Privatization

Inside the offices of the Heritage Foundation–the non­profit policy advocate for the Reagan Administration, a handful of zealots are in constant touch with the Office of Management and Budget (OMB). Their mission: privatize a large array of governmental services and assets. The Heritage list was reflected in the recent report of the President’s Commission on Privatization whose official adviser was none other than Stuart M. Butler of the Heritage Foundation. The Commission recommended to Mr. Reagan that all or part of the following be privatized–that is sold off to private business or serviced by private contractors:

Low-Income Housing (or what is left of it under Reagan), housing finance, federal loan programs, Postal Service, Air Traffic Control, prisons, military commissaries, Amtrak, the Naval Petroleum Reserves, Medicare, and urban mass transit.

The privatizers left out the federal lands and federal dams, knowing that selling off one third of America and less expensive electricity would cause an instant public furor. But their list is ignoble enough to warrant some observations about their claims that privatization would be more efficient and provide Americans with more choice.

First, there is ample experience with privatization. One can start with the privatizing of the manufacture of military weapons, aircraft and ships. Only a joker can assert that this has been efficient. The cost over-runs of the military contracting companies have set world records. The long delayed B-1 bomber now comes in at $2.8 billion per plane–over ten times what it was originally expected to cost and still it is full of bugs.

At the municipal level, privatizing garbage collection and meter collections have provided some of the worst excesses of corruption and bribery. Local and state government procurement and construction scandals have kept many a prosecutor busy with grand juries and, yet, these laws enforcers say they are only scratching the surface.

The Postal Service offers a presort discount for commercial

mailers. There is a thriving private presort industry which is being given an extra $430 million a year as an outright subsidy above and beyond the amount that presorting saves the Postal Service.

This presort industry is now a powerful lobby preserving and extending a subsidy that is indirectly paid by postal users such as residential first class mailers. Ending this subsidy would easily restore the closing of post offices for half a day (estimated saving-$20 million a year) and the stopping of Sunday pickup and sorting (estimated savings of about $50 million a year.)

One of the bizarre recommendations of the Presidential Commission was the private operation of prisons, including maximum security facilities. These private prison corporations would make the profits, but the government would still incur any liability for the misoperation of these penitentiaries. Just think of the problems which would arise when massive coercion starts mixing with bottom line-trade secrecy corporatism.

With oil prices near a ten year low, the Commission urges the “immediate” selling of the federal government’s naval petroleum reserves in California and Wyoming. These wells were set aside for national security purposes, not for the further enrichment of Exxon or Mobile Oil.

In an incisive critique of the privatization ideologues, Professor Paul Starr of Princeton University points out the erosion of services, (where profits cannot be maximized), the loss of accountability and the removal of essential services that formerly were considered a Public service. If you think making government accountable and legislators responsive is difficult, try making the privatizers heed you when they are once removed and have their campaign contributions and other lobbying grips on their governmental patrons to pay them even more.

Copies of the Starr Report may be obtained for $3.00 from the Economic Policy Institute, 1730 Rhode Island Avenue, N.W., Washington, D.C., 20036

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