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Posts Tagged ‘Privatization’

More on ALEC

Tue ,25/02/2014

This is a continuation in the series  Who Is ALEC ? and Academic Freedom and Democracy – ALEC Style, as it is important to keep the light on ALEC. On the surface, the American Legislative Exchange Council provides model legislation for state and national legislatures. Its membership boasts 300 corporations and special interest groups, and about 2000 state legislators, governors, US Congressmen, and US Senators. ALEC sponsors meetings where corporations and their representatives entertain our legislators and help craft “model legislation”. From the corporation’s viewpoint, it is “dream legislation” – and ALEC is the organization that helps their dreams come true. What corporation wouldn’t want legislation designed to limit liability, provide subsidies, weaken regulations, criminalize whistleblowing, lower taxes, provide an edge over competing technologies, or to transfer public funds to them by privatizing education, health care, workers comp, public pensions, and prison systems?

About 1000 model bills are available from ALEC. Legislators can copy the bills, change them to disguise their source, and present them as their own. Most voters, the press, and even legislative colleagues often do not realize that the legislation came from ALEC. ALEC’s hidden hand was exposed when a Florida lawmaker introduced a resolution urging “Congress to Cut the Federal Corporate Tax Rate” that carelessly included ALEC’s mission statement. Sponsoring ALEC legislation insures politicians they will receive support for reelection campaigns. ALEC’s legislation is supported by biased research, talking points, and slick ads to convince voters that the politicians are really looking after their best interests. 

 The press, average citizens, and small business owners are excluded from ALEC by steep fees and screening to insure harmony with ALEC’s mission. An elaborate system insures that information cannot be obtained by Freedom of Information Act requests. Much of ALEC’s secret activity is coordinated through Americans for Prosperity, a Libertarian think tank, which now has offices in all 50 states. ALEC takes great pains to keep secrets, as several corporations have withdrawn when their participation was discovered. Clearly, transparency and full, honest disclosure is need.  However, ALEC has 401(C)3 status, which makes it tax exempt and allows it to hide its agenda and the identity of donors. Although ALEC claims it is not a lobbying group, it is hard to see how claiming they are “coaching” and “educating” legislators exempts them from laws requiring disclosure of lobbying activities.

ALEC’ s most shameful activity is attempts to suppress the votes of those not likely to support its agenda – the poor, the elderly, minorities, college students, and working people. Paul Weyrich, the founder of ALEC, once explained why, saying “our leverage in the elections goes up, quite candidly, as a number of voters go down.” One of ALEC’s favorite tactics is to accuse detractors of being leftists or liberals to discredit them with religious groups and Conservatives. However, the network of think tanks and donors that support ALEC are not Conservative, but Libertarian, and their low regard for the for the truth  or the poor or is hardly Christian.  Citizens United gave corporations a large voice with their money, but it could not give them a heart or a soul.

 According to  Bill Moyer , ALEC is undermining our democracy. The strength of the United States is its unity. Corporations, through ALEC , Libertarian think tanks, and the far right wing of the Republican Party, are working to destroy that unity so they can escape regulation and avoid taxes. We live in a country with enough resources to insure that every citizen has food, shelter, medical care, education, and an opportunity to contribute back to society. That won’t happen as long as our legislatures are willing to let some citizens go without so others can have more. The best situation is a balance in power between business, labor and government. However, modern-day Libertarians want to give all the power to businesses, claiming that businesses making decisions in their self interest will lead to the most good for everyone, but the reality is that it makes the most good for the already wealthy.

Academic Freedom and Democracy – ALEC Style

Sun ,23/06/2013

Academic freedom is one of the cornerstones of our educational system, so who could be against it? Representive Gus Blackwell introduced into the 2013 Oklahoma legislature HB 1674, called the “Scientific Education and Academic Freedom Act”. But there was something strange about the bill, as science teachers in Oklahoma already have a system ensuring  academic freedom. And, the bill only insured Academic freedom in four areas which Representative Blackwell deemed controversial, specifically “biological evolution, the chemical origins of life, global warming, and human cloning”. Mr. Blackwell’s education and expertise is in religion and business administration, so it’s unusual that he knows what is controversial in science. Oklahoma scientists and science educators were almost unanimously opposed to the bill as it is their opinion that there is virtually no scientific controversy on the core facts of global warming and evolution.

