Reason Foundation Advises Jindal

Apparently, we can save a few million bucks here and there by offering (extremely) short-term contracts to privatize a little bit of government work, which includes work performed by the Louisiana State Police.

Here:

Sen. Jack Donahue, a St. Tammany Parish Republican who chairs the streamlining commission, said he expects a large portion of the panel’s recommendations — due in a report by Dec. 15 — will involve hiring outside contractors to do work now performed by state employees.

Simple idea: Fire the state employees, with their pesky health care coverage and retirement packages, contract out their work to a private company for five years, and save a few bucks. It doesn’t matter if you strip “government” employees of their jobs, health care, and retirement, because, in exchange, you can save a little bit of money by offering the same jobs without real benefits or long-term sustainability (again, we’re talking about five year contracts) to the private sector. Despite what some may argue, “hiring outside contractors,” in this case, means firing existing employees.

No doubt, there are areas in government in need of increased efficiency, but in order to meet those challenges, it will take actual governing.

The Department of Revenue doesn’t like having to answer questions from citizens about taxes and delinquencies. They’d rather taxpayers hire a company to cover that responsibility. The State Police apparently believes they could save money by having another company conduct background checks. Seriously. Does “streamlining” simply mean temporarily allowing private companies to take over what should otherwise be bureaucratic functions? Answering the phone. Searching databases.

Maybe I’m naive, but when I first heard about Jindal’s commission on streamlining government, I thought it was going to address civil service reform, hiring and firing practices, and organizational structuring; those are the real issues we must confront in any attempt to streamline government. I didn’t expect it to advise hiring more call centers and background checkers on the public dime.

But then again, a long-term fix would take serious work, and after all, Jindal’s being advised by the staunchly pro-privatization Reason Foundation, whose spokesperson magically invents statistics to promote their agenda:

“On average you can save 10 to 25 percent through privatization. That’s significant,” said Leonard Gilroy, with the Reason Foundation, a nonprofit public policy organization working with the Jindal administration to find areas for outsourcing.

And here (I encourage you to read the entire entry and then conduct your own Google search):

The Reason Foundation is an American nonprofit think tank founded in 1978 that also publishes Reason magazine. Based in Los Angeles, Reason is self-described as nonpartisan and publishes a statement of values that can best be described as libertarian. Like most think tanks, they are a non-profit, tax-exempt organization that provides papers and studies to support a particular set of values. According to Reason’s web site, these are “the values of individual freedom and choice, limited government, and market-friendly policies.”

Responses

Brian

September 8, 2009

I have one word in response:

Blackwater.

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Owen M. Courrèges

September 8, 2009

First of all, with a looming budget crisis, we need savings now, not later. Secondly, privatization can secure long-term savings if the program is successful and renewed with additional contracts.

I haven’t been pleased with Jindal’s overall ability to reduce the public payroll, frankly (last I heard it had increased considerably). I certainly wouldn’t criticize his efforts to contract out certain functions to alleviate the deficit; he just needs to do more of that and have a more consistent approach to reducing the state budget.

As for the Leonard Gilroy, what’s your evidence that he was making up statitistics? (Aside from a dislike of the Reason Foundation, of course).

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1. Lamar White, Jr
  
  September 8, 2009
  
  Owen, please provide objective, empirical evidence that demonstrates the ways in which “expanded privatization… can provide equivalent services at a cheaper price.”
  
  Please also explain how, if this is the case, large-scale privatization efforts in South and Central America as well as Europe, Africa, and Russia have failed to reduce spending, increase standards of living, and improve government efficiency.
  
  It may sound good on paper, but Friedman economic theory, when it is actually applied, has repeatedly failed.
  
  If you seek true reform and increased efficiency, then you should embrace civil service reform and, in some cases, organizational restructuring, instead of killing jobs (and careers) simply to make small short-term gains that are, by definition, absolutely unsustainable.
  
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Drew Ward

September 8, 2009

The fact is privatization only saves the government money in the short term because private companies agree to fulfill the same services with employees they pay less.

These private companies often have contract employees who are hired only for a set duration. They generally do not receive the same benefits as state employees, often have no health insurance, almost never have retirement or job security, and are paid less that the government employees they are replacing. And, whereas the government employee works for the people and (for some) feels some loyalty to the people who pay their salaries, the privatized employees work for a company and have no vested interest in serving the public beyond the minimum standards required to keep their jobs.

In the end, when these employees are fired because the contract their company has expires, the state still gets to pick up the cost of retraining these people and getting them new jobs. The state gets to pay the unemployment, the welfare, the medicaid, the EBT. And if these employees get sick it’s the state that gets to pay for their uninsured healthcare and when they get old it’s the state that gets to pay to help them live without a retirement.

Basically if Jindall goes ahead with privatization all he is doing is doing exactly what he and his cohorts accuse Obama of — he’s placing a huge burden on their futures because they will eventually have to pay exponentially for these “savings” of today.

Finally if you want to look at true cost savings, simply take a look at the US military. Halliburton now does many of the jobs that soldiers once did like Cooks, Cleaning, Laundry, Sewing, vehicle repair, electronics technician. Now which is a better use of money, paying a Private in the Army 20k a year to cook eggs in Iraq or paying a Halliburton employee 85k a year to cook those same eggs in that same kitchen?

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Owen M. Courrèges

September 8, 2009

Drew,

You’re assuming that private employers contracting with the government never hire W-2 employees, and further assuming that all of their employees are only hired for set durations and never renewed. Neither of those claims are true; it varies from contractor to contractor. Furthermore, an employee who performs well and gains experience will either: 1) get a full-time position when the job terminates; or, 2) receive a steady line of contract work from the private company.

