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The rationalization of privatization:

  1. Governments are inefficient.
  2. Private firms are more efficient because they are subject to competition.
  3. Therefore, the public will save money by turning over parts of government to the private sector.

How this works out in practice:

  1. Government "inefficiency" is a code word for having reasonably well-paid, unionized government employees.
  2. Labor costs can be lowered by privatization (of the workers).
  3. Management in private firms gets much more in compensation then those holding similar jobs in government.
  4. Private firms must also make a profit if they are to stay in business.

A simple example from health care: The head of the Social Security Administration gets a salary in the $100K range (I haven't been able to find the exact figure). The head of United Health Care has a retirement package of $1.1 billion. Medicare has an overhead rate of 2-3%, private insurers are typically in the 30% range.

The latest give away is US highways. Just today the governor of Pennsylvania has started talking about selling or leasing the Pennsylvania Turnpike (built with federal funds). His excuse is that the state can't raise the capital needed to maintain it and expand transportation services. This is obviously false, if a private firm can borrow against the revenue generated by the tolls so can the state. In addition the state can issue tax-exempt bonds which means the cost of financing will be lower.

What we can expect is higher tolls (to pay for the acquisition and decreased maintenance). This is just another one of fake economic theories (like a rising tide lifts all boats) that conservatives use to rip off the public.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Thu Dec 7th, 2006 at 10:14:08 AM EST
The head of United Health Care has a retirement package of $1.1 billion.
Could you provide a link please?  I'm definitely doing the wrong thing for a living.
by wchurchill on Thu Dec 7th, 2006 at 01:44:34 PM EST
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by rdf (robert.feinman@gmail.com) on Thu Dec 7th, 2006 at 03:50:44 PM EST
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thanks, incredible and ridiculous.  the stock did soar,,,but that is crazy.
by wchurchill on Sun Dec 10th, 2006 at 07:35:47 PM EST
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