The bill allowed “teachers to help students understand certain information about scientific theories; disallowing State Board of Education, district boards of education, and certain administrators from prohibiting teachers from helping students understand certain information about scientific theories.”  Perhaps the bill would have been more aptly named the “Freedom from Accountability Act”. Apparently Mister Blackwell had not thought this through. It would also shield any science teacher, no matter of what religion, who wished to introduce their beliefs into their science classes. The bill even had an emergency clause providing that it be enacted immediately with a letter sent to school officials informing them of the decision. And, why is this now an emergency? The bill passed Oklahoma’s education committee by one vote, but fortunately for the quality of science education in Oklahoma, the 2013 session ended without it coming up for a vote. But, you can be sure it will be back.

The unusual nature of this bill can be understood as similar bills, with almost exactly the same wording, have been introduced in about 20 states. It is one of the “model bills” being promoted by the American Legislative Exchange Council (ALEC). ALEC is composed of over 300 special interest groups and corporations such as Exxon Mobile, AT&T, pharmaceutical companies, and Koch Industries. They sponsor conferences where their representatives  meet with state legislative members to collaborate on “model bills” and to draft legislation favoring their special interests. ALEC now has over 1000 “model bills”, many of which seek to limit workers rights, limit corporate liabilities, oppose environmental regulations, cut taxes, oppose universal health care, and to privatize such things as education, workmen’s compensation, and the prison systems.

Though mainly supporting corporate interests, the legislation often gives a nod to religious groups and to conservatives to win their support. The state legislators take the “model bills” back to their respective states, often as their own work. It also carries an understanding that by sponsoring the bill, they will receive support for their reelection campaigns. ALEC has 501(C)(4)status as a charity, which makes it tax exempt and hides its motives and the identity of its donors. Although ALEC claims it is not a lobbying group, it is directly lobbying our state Congressmen while getting around laws that limit lobbying and require disclosures of lobbying activities.

Representative Blackwell is a member of ALEC and, according to Source Watch, used state funds to attend their meetings. His interest in the bill was probably to introduce creationism into science classes, but adding climate change to the “controversy” list aligns with the interests of the fossil fuel companies. A leaked document from the Heartland Institute, a Libertarian think tank funded by fossil fuel interests, showed that introducing doubt about climate change into science classes was one of their goals.

Bill Moyer recently had a program on how ALEC is undermining American democracy. Although ALEC claims to promote capitalism, it is actually the citizens who pay. Not only do many politicians attend their meetings at state expense, members of ALEC get a big tax break for their lobbying activities and our taxes still pay for privatized state functions.  Sourcewatch lists 25 Oklahoma legislators as members of ALEC and Governor Fallin was once ALEC’s woman of the year, which means she favored the needs of large corporations and of the wealthy long before she became governor. We just saw a number of ALEC sponsored laws make their way through the Oklahoma Legislature, much to the detriment of ordinary citizens.


(c) 2013 J.C. Moore

Should Entitlement Programs Be Reformed?

Sun ,10/06/2012

Many who are successful attribute it to their ability and hard work. That is often true, but most Americans also owe their success to the opportunities, education, and resources that our country provides us – and also to good fortune. Our country provides safety nets so that no matter how fortunate or unfortunate a person is in their life, they will receive healthcare and not be destitute in old age. Those safety nets are often called “entitlements programs “, and that is true. We all pay to support those programs through taxes and contributions and we are all entitled to the benefits. Those who do not need the safety nets, or who do not wish to pay their share, often want to reform them in ways consistent with their self-interest.

 In the Tulsa World article, “Social Security, health care reform needed”, John Brock lays out a plan to remove government from managing retirement funds, Social Security, workers compensation, and health care. Mr. Brock says “the solution to our government’s problems is to empower people to manage their own affairs.” Though empowering people sounds good, the article is based upon questionable assumptions.

