The Privatization Scam: Five Government Outsourcing Horror Stories

[eridani]

http://www.nationofchange.org/privatization-scam-five-government-outsourcing-horror-stories-1400594123

So how has this wave of privatization worked out? Has privatization saved taxpayers money and improved services to citizens? Simple answer: of course not. If a company can make a profit doing something the government had been doing, it means that we’re losing out one way or another. It’s simple math. And the result of falling for the privatization scam is that taxpayers have been fleeced, services to citizens have been cut way back and communities have been made poorer. But the companies that convinced governments to hand over public functions have gotten rich off of the deal. How is this a surprise?

Here are five privatization horror stories, where government outsourcing has gone terribly wrong. (Or maybe you’d say it has gone terribly right if you are one of the companies getting the taxpayer dollars.)

1. Chicago Parking Meters

The mother of all privatization horror stories is what happened with Chicago’s parking meters. In 2008 the city “financialized” its parking meter revenue stream. It leased the rights to collect from parking meters to a consortium led by Wall Street bank Morgan Stanley. The lease is for 75 years.

Right away parking-meter rates went up fourfold and meters stopped working. The city’s residents were unhappy, but there was nothing they could do about it.

But wait, it gets worse. Unsurprisingly, it turns out that the big Wall Street bank was more interested in making money than in giving Chicago the best deal it could. An inspector general looked into the deal and found that the city was shortchanged by at least $974 million. But a 2010 Forbes story says the Morgan Stanley consortium may realize a profit of $9.58 billion after paying Chicago only $1.15 billion.

To top it off, the city not only gave up 75 years of revenue for not nearly enough up-front cash, it had signed a contract prohibiting the city from interfering with Morgan Stanley’s ability to profit from the deal. This means the city can’t build parking structures where they are needed and can’t even give out disabled parking permits. The city can’t even close streets to have street fairs or festivals without paying Morgan Stanley for lost meter profits.

[doxydad]

1. And now they want..

...to privatize the USPS...even though not one cent comes from the government. Screw Darryl Issa.

[malaise]

2. It should be called what it is - the 'for profit' looting of public assets

by criminal politicians and their cronies.

[CrispyQ]

7. Exactly.

Americans have lost sight of The Commons. We let a bunch of mealy mouthed politicians convince us that private industry can do it better & cheaper. Well they can certainly do it cheaper. Once it's privatized, The People have lost control. At least if you don't like how government is doing something you can vote them out, but unless you have shares of stock, you have no power over the BOD.

I'm waiting for this supreme court to give the corpos voting rights. One vote per share, do you think?

[malaise]

11. Yep the notion of the social good

is disappearing like our eroded beaches.

[raouldukelives]

14. And once you do have stock, you are complicit.

Probably why people don't like stories about the extreme destruction and loss of liberty corporations are lavishing upon us. Once you hear something like that, once one is no longer ignorant of the facts, one can't claim to be anything but an active supporter when they choose to enrich themselves at the expense of us all.

[SamKnause]

3. No sane person would have agreed to any of these "deals".

No honest person would have agreed to any of these "deals".

No reputable person would have agreed to any of these "deals".

No person representing the good of the people would have agreed to any of these "deals".

No informed person would have agreed to any of these "deals".

The corrupt politicians that are selling this country piece by piece should be imprisoned for life, all of their assets should be seized, the contracts should be nullified, and legislation should make these practices ILLEGAL !!!!

[ctsnowman]

4. X 1000

[bullwinkle428]

5. I'm sure Rahm Emanuel was "SHOCKED!!1!" when he was told of all

of the ramifications of that parking meter deal!

[ieoeja]

23. Daley privatized Chicago parking meters.

Surprisingly, Rahm has actually been pushing back against them. He's fought them in court a couple times.

[gtar100]

6. Wow. These stories just turn my stomach.

It wouldn't be so bad if just those who favor privatization got to receive "the benefit" of their schemes, but these are scams and they are affecting everyone and in particular millions who know better than to trust a private corporation over a municipal government on issues that are common concerns. We have enough issues dealing with government bureaucracy but a private corporation means the public is shut out entirely. How is that ever a good thing when it comes to dealing with community issues?

And seriously... 99 year leases with no-compete clauses? Sick, sick, sick!! I pray for justice because other than boycotting where I can, I feel there's little else I can do. The greed and callousness of these people is simply nauseating. May they reap the full return on what they have done to this country and this world.

