after story in the Providence Journal about the cost of the privatized work force. Some 650 employees were hired by the State through the private sector. It turns out that the overhead cost was over 100%. We were told that this was standard practice in the industry. Secretaries that could be at work for the state for half the cost were being paid by private entities, while the connected folks took off with millions. At least this story got reported.

When I retired from the State, my exit interview was focused on the costs of privatization and the sham that it is. I outlined my disgust with a system that would not hire any new employee, yet it would pay the private sector $850 thousand for a j0b that should only cost $200 thousand. Contractors being paid to watch over contractors is the way the Republican leadership sees things. In this case that I'm very familiar with, a contractor was paid $45 thousand to supervise the job site. If the state hired the construction engineers that it should have, that person could watch over a dozen construction projects. Hell, they used to! The entire project was bloated with contractor rip-offs. I had a good feel for this as I had just contracted for the building of my own home. My home was 3000 square feet and the contract was close to $200 thousand. This State contract involved a building that was a lot smaller and cost taxpayers $850 thousand.

Remember the $1million dollar lawyer the Department of Environmental Management hired for the conduct of a single case? Tell me that the Public sector can't do this cheaper and I'll call you a fool.

How about "Blackwater", remember them? They just changed their name because of their incompetence in Iraq. Iraq has to be the first outrageously privatized war in history. What do you think about paying a mercenary $500 thousand each year for a job that was formally done by our own military? This is cheaper than paying a soldier? The head of "Blackwater" could not even tell Congress how much money he made, although he said it was over $1 million per year. This compares to the $160 thousand that General Petraeus was making. What about the no-bid contracts in Iraq? You remember; "Halliburton"!

Privatization merely replaces public transparency with a profit culture that is out of our view. It's out of our view until the private sector starts asking for bailouts! Ronald Reagan got it wrong and is partially responsible for today's financial disaster. Privatization as cost savings for government is in large part a myth. If you don't believe me, just google "privatization myths". Government is not the problem, the Reagan sheep are!

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