 The first assumption is “that the government is controlling our lives more and more.”  That is a common theme in politics these days, but hardly true. We democratically elect our representatives and leaders, and we have much more control over our government than probably any other country in the world.

The second is “having a government manage these necessities is risky. “ He points out that Greece, Spain, and a number of state and local governments are having financial problems. That’s true, but is not necessarily because of their entitlement programs. Many of the problems stem from the fact that the wealthy have found ways to reduce or avoid paying taxes. He goes on:  “For decades governments have been taking on future obligations without making provisions to cover the costs.” However, in many cases, provisions were made to cover the cost but later tax cuts reduced the expected revenues. Then, there are many who do not think that teachers, policeman, fireman, serviceman, and other government employees are worth the retirement funds provided them.

The next assumption is that Social Security “will default in the near future”. The Social Security trust fund is adequate to pay benefits through 2023, and raising the FICA cap could extend it through 2080. The Social Security Trust Fund is invested in US Treasury bonds, which earn interest and are as solid as theUS government. We are lucky that Social Security was not privatized in 2006, as the recession would have wiped out much of our retirement savings.

The final assumption is that we all have the time and the expertise necessary to deal with the work that Mr. Brock’s plan would require. Those who are wealthy and lucky would certainly profit from managing their own accounts, but those who lack expertise or are not lucky may end up with no medical care provisions or retirement funds.

 The idea of insurance is to spread risk and the larger the population, the less expensive and more reliable insurance is. Spreading the risk over every citizen increases the efficiency and provides a safety net for everyone. We are lucky to live in a country where we enjoy the benefits that self governance and cooperation affords us. We should resist efforts to remove programs which provide our safety nets from government management, particularly if it makes them less reliable or managed by those who desire to profit from them.

(c) 2012 J.C. Moore

Bits and Pieces 8: Is It "Indisputable" that "Social Security Is Going Broke"?

Sun ,14/08/2011
Mary Beth Franklin has written an excellent article on how to improve Social Security. However, she claims that it is an “indisputable fact” that Social Security “is slowly going broke” – which is hardly true. That claim was made up by those who wanted to privatize Social Security and, considering how private investments have gone, we should all be thankful that Social Security was not privatized.

As the article explains, ” revenue collected through payroll taxes, plus interest, will be sufficient to fund retirement benefits until 2023. After that, Social Security will have to dip into the Trust Fund until the trust fund runs dry around 2036.” That is true, but the Social Security Trust Fund was set up to pay for the surge in baby boomers who will go into the system the next few years, and when it is exhausted, its job will be done.  After 2036, Social Security will be able to pay 77% of its obligations through collections, which is hardly going broke.

Just as Social Security was changed in the 80’s to allow for the surge of baby boomers, it can also be changed to allow for the short-fall that will start occurring in 2036. Currently, wages over $106,800 are not subject to SS withholding taxes. A recent  poll  found that the change most Americans prefer is to also subject wages over $106,800 to Social Security taxes  – which would extend the Trust Fund through 2083.

Claiming Social Security is going broke is a wrong and harmful idea as it plays into the hands of those who want to change Social Security for political and special interest purposes.  

(c) 2011 J.C. Moore

Why Not Privatize?

Sun ,17/04/2011

Privatization. It is usually assumed that private enterprise will find efficient ways to do things and lower costs to the benefit of consumers and taxpayers.  That assumption is probably true when it comes to providing innovation and developing resources. The recent failure of some of our largest private companies have caused an  economic downturn which, along with tax cuts, have left the federal, state, and local governments with financial problems. Privatizing public services and resources is being considered as a way to reduce costs and raise money.

