Does privatizing government services spur economic growth? How do we ensure oversight? And how far is too far? (More)

Last night in Evening Focus we began our faculty debate on privatizing government services. Tonight we conclude that debate. We rejoin our moderator, the BPI Squirrel:

Squirrel@BPI: Good evening, and welcome back to the second part of our faculty debate on privatization here at Blogistan Polytechnic Institute. Once again, our panelists are: Roby NJ, Norbrook, addisnana, DWG, winterbanyan, JimW, and RevGerry.

We found all of the sponge golf balls after last night’s debate, so once again each panelist has one. Again, these are to entertain Pootie the Precious, and while we’re sure they won’t cause any physical injury – does he look injured to you? – please don’t hurl them when you disagree with someone.

We’ll follow the same format tonight: I will ask three questions, and for each I’ll select one panelist for a Response and another panelist for a Rebuttal. The panelists for each response and rebuttal were selected at random. However the list was hung on a clothesline near the hot tub faculty lounge overnight, rather than returned to the bottom of Pootie the Precious’ litter box. I hope you all are as grateful for that as I am.

Our first question tonight:

With such high government deficits, won’t privatization save taxpayers money and spur economic growth?

The Pro-Public Response goes to winterbanyan:

winterbanyan: Mr. Squirrel, I love those ear tufts. Do you have any idea how old a human has to get to compete with you on ear tufts?

Squirrel@BPI: Thank you. I noticed that older humans also have ear tufts. Do you also grow fluffy tails?

winterbanyan: Um, no, but we often feel like we chase them. On the question, privatization may initially seem to save taxpayers money as the lowest bidder wins the contract. Unfortunately, the lowest bidder also performs about as you would expect: since private business needs to make money, if they can’t make it off the contract, they make it by cutting corners. But an even bigger danger comes later: once important tasks have been turned over to private business, the government is no longer able to perform them, through loss of skills and/or equipment. The private business no longer faces competition because the start-up costs would become too great. So then we have the government contracting out services to monopolies who can charge more. Competitive bidding is forgotten and the public fisc becomes a private trough for a handful of businesses.

Thank you for that Response, winterbanyan. And the Rebuttal goes to Roby NJ.

Roby NJ: Is this because of the hat? It’s not a Smug Corporatist Hat anymore. I sold billboard space on it for “Firewalker Adventure Tours.” See, I underlined “Fire walker” and crossed off “Adventure Tours.” It’s now a Wisconsin CheeseHead Progressive Protest Hat! Doesn’t that count for anything?

Squirrel@BPI: You sold ad space on your hat? This is progressive … how?

Roby NJ: Good point. OK. Save taxpayers money and spur economic growth…. Perhaps this is the time to distinguish between good and bad privatization. I can’t defend privatization that’s done for bad reasons, or where flawed assumptions lead to services being contracted out to inept privateers, with little or no oversight. We know there is an awful extreme, but we shouldn’t fall for slippery slope fallacies and assume that privatization can’t be done well. It can also include the sale of government assets and/or auctioning off rights to use a public good for commercial purposes. Governments gain an immediate budget windfall, and are also then off the hook for a money-losing operation. The resulting private operation generates profits, pays income taxes, and has natural market incentives to improve, grow, and expand, generating even more positive economic activity and taxable revenues.

Squirrel@BPI: Thank you for that Rebuttal, Roby. Again, please don’t hurl the sponge golf balls, even if it can’t possibly hurt him, not even the tiniest little bit. We’d like to keep this civil.

Our second question is:

How can we ensure oversight of public services when corporations claim “proprietary secrets” in bidding for and performing government contracts?

For the Pro-Privatization Response, we turn to Roby NJ:

Roby NJ: I’m sorry, were you talking to me? ‘Cause I’m busy making a protest sign. How do you spell Squirrel = Mubarek = Walker?

Squirrel@BPI: It’s spelled I-A-M-A-C-O-R-P-O-R-A-T-E-T-O-O-L.

