econintersect .com

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 08 June 2017

Here We Go Again: Another Privatization Scam

by Rodger Malcolm Mitchell,

We have discussed the privatization scam many times before. It is the scam in which traditionally government-owned-and-operated functions are turned over to rich guys in the private sector.

Please share this article - Go to very top of page, right hand side for social media buttons.

One excuse for privatization is the religion that the private sector always is more efficient, honest, and responsive to the public, than is the federal government. No evidence for this exists, but it is widely believed by people who don’t understand one simple reality:

While the motive of a federal government agency is to provide a service to the public, the motive of a business is to provide a profit to the owners.

It is true that there are many efficient, honest, responsive businesses, and many that are not (Hello banks and other businesses that created the Great Recession). The same is true of government agencies - neither more nor less true.

Image result for thumb on the scalee.

However, the thumb on the scale is the profit motive, which inexorably tilts the private effort toward cutting quality and service, while increasing costs.

Let’s face it: If private businesses were so efficient, honest, and responsive, we wouldn’t see so many bankruptcies and so many businessmen being fined for their misdeeds.

(Does multiple bankruptcies and being fined for misdeeds sound like any businessman you know?)

Another excuse for privatization is the private sector’s willingness to take on projects a government can’t afford. This, however, applies only to monetarily non-sovereign state and local governments, not to the Monetarily Sovereign federal government, which never can run short of its own sovereign currency and can afford anything.

And, if a state or local government can’t afford a project, the result of privatization either is greater efficiency (which rarely happens) or a combination of service reductions and price increases (which almost always happens).

Thus, privatization of state and local government projects generally is a fast road to the public paying more to receive less.

By contrast, privatization of federal projects is the fast road to large profits for the already rich “in-crowd" of campaign contributors.

Here are some excerpts from an article that appeared in the 6/5/17 LA Times:

President Trump announces plan embracing privatization of air traffic control system

President Trump will push for the separation of air traffic control operations from the Federal Aviation Administration.

“We’re really moving into the modern decade of technology in air traffic control. It’s a system where everyone benefits from this," White House economic adviser Gary Cohn said in a conference call with reporters.

There are about 50,000 airline and other aircraft flights a day in the United States. Both sides of the privatization debate say the system is one of the most complex and safest in the world.

You may wonder, “Why privatize a system that is one of the most complex and safest in the world."

U.S. airlines have been campaigning for more than two decades to separate air traffic control operations from the FAA.

That effort picked up steam last year when the union that represents air traffic controllers agreed to support a proposal to spin off air traffic operations into a private, nonprofit corporation in exchange for guarantees that controllers would retain their benefits, salaries and union representation.

The federal government could give those guarantees without privatizing the system.

Airlines have been lobbying vigorously for the change, saying the FAA’s NextGen program to modernize the air traffic system is taking too long and has produced too few benefits.

The changes would involve moving from the current system based on radar and voice communications to one based on satellite navigation and digital communications.

The federal government could pay for those changes far more easily than any private operator could.

Airlines and the controllers union say that the FAA’s effort to modernize the air traffic system has been slowed down by the agency’s dependence on inconsistent funding from Congress and occasional government shutdowns and controller furloughs.

As a result, the FAA has had difficulty making long-term commitments with contractors.

We have a military, funded by the federal government. The military continuously upgrades its systems. The military makes long-term commitments with contractors. Why can’t the FAA do what the military does?

Privatization would not solve the funding problem.

Union officials have complained that the FAA has been unable to resolve chronic controller understaffing at some of the nation’s busiest facilities and pointed to the modernization effort’s slow progress.

What would a private company do to “resolve chronic understaffing." Same situation as above. Privatization would not solve the real problem: Funding.

But FAA Administrator Michael Huerta has said the agency has made progress during the past decade in updating its computers and other equipment in order to move from a radar-based to a satellite-based control system.

Huh? If the agency has “made progress," why hasn’t it made more progress? Funding?

Democrats have largely opposed the changes, warning that the proposed board overseeing the estimated 300 air traffic facilities and about 30,000 employees would be dominated by airline interests.

Hmmm . . . a board dominated by the businesses it oversees. What could possibly go wrong with that? It would be akin to having a bunch of anti-regulation people run the SEC, the Treasury Department, and the EPA.