[CrispyQ]

8. We Don't Have a Democracy, We Have an Auction

A bumper sticker that I have that I saw once.

[ProSense]

9. In New Jersey:

Prisons, Privatization, Patronage

By PAUL KRUGMAN

Over the past few days, The New York Times has published several terrifying reports about New Jersey’s system of halfway houses — privately run adjuncts to the regular system of prisons. The series is a model of investigative reporting, which everyone should read. But it should also be seen in context. The horrors described are part of a broader pattern in which essential functions of government are being both privatized and degraded.

First of all, about those halfway houses: In 2010, Chris Christie, the state’s governor — who has close personal ties to Community Education Centers, the largest operator of these facilities, and who once worked as a lobbyist for the firm — described the company’s operations as “representing the very best of the human spirit.” But The Times’s reports instead portray something closer to hell on earth — an understaffed, poorly run system, with a demoralized work force, from which the most dangerous individuals often escape to wreak havoc, while relatively mild offenders face terror and abuse at the hands of other inmates.

It’s a terrible story. But, as I said, you really need to see it in the broader context of a nationwide drive on the part of America’s right to privatize government functions, very much including the operation of prisons. What’s behind this drive?

You might be tempted to say that it reflects conservative belief in the magic of the marketplace, in the superiority of free-market competition over government planning....But if you think about it even for a minute, you realize that the one thing the companies that make up the prison-industrial complex — companies like Community Education or the private-prison giant Corrections Corporation of America — are definitely not doing is competing in a free market. They are, instead, living off government contracts. There isn’t any market here, and there is, therefore, no reason to expect any magical gains in efficiency.

- more -

http://www.nytimes.com/2012/06/22/opinion/krugman-prisons-privatization-patronage.html

Flashback...

February 2011:

Democrats fight Gov. Christie's plan to privatize N.J. government functions

By Matt Friedman/Statehouse Bureau

TRENTON — Democrats are pushing back against Gov. Chris Christie’s plan to privatize some state government functions by calling for a change in the state constitution to put a short leash on agencies that want to hire private firms.

<...>

A Christie administration task force last year recommended privatizing functions like health care for prison inmates, toll collections, state parks, highway rest stops and career centers for the unemployed. The task force estimated the state government could save $210 million through the changes.

The New Jersey Turnpike Authority recently put out a request for proposals that calls for toll collectors to make $12 per hour — less than half what experienced employees now make.

Democrats said they were trying to avoid abuse and waste that occurred in the 1990s with the privatization of vehicle inspections and the installation of the E-ZPass toll system.

- more -

http://www.nj.com/news/index.ssf/2011/02/democrats_fight_gov_christie_p.html

July 2012 editorial:

Privatization no panacea for government

A task force assembled by Gov. Christie recently reported that New Jersey’s government could save a bundle simply by turning over many of its core functions — from motor-vehicle services to school facilities — to the private sector. But thanks partly to another governor named Christie, New Jerseyans need not wait in suspense for the results of this government innovation. That’s because the state already has some disastrous and relatively recent experience with privatization — much of it in the areas singled out by the task force.

Christie deserves credit for cutting the state budget and looking for more ways to do so. And so far this is only a report (though one ordered up and roundly praised by the governor himself). But given the state’s history, some of the task force’s ideas weren’t even worth examining, let alone pursuing any further.

In 1998, Gov. Christie Whitman’s outsourcing of motor-vehicle inspections to a private company led to epic lines and widespread outrage. It later emerged that the sweetheart contract had gone to a company associated with avid campaign giving. Whitman’s privatization of motor-vehicle agency offices also contributed to interminable waits, as well as corruption and security breaches. That helped end the Division of Motor Vehicles’ long death spiral and bring about an overhaul that replaced it with today’s Motor Vehicle Commission.

- more -

http://www.philly.com/philly/blogs/inq_ed_board/Privatization_no_panacea_for_government.html

Privatizing the DMV was worse than a disaster. Using Krugman's phrase, it was "closer to hell on earth."

[Romulox]

10. Except Obamacare? It's the privatization scheme that we support, right? nt

[jeff47]

12. Obamacare doesn't require privatization

For example, Vermont.

Obamacare is good inasmuch as it could actually pass. Single-payer could not pass at the national level. Even Sen. Sanders says there were nowhere near enough votes for single-payer to pass.

