WSJ Blows Up Privatization

Here's something that the link-happy Sykes or the concrete-loving* PaddyMac won't be covering, even though it is from their beloved Wall Street Journal. Namely, that something is privatization of public services doesn't work.

From WSJ:

So the thing to do is give up. Lease those roads and bridges out. Let a private company collect the tolls, widen the lanes, and fill the potholes. They can make it work, and when they do, they will create jobs.

Besides, the private-sector group insisted, if we don't take the money, someone else will. It's a harsh, competitive world out there, and governments all over the world are racing one another to turn their infrastructure into investment opportunities. Americans must act "before private funds are attracted elsewhere."

Just to make sure Americans do the right thing, the pro-privatization worthies further suggested, in the words of a Reuters account, that maybe the coming federal stimulus package "should tie stimulus funds to private capital involvement." Apparently these privatization deals aren't sweet enough to sell themselves.

But there's good reason to be reluctant to privatize. It doesn't take an MBA to figure out that we didn't build our Interstate highways in order to create opportunities for venture capitalists. The purpose was public service.

Transferring them to the private sector, at the very least, complicates this mission. At worst it will effectively close those roads to the part of the population that can't afford the revolutionary tolls that private ownership will surely bring. The cost of, well, just about everything will start to rise as more pieces of the transportation system embrace their for-profit destiny and start charging whatever the desperate commuter will bear. Wear and tear on the remaining public-sector roads will certainly increase as traffic is driven off the tollways.

And even if your governor's heart is set on immediately extracting the long-term value of a highway, privatization isn't the cheapest way to do it. Public borrowing is costly these days, true, but interest rates on municipal bonds are still considerably lower than those borne by corporate debt. Allowing a private rather than a public entity to take over your toll road merely means that your tolls will have to be that much higher to cover their more expensive debt.

Perhaps it's best to go back to the ideological beginning. One of the reasons our roads and bridges are falling apart is public hostility to tax increases -- gasoline taxes in particular. This attitude, in turn, is largely the product of the generalized distrust of government that conservatives have stoked for decades.

I can just see Paddy cringing when he read this.

How About Doing The Job Right?

McIlheran has a column in today's paper in which he extols the supposed panacea of privatization. He must still be feeling giddy from his weekend in Pewaukee, as that he is being rather silly, even for him.

To save you the grief of having to first read it, and then decipher it, and then translate it to English, then wonder what the heck he is trying to say, I will give you some of the lowlights.

Take this part (emphasis mine):

This balance goes to the heart of most complaints about privatization. County Executive Scott Walker has talked about seeing whether the county can provide services while saving some money. Critics say it's all about the jobs.

The question here is which Walker is he talking about. The one that is running now, for an election he promised he wouldn't run for, or the Walker that promised he was against privatization.

Then McIlheran tries this argument (again, emphasis mine):

Critics like to cite the Milwaukee Public Museum as a sign privatization doesn't work, though that story was more about a missing-in-action board of directors. Locally, governments have successfully contracted out or simply shed all sorts of tasks. As in the case of the sewerage district, it's made it easy to change vendors when it suits the public purpose.

He shoots himself in the foot twice here. First, he admits that the board of the private agency running the museum screwed it up. That is not a way to win an argument. Then, he highlights the fact that if one company is dumping sewage in the lake, just switch companies. Sooner or later, I'm sure we'll find one company that will stop dumping sewage in the water. But then there will be extra costs, so your taxes will still go up.

McIlheran shows he doesn't do research, or just ignores the facts if they don't agree with his premise with this ditty (emphasis is no one's but mine):

But even the possibility of privatization lowers costs, says Peoples, because when competition's a possibility, unions have less leverage in bargaining. Tellingly, Milwaukee County finally won concessions on the benefits it was paying courthouse employees only after it threatened to contract out security and maintenance.

The thing that McIlherna fails to tell you is that a) Walker also gave the union a $250 signing bonus to pass the contract, b) this is virtually the same contract that the union offered the county two year prior, and c) the recommendations for the contract came from his 2002 opponent, David Riemer, who Governor Doyle had to send in to help Walker out of the mess of his own making.

Finally, I will leave you with this annoying bit of factual evidence. When former Governor Tommy Thompson decided to privatize Milwaukee County's child welfare program, an independent study (pdf) was done. The results: Public employees had twice the production per dollar than the private agencies.

The big difference is not the cost of the service, it's who gets it. Public servants that are paid sufficiently provide better service. Private agencies cost the same, if not more, but all the money goes to a few executives, and the services suffer.