Oops, President Trump already did that. Anti-regulation is a Trump pattern, as you can see by examining his cabinet appointments.

The oft-bankrupt creator of the notorious Trump University con and the Trump Foundation scam has good reason to despise business regulation. Allowing the airlines to dominate the FAA would be in line with his policies.

They have also pointed to the unprecedented safety under the current system and noted repeated computer system failures in recent years by U.S. airlines, questioning whether they are ready to handle complex technology modernizations.

No wonder the airlines oppose regulation. They themselves can’t handle the change. If they dominate the board, they wouldn’t have to spend so much on “complex technology modernizations."

Business aircraft operators, private pilots and nonhub airports have also expressed concerns they may need to pay more and get less service under a private corporation even though airlines have promised that won’t happen.

Would you trust the airlines’ promises, especially if they are the ones who will run the FAA?

In general, the privatizing scam works like this:

  1. Skim money from a federal agency.

  2. Act “shocked, shocked" that the agency can’t do its job.

  3. Determine that the “solution" is to privatize.

  4. Turn over the operation to a company owned by a big political donor.

  5. Watch as the cost goes up, the service goes down, and the donor gets rich.

Consider a parallel situation, airport security:

The TSA said it has found no difference in performance between federal workers and private contractors.

What would really help long lines is if Congress stopped siphoning off money from the TSA, said Christopher Bidwell, vice president of security for Airports Council International North America, an advocacy group for airports.

Sounds familiar? Congress underfunds, then says the solution is not money but privatization.

Because TSA is underfunded, basically," Bidwell said, “the void has been filled on a voluntary and temporary basis by airports and airlines as well."

Every passenger pays an $11.20 round-trip security fee. Bidwell said since 2014, Congress has been redirecting a third of that money, which adds up to over a billion dollars a year. And since 2013, TSA has laid off around 10 percent of its staff.

Bidwell said there just aren’t enough workers, public or private. Until that changes he said, many long lines await.

Congress has no financial need to take dollars from TSA. The federal government never can run short of its own sovereign currency.

Congress underfunds in an attempt to make TSA fail, then blame the failure on government - and then privatize as a phony solution to the underfunding.

This is the same privatization scam Trump wishes to perpetrate.

Unfortunately, we also must deal with the Libertarians (aka the Anarchists) who believe any government is bad government, so will go along with any plan, no matter how inept, that eliminates government.

For instance:

Should Progressives Call for Privatizing Parts of Government?

By Rob Kall

We need to privatize government to protect ourselves from Trump-appointed foxes in the henhouse.

There’s the irony - the belief that privatization - i.e. appointing rich private donors to get paid for government work somehow protects us against the henhouse foxes.

That’s usually something that conservative and corporations want, but now, we have a government that has been taken over by, despoiled by and infected by a psychopathic narcissist who allows decisions to be made by an extreme right wing bigot, Steve Bannon.

So instead, we are to be taken over by an extreme right-wing corporate bigot?

So the way that Americans need to protect themselves is to take a bottom up approach to privatizing government. Not privatize it so it is run by big corporations, as Republicans and corporatist Democrats routinely do, but privatize it so it is run by groups of responsible, respected individuals who are accountable to people.

They could even be elected in privately held but open elections.

Hmmm . . . now let me think: “Elect responsible individuals accountable to the people." Isn’t this what’s called “government“?

We need to replace the EPA since it is no longer a trusted organization/institution. We need to replace health care organizations. We need to replace the Justice Department.

Hmmm, again. Is this something like the notorious “Repeal and Replace" idiocy promoted by the Republicans, who had great plans for “Repeal," but after seven years, still have no idea how to “Replace"?

I wouldn’t be surprised, if these efforts take root, that the government agencies that we are defending ourselves us by privatizing, would go after the new privatized entities, accusing them of horrific crimes.

I’m not sure how that works, Mr. Kall. When the government decides to privatize an agency, they no longer exist.

So who exactly would “go after the new, privatized entities," the government that made the decision to privatize, or the agency that no longer exists?

Bottom line: Federal privatization is a scam when done at the behest of a crooked President, or an exercise in ignorance if done by the Libertarians.

Either way, it’s a bad idea.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical Opinion Post Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.

Econintersect Opinion

Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government

 navigate econintersect .com


Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2018 Econintersect LLC - all rights reserved