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Thread: How Privatization Loots Taxpayers

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    Cat-tastic Babba's Avatar
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    How Privatization Loots Taxpayers

    It's always seemed like common sense to me that in the long run privatizing government services actually costs more. We are too often penny wise and pound foolish.

    A new report from In the Public Interest (ITPI) highlights some of the horror stories that happen when local and state governments “outsource” or “privatize” public functions to private companies, and offers recommendations to prevent similar disasters.
    Ignored is the public cost to these “savings” that are not included in the privatization considerations. Because the public employees were laid off, unemployment assistance is paid by the taxpayers, houses are foreclosed, local businesses and landlords lose the business of these employees. Because the replacement employees are paid low wages, they likely qualify for food stamps, Medicaid, etc. – paid by the taxpayers. These low-wage employees can’t afford to buy houses or pay rent, can’t afford to shop at local retailers, etc. so the local economy is hit. The local tax base is reduced.So the community actually does not benefit from “lower costs” from privatization.

    ?Horror Stories? Show How Privatization Loots Taxpayers


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    Senior Member Raoul_Duke's Avatar
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    You're right. Private companies working for the government have no reason to limit costs because the government has no reason to limit costs. What this is an argument for is a reduction of what the government actually is responsible for doing. THAT is the only way the taxpayer isn't "looted."
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    Cat-tastic Babba's Avatar
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    Quote Originally Posted by Raoul_Duke View Post
    You're right. Private companies working for the government have no reason to limit costs because the government has no reason to limit costs. What this is an argument for is a reduction of what the government actually is responsible for doing. THAT is the only way the taxpayer isn't "looted."
    I certainly do not agree with this statement but even if I did, private companies are more and more passing labor costs onto the government because of low wages.

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    Scucca Æthelfrith's Avatar
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    Quote Originally Posted by Babba View Post
    We've had some horror stories here. Royal Mail sold off on the cheap. BT (and other Thatcher offerings) also sold off cheap, with the right wing politicians involved then getting cushy numbers as directors. However, contracting out has been the worse. The NHS finding "private sector savings" with cleaning ensured boom time for super bugs
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    Veteran Member bajisima's Avatar
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    Quote Originally Posted by Babba View Post
    I certainly do not agree with this statement but even if I did, private companies are more and more passing labor costs onto the government because of low wages.
    I think the biggest issue is the people. Average taxpayers feel much better seeing a company paying low wages and needing govt assistance than keeping the govt contracts. I am not sure why but they hate taxes and refuse to pay public employees decent salaries and retirements yet they don't care if these things are privatized and the workers get paid so little they need assistance. Its like they feel its two different wells they are drawing from when its the same. However the bulk of the blame goes to the government because they allowed this to happen. They felt the pressure from the taxpayers and outsourced the work. I think had they stayed the path private companies might have felt the pressure to up salaries and benefits as well. Now if they keep privatizing everyone makes less.
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    King Obama is a traitor! michaelr's Avatar
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    Quote Originally Posted by Raoul_Duke View Post
    You're right. Private companies working for the government have no reason to limit costs because the government has no reason to limit costs. What this is an argument for is a reduction of what the government actually is responsible for doing. THAT is the only way the taxpayer isn't "looted."
    Privatization isn't what it used to be. If a city can preform a service for X amount, then privatization has to either preform for said amount or more. This always leads to higher costs and/or, usually and, less services.

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    Cat-tastic Babba's Avatar
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    Quote Originally Posted by bajisima View Post
    I think the biggest issue is the people. Average taxpayers feel much better seeing a company paying low wages and needing govt assistance than keeping the govt contracts. I am not sure why but they hate taxes and refuse to pay public employees decent salaries and retirements yet they don't care if these things are privatized and the workers get paid so little they need assistance. Its like they feel its two different wells they are drawing from when its the same. However the bulk of the blame goes to the government because they allowed this to happen. They felt the pressure from the taxpayers and outsourced the work. I think had they stayed the path private companies might have felt the pressure to up salaries and benefits as well. Now if they keep privatizing everyone makes less.
    The demonization of government and government workers has a lot to do with taxpayers cognitive dissonance on this.
    Thanks from Tom Joad, Red Eft, labrea and 1 others

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    Senior Member Raoul_Duke's Avatar
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    Quote Originally Posted by michaelr View Post
    Privatization isn't what it used to be. If a city can preform a service for X amount, then privatization has to either preform for said amount or more. This always leads to higher costs and/or, usually and, less services.
    Lets face it - what this is is an attempt by the government to get out from under the over generous retirement health care and unionization costs of the government employment system. Yes, it is likely "more expensive" on a current cost basis. But if you include the onerous "legacy" costs associated with keeping these services "in house" it is most likely a screaming bargain.

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    Veteran Member bajisima's Avatar
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    Quote Originally Posted by Babba View Post
    The demonization of government and government workers has a lot to do with taxpayers cognitive dissonance on this.
    It is what they see Babba. I have been in this very situation and its all whats happened in their lives that causes this. Public employees get COLAs, raises and what not every year so they have had an upward curve over the decades. So it isn't uncommon to see a police officer with 25 years making 100K a year with overtime and good benefits. However private companies salaries have gone down and people don't get raises every year so they fall behind. So their workers make less. They feel cheated because that police officers salary comes from their taxes. It then becomes resentment and then it turns into people wanting to privatize all government functions. There was an article on CNBC last year that studied salaries and COLAs over the last 4 decades. It seems that most public employees today were in line while private employment had fallen dramatically. They said that the average American wage should be $90K a year for it to be in line. We are currently less than half of that.
    Thanks from labrea

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    Veteran Member bajisima's Avatar
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    Quote Originally Posted by Raoul_Duke View Post
    Lets face it - what this is is an attempt by the government to get out from under the over generous retirement health care and unionization costs of the government employment system. Yes, it is likely "more expensive" on a current cost basis. But if you include the onerous "legacy" costs associated with keeping these services "in house" it is most likely a screaming bargain.
    That's only because private corporations have done away with pensions and legacy costs. Now you can work 40 years and walk away, company doesn't pay anything. They have shirked their responsibility.
    Thanks from Babba and labrea

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