City Services: As a way to save money, many small towns and cities are considering turning their basic services such as water, trash and sewer over to private companies. This has not always worked out well.  As an example, Coatesville, Penn decided to sell off its drinking water and wastewater infrastructure in 2001 and invest the money in a trust fund to be used for city services. But privatization hasn’t been the economic boon the city hoped.  The residents have seen their water and sewer rates jump 85 percent since American Water, the largest water corporation in the country, took the helm. Last year the company proposed a 229 % rate hike for sewer services, forcing the city to cobble together money for legal fees to fight back. (1) Privatization doesn’t always promote efficiency. The trash in Wichita, Kansas is collected by several private trash companies, and customers in any part of town can contract with any of the companies. The result is that several large trash trucks navigate most streets of Wichita each week, resulting in increased noise, wasted energy, more exhaust fumes, and damage to the streets, which of course, the city repairs.  Even though residents of Wichita pay 30 to 50% more than residents of comparable cities with public trash services, a measure to franchise the trash system was defeated amid criticisms of “government control” and “loss of freedom to choose”.

CompSource. The state of Oklahoma gave its wealthiest citizen a nice tax cut in 2004, which, with the economic downturn,  has left the state government strapped for cash. One proposal to raise money was to sell CompSource Oklahoma, which has been providing workman’s comp to state workers for 76 years – apparently successfully. State Rep. Dan Sullivan pushed for privatization of CompSource because: “It’s a fundamental issue of what is the proper function of government . Is it to compete with private enterprise? We think not.”  He also claimed the increased competition would lower rates. That sounds good, except an expert in comp insurance pointed out it would cost more to insure state employees and 40% -70% more to insure workers in high risk categories, such as volunteer firefighters, oil field workers, and farm workers. The plan fell through, for the time being, when it was discovered that the state might not get the proceeds from the sale and that the politicians pushing the matter had ties to the insurance companies who would profit from the sale. (2)

Medicare and Social Security. Privatization of Government services for ideological reasons often fails as a practical way to lower costs. While privatizing Medicare was ostensibly done to reduce costs, the Medicare Advantage Plans created have increased the cost to the government by 14% and decreased the long term stability of the program. Also, to reduce costs, the plans created the infamous “donut hole“ that costs seniors an additional $25 billion annually. (3) The cost created by privatizing is not a mystery, as the VA and Medicare  have a 3-5% overhead while private insurance companies have an overhead of 15% or more. That is something that should be considered when thinking of health care reform.

Social Security is one of the most effective and popular government programs. It provides a safety net so that no matter how fortunate or unfortunate people are in their choices and investments, they will not be destitute when they retire.  The recent attempts to privatize SS would have been a boon to the financial services industry and money poured in for promotion and campaign donations. After the recent economic downturn, we should all be grateful that the plans to privatize Social Security failed. Some private pension accounts lost as much as 40%, while Social Security paid reliably. The idea that SS is going broke, part of the PR created to try to justify privatizing SS, still lingers on. (4)

Public Service: Our public servants, teachers, firefighters, police, military personnel, and the myriad employees that run our country, actually serve us well. Their pay is usually determined by their responsibilities, experience, and education, as in the GS ratings of federal employees that determine their compensation. Public servants seldom receive bonuses and sometimes little appreciation for doing their job well. The government does not make a profit so their services can be provided at lower cost. And, while we have little say about what goes on in the boardroom, our elected representatives are in charge of public employees.  While it may not be the role of government to compete with private industry, it is certainly not the role of government to make policies that favor private companies over the needs of our citizens. Certainly, privatization for purely ideological reasons is a bad idea that should not override practical considerations.

(1) http://www.alternet.org/story/149725/vision:_how_small,_mostly_conservative_towns_have_found_the_trick_to_defeating_corporations

(2) http://jcmooreonline.com/2009/10/01/will-privatizing-compsource-lower-costs/

(3) http://www.cbpp.org/cms/index.cfm?fa=view&id=2917

(4) http://jcmooreonline.com/2010/08/04/is-social-security-going-broke/

(C) 2011  J.C. Moore

Update on 10/26/2016: Here is another case of a privatized water system that didn’t work out well  that cities should  consider before privatizing.

Update on 10/7 /2021: Privatizing Kansas prisons has not worked out well. “For-profit Kansas prison an understaffed ‘hell hole’ of violence, death and drugs. “ … Report in Kansas Reflector

Is Social Security Going Broke?