Finally, you assume that the government employees being replaced deserved the compensation that they received. If they can be replaced so easily with workers capable of doing the job who are willing to work for less, that would seem to be pretty hard evidence that they were being overcompensated. In any event, you’ll often find that private contractors have better incentive programs and compensate high performers quite well. They just don’t offer them the classic, cushy government job. In a day and age when public sector salaries are beginning to vastly outpace private sector salaries, I’d say it’s high time to start trimming the fat.

Also, I’d note that people are jumping around from job to job far more today than ever before. The value of being an official employee receiving W-2 paychecks has therefore declined, and many “independent contractors” are actually just employees by another name. For some, it’s simply temp work. For others, it’s an ongoing arrangement.

As for Halliburton, I haven’t seen a full cost-benefit analysis so I can’t comment on the figures. I do know that a solider’s salary only represents a fraction of their compensation. There may also be other considerations involved — i.e., the need for soldiers in areas where contractors are less appropriate. In any case, I’m not saying that privatization is an unqualified good in every instance — I’m just saying that expanded privatization, judiciously employed, can provide equivalent services at a cheaper price in many cases.

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1. Drew Ward
  
  September 8, 2009
  
  Owen I think you’re living in a dream world where employers always do what we think they should do…which of course they do not!
  
  As for the soldiers’ pay, their salary is pretty much all of their pay. If they are married they get a housing allowance, but in my example of a private, most are single. That means they get no fringe benefits, no extra housing, no extra food, they actually have to pay for their own uniforms and most of their equipment.
  
  Check out the real world, it doesn’t work like you think it does.
  
  Reply
Owen M. Courrèges

September 9, 2009

Drew,

No, but I think that employers normally do what’s in their best interests. If they have a good contract employee and they have the need, they’ll offer him/her additional work. Of course, an employer may be stupid and disregard good employees, but that hurts the company and leaves them vulnerable to better competition. Unless that lousy, talent-ignoring company successfully resorts to, say, rent-seeking, it won’t stay in business.

Not to say that doesn’t happen — many businesses have become entrenched through lobbying for regulations, subsidies, etc., that create barriers to market entry insulating them from competition. When that happens, they can have terrible policies and ignore talent and hard work to their heart’s content. Thankfully, many people, like those at Reason, oppose this (full disclosure — I did a brief summer fellowship with Reason after college).

As for soldier pay, I don’t believe you’re correct there. My understanding is that the majority of a soldier’s compensation is non-salary in the form of uniform subidies, housing subsidies, free or subsidized food, tax advantages and free medical care through the VA. Moreover, soldiers on foreign duty usually receive additional benefits and compensation. The pay isn’t the greatest for enlisted men, but it’s hardly the shambles you make it out to be.

And if you want to get into a discussion about how the real world works, we can have a loooooooooooong discussion about government bureacracies and their entrenched, institutional inefficiencies.

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1. Drew Ward
  
  September 9, 2009
  
  Officers receive uniform subsidies and housing and such. Enlisted servicemembers get next to nothing. Most work for less than minimum wage and most military families live far below the poverty line with many on food stamps.
  
  Trust me, I am only a few years out of the Army myself. The average yearly uniform allowance is about 40-75 bucks. The cost of a single PT (exercise) uniform can easily run $500. The required running shoes $75. A pair of dog tags $12. A pair of official ear plugs $15. The required ear plug case $5. A pair of DCU’s $150. Boots $75. The official issue socks $10. A rank pin $10.
  
  As for the VA benefits, the only way you get most healthcare after you get out is if you are disabled to the point of being unemployable, or if you are living in abject poverty and even then there is a copay.
  
  The GI Bill for school you have to buy into by paying $100 each month during your first year (when you are probably only making around $900 a month) plus an additional $500 buy in after that.
  
  They do not get subsidized food, in fact they are charged for meals even if they are at work and can’t go eat those meals.
  
  As for being deployed, the only thing they get is danger pay ($1-200 per month) and they don’t have to pay income taxes. That’s it.
  
  I’m not trying to harp on you, but just to point out that so many of these thinktanks and their supporters, for that matter so many otherwise well-intentioned voters, operate and form their views based on a false idea of what the world is really like. They like to think that things really aren’t THAT bad and that people and companies will generally do what’s right without being made to.
  
  It’s not the case, and that’s sad. It’s sad, but very true. So, when people make recommendations and talk about reforms, or regulations, or cuts or whatever, people need to do so working off the premise that things are probably much worse than we would like to think, and that for all the good we try to do, most people and businesses will try to screw everyone else to make a buck.
  
  Reply
Rhonda Reap-Curiel

September 11, 2009

I’ll just add these two cents for what it’s worth.

Having worked several large projects, recently, I had to team up with State, Parish and Local level government employees from multiple agencies, but all levels of each separate agency. There was not one function any of them served that at some point we chose to find a private provider for because of the (1) inefficient processes; (2) bureaucratic nightmare of getting a simple question answered and (3) the lackadaisical attitude the employees at each of these agencies. To say that a government employee is actually going to work harder and care more about the people they serve because the taxpayer pays their salary is a fallacy at almost every level of government in Louisiana.

Most government employees are but a few years from retirement and will take their time because they get paid whether they process 10 pieces of paper or 1 per day. NOW there are good employees at State Agencies. Unfortunately, they are stuck in a civil service system which does not allow them to receive the level of pay or bonus pay they should for going above and beyond their normal duty to perform for a customer.

There are plenty of services offered by the State which can be privatized. I’m not sure Revenue is one area I would suggest however. We have fought contingency fee auditors for many years. Opening up some of the services provided by Revenue to private contract providers will only increase the amount of frustration business owners and private citizens have when dealing with this particular department.

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