Also, Obamacare is good because it lays the groundwork for single-payer - the battle is now state-by-state instead of national. And we will do very well in the "blue" states. Successful programs in those states will make it obvious that Republican FUD is FUD, and single-payer will expand until it becomes a national program. Also known as "Exactly what Canada did".

[Romulox]

13. Obamacare is mandated, for-profit insurance. All the rest is excuses.

To say that it was all that was possible (a dubious assertion, to be sure!) doesn't change that.

[jeff47]

15. Good thing you didn't bother reading more than one sentence!

Otherwise reality might get in the way of your righteous anger.

"Obamacare" gives us the framework to get single-payer. Use it. Start pushing your state government to go single-payer or offer a public option.

To say that it was all that was possible (a dubious assertion, to be sure!)

So when Bernie Sanders says there was only 10 votes in the Senate for single-payer, including his, is he lying? Or do you think he's such an idiot that he miss-read a 60-40 win as a 10-90 loss?

[Romulox]

16. It was off topic. The topic of this thread is "privatization", which is what Obamacare represents.

"Obamacare" gives us the framework to get single-payer. Use it. Start pushing your state government to go single-payer or offer a public option.

No real evidence for this exists. At any rate, it's not the topic I was addressing.

[jeff47]

17. Except that Obamacare does not require privatization

Again, reading. Try it!

No real evidence for this exists

Have you alerted the state of Vermont that they do not exist?

At any rate, it's not the topic I was addressing.

Actually, it is the topic you are addressing. The problem is it solves your complaint.

If you want single-payer, get it. By pushing your state to offer it. You're claiming that is off-topic, which demonstrates what you really want to do is complain.

Also, you forgot to indicate if Sanders is a liar or an idiot. Was he lying about that 10-90 loss, or is he so inept he miss-read a 60-40 win?

[Romulox]

18. Obamacare mandates for-profit insurance. Exhorting people to "push to change it" admits that. nt

[jeff47]

19. Obamacare mandates insurance. For-profit is optional.

VT is working on single-payer to handle the mandate.

The majority of the policies sold on Mane's exchange are from a non-profit co-op.

There is nothing in the ACA that mandates profit. The only parts of the ACA dealing with profit are the limits on profit. A limit is not a minimum.

And you still keep forgetting to answer whether you think Sanders was lying or incompetent.

[Romulox]

20. Our gov't's healthcare marketplace (Healthcare.gov) is a clearinghouse for private insurance.

It may not "require" private insurance, but private insurance is integral to Obamacare as implemented.

[jeff47]

21. Private does not require profit.

Remember that Maine example? That non-profit co-op is private. Because it isn't the government.

but private insurance is integral to Obamacare as implemented.

Because single-payer becomes an option in 2018. Start working your state government now.

And it's so odd you forgot to answer if Sanders is lying or incompetent. Again.

[Romulox]

22. OK. It's a clearinghouse for private, FOR-PROFIT insurers (Aetna, Humana, et al.)

This is lame.

[jeff47]

24. Yeah, it really sucks when someone makes you back up your complaints.

Btw:

OK. It's a clearinghouse for private, FOR-PROFIT insurers (Aetna, Humana, et al.)

Remember that private, non-profit co-op in Maine?

Guess what state didn't set up it's own exchange, and thus is using the federal exchange?

And Sanders: Lying or incompetent?

[eridani]

30. Exactly. PLEASE get involved in your state single payer organization

In WA State, the chair of the House health care committee had her aides rewrite our bill to be ACA compliant. And of course Vermont is moving ahead.

[taught_me_patience]

25. Meh... it's easy to pick out a few examples of it not working

There are also other examples where privatization saved a lot of money. You could find many examples of cost overruns in government projects too...

[daleanime]

27. Then where are your examples?

[daleanime]

31. Then I guess its not too easy.....

[daleanime]

32. I'll settle for two.

[daleanime]

26. kick, kick, kick.....

but....food stamp fraud!

[Go Vols]

28. Private prisons are working out well :/

[blm]

29. USS Cole bombing. SecDef Cheney privatized military logistics in 1991. Halliburton/KBR was in charge

of refueling US ships in Yemen port.

Interestingly, no corporate news media picked up on this fact during the 2000 election or during the investigation of the bombing afterwards.