Privatization of government services is nothing but a boondoggle for political cronies

I was pleased to read that 6 residents of Cincinnati are challenging the City Council’s plan to privatize parking. They want to put the plan on the ballot and let voters decide.

The City Council is giving the typical reason for outsourcing control of what amounts to about 11% of the parking spots in Cincinnati: they say they need the pre-payment of $92 million to close a budget gap and save 344 jobs.   That’s obviously a load of hooey. What will the city do next time it needs to balance a budget? Instead of keeping a steady stream of income from a community asset, the City Council is taking a one-time payment (plus an additional paltry $3 million a year for 30 years). It’s very short-term thinking.

The Port of Greater Cincinnati Development Authority is paying the money and will then contract with private operators.  The Authority and the private operators would not be involved if they couldn’t make a profit. Why can’t the city continue to operate the parking lots and spaces and make the profit itself? It won’t solve Cincinnati’s fiscal dilemma, but nor will selling off money-making assets.

Cincinnati faces the typical problems of most cities: People work there, but live and pay most of their taxes to the surrounding suburbs. Because Cincinnati is the center of the metropolitan area, it has virtually all of the public institutions such as universities and hospitals, all non-profits exempt from paying property taxes. In short, the tax base is too narrow and unfairly made narrower by the unwillingness of suburbanites to contribute to the municipalities that provide them with jobs, entertainment, tertiary health care and institutions of higher learning. Fixing the basic tax inequities would provide a permanent solution. Instead, the City Council wants to give away the store—probably to political cronies.

The idea of privatizing standard and long-time government functions such as parking, prisons, highways and schools is nothing more than an elaborate scheme to transfer wealth from the many to the few.  Just consider the money flow and you’ll see that I’m right:

  • Instead of the government making the profit, the owners of the privatized companies do. The few take the profit from the many.
  • The typical company providing privatized services is non-unionized with most employees making far less money than the government workers who previously did the jobs.  Executives in government services typically make far less than their counterparts on the outside. Again, the few take the profit from the many.

One of the most repeated myths in the marketplace of ideas is that the private sector always does it better than the public sector. All evidence indicates that it certainly isn’t true when it comes to prisons, the privatization of which has led to many scandals.

If we compare like populations, we see that privatization of schools hasn’t worked either.  Comparing private schools to public schools proves nothing, since the population of private schools is so much wealthier and well-connected. We have to compare public schools to their replacement in public school areas—the charter school.   Virtually all studies show that the charter school movement has yielded disappointing results in student performance in school and on standardized tests (which don’t test all skills, but do test a lot of skills such as reading and math that are needed to get through life and hold down a job).  But right-wing politicians like charter schools, because charter school teachers typically don’t have to belong to the union.  The teachers make less (and thereby put downward pressure on the pay of other teachers and job-holders) and the charter school operators make more.

What’s funny is that the way to fix the flaws that critics find in public institutions such as schools and prisons is more money. More money for more teachers, better books, labs and computers. More money for more guards and more education programs for prisoners. But the profit reaped by the owners of companies that run outsourced government services results in society having less money to throw at the problems.

What the 20th century should have taught us is that mixed economies work best. There are lots of societal functions for which private businesses are in a position to deliver the best mix of price and benefits. But the services that government has run for ever, or at least since the 18th and 19th centuries, seem to have worked pretty well. At least they did until the
Reaganites and their even more conservative political descendents decided to starve government by lowering taxes.




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