Roby NJ: T-O-O-L. Got it. Thanks. The question is about transparency and oversight, right? Okay. This may be more of a philosophical argument on ethical reasoning models. Those who insist on explicit transparency into the inner operations of private, competitive businesses are deontologists: formalists who believe that ethics are expressed in the intentions, process, and actions. Businesses are by nature consequentialists: they measure virtue by the final utility. It’s an argument over whether the ends justifies the means – if in the end a business has accomplished the greatest good for the greatest number – or if business operations have to be scrutinized to ensure that no end is accomplished through improper means. Businesses have to comply with all laws, and should operate with high ethical and moral standards, but they also want to protect their unique operational competitive advantages.

Squirrel@BPI: Thank you for that Response, Roby. The Rebuttal goes to JimW, and by the way, does your barber trim those ear tufts? Humans should respect badges of age.

JimW: Thank you, Squirrel, I think. As to transparency in contracting, Congress is considering this issue right now. As Jeannette Franzel of the GAO testified, “DOD accounts for approximately 70 percent of the federal government’s annual contract spending – $367 billion in fiscal year 2010 – and other federal agencies accounted for $168 billion in contract spending. With hundreds of billions in taxpayer dollars spent on government contracts, strong contract oversight is essential.” Other testimony showed unjustified contracting costs as high as 15% of the contract budget. That is ample reason to doubt that respecting corporations claim of “proprietary secrets” in bidding for and performing government contracts would result in anything other than further rewards to contractors at the taxpayers’ expense. When you are talking $33.9 billion (with a B) dollars you are talking real money.

Squirrel@BPI: Thank you for that Rebuttal, JimW. Our final question of the night is:

With so federal, state, and local contracts already in place for private schools (charter firms), regulators (consulting firms), police (security firms), and even prisons, how can we roll back the tide?

The Pro-Public Response goes to RevGerry:

RevGerry: Squirrel, thanks for inviting me to this party. Most excellent guests, and you yourself are very cute with your adorable ear tufts and fluffy tail. But I am so tempted to throw this sponge ball; it looks like all the macadamia nuts are gone.

On the question, the people have been deceived into choosing guardians whose loyalties lie elsewhere. Say we need acorns to live and our government guards and manages our means of survival. If big-money campaigns deceive voters into believing that the best and cheapest acorns come from candy factories, they vote for people loyal to candymakers. Tree farmers become unpopular. Private oak forests become worthless. Officials sell off public forests to candymakers at two cents on the dollar, and create a national candy diet – sweet but not nourishing. To reverse this, the public must come to see the truth. We must grow a United Citizenry to take money out of elections and fire false guardians. We must re-establish honest debate and a fair and honest economic playing field. And we must never again turn over our basic common survival to businesses, whose legal mission can never be to guard our good.

Squirrel@BPI: Thank you for that Response, RevGerry. The final Rebuttal goes to … Roby NJ:

Roby NJ: You know, fine. I get it. I’m sorry about the fur hat thing. My ears were cold. So I have to spend two days defending corporatism and privatization, and get pelted with sponge golf balls and stray nuts. It’s OK. I can take it. Life is good. It’s not like I live in a state where the governor wants to undermine unions and make school teachers the enemy of the public…. Oh wait, I do.


Roll back the tide of privatization? Good luck with that. Maybe the good RevGerry is right, and many privatization decisions are made for political reasons, following an ideology, not an economic logic. Thing is, you can get as political as you want to try to undo it, but winning a couple of elections won’t be enough. You’re going to need facts and a lot of power. And the facts that matter are costs and efficiency. What’s it going to cost to switch back? Show how bringing a public service back into government will be more efficient. Enough more efficient to overcome inertia and costs of changing. And pick your battles. Look at the political climate and be realistic. If a public service has become an entrenched private sector business, government should make and enforce rules to keep it honest and accountable. I’d change your goal from “roll back the tide” to “draw a line and allow privatization only when it’s provably in the public interest.”

Squirrel@BPI: Thank you for that Rebuttal, Roby. And that’s the last word for now, as we’re out of sponge golf balls and out of questions. I’d like to thank all of our panelists for participating in this debate. Please give them a big round of applause.

Thank you all for joining us. Please talk amongst yourselves. I’ll be in the kitchen looking for macadamias.

Good night and good nuts.