Wed ,04/08/2010

Is Social Security Going Broke? No. According to the actuaries at the Social Security Administration, the bottom line is that Social Security (SS) is financially as sound as the U.S. government. (1) The surplus in the SS trust fund today stands at  $2.4 trillion and is entirely invested in Treasury bonds which earn interest. The trust fund will peak in 2027 at nearly $6 trillion and there will be sufficient money in SS to pay 100 percent of benefits until 2041. A few small changes now could extend the trust fund until 2083. The Treasury bonds are backed by the full faith of the US government and SS would only go broke if the U.S. government went bankrupt.

Why Do Many Believe Social Security Is Going Broke? It is because many politicians and financial advisers are telling them so. The claim that SS was going broke was part of the PR created to try to justify privatizing SS. Privatization would have been a boon to the financial services industry and money poured in for promotion and campaign donations. Privatization eventually failed, but the idea that SS was going broke has lived on. The theme that “SS is going broke” has now become a talking point used by unscrupulous politicians to blame political opponents, inspire fear, convince voters that the government isn’t working, or to justify changes to the system to benefit friends and donors. The theme is also a useful marketing tool for retirement funds who wish to convince potential customers that no matter how much money they have saved, they will eventually run out – unless they invest with them. Of course, a solvent SS ruins that argument.

Won’t the Baby Boomers Use SS Up? No. There was a hike in the Social Security payroll tax in the 1980s so that baby boomers would pay a bigger share of their own retirement. That hike created a surplus to handle the crunch of baby-boomer retirements and the surplus went into the SS trust fund. The trust fund is projected to grow steadily until 2027 and after that, it is estimated that SS funds will be sufficient to pay 100 percent of benefits until 2041. After that, payroll tax revenue alone will be sufficient to meet 78 percent of the program’s obligations – even if no changes are made.

Should Changes Be Made? The SS trust fund could be extended by either increasing the retirement age, reducing  benefits, increasing the payroll tax, or raising the cap on earnings.(2) The latter might be the fairest and most popular. Earnings above $106,000 a year are now exempt from SS taxes. As the inequality in earnings between top and average wage earners has grown over the years, the cap has exempted a larger share of top wages from taxes – and thereby reduced SS collections. An analysis by the Congressional Budget Office shows that if the cap were lifted, the Social Security trust fund could be extended through 2083. A poll conducted for USA Today by Gallup shows that 67% of Americans would support lifting the cap. (3)

Social Security was created by the Social Security Act of 1935 in the midst of the Great Depression to provide for retired workers who had lost their life savings. It did that, and since has become one of the most relied on government programs. Many economists think future retirees may be even more dependent on Social Security because of the disappearance of traditional pensions. Social Security provides a safety net so that no matter how fortunate or unfortunate Americans are in their lives and choices, they will not be destitute when they retire. A few thoughtful changes now will insure that SS will be around when those who are now babies reach retirement age.

1) http://www.ohio.com/news/american_dream/27325314.html

2) http://www.cbo.gov/ftpdocs/115xx/doc11580/07-01-SSOptions_forWeb.pdf

3) http://www.dailykos.com/storyonly/2010/8/2/889034/-Proof-that-the-Social-Security-problem-is-easy-to-fix

Will Privatizing CompSource Lower Costs?

Thu ,01/10/2009

The proper role of government in health care has been the source of many recent arguments on health care reform.  A similar argument has been going on at the state level in Oklahoma. According to a recent Tulsa World article1, “Workers comp proposal mulled “ , Oklahoma State Rep. Dan Sullivan wants to privatize CompSource Oklahoma because: “It’s a fundamental issue of what is the proper function of government . Is it to compete with private enterprise? We think not.”   According to Sullivan, the incentive behind the privatization is to lower workers’ compensation insurance rates as rates should fall because of increased competition.

 That rationalization seems weak. It would seem that providing workman’s comp to state workers is a proper function of  the state government.  CompSource Oklahoma  has been doing so for 76 years – apparently successfully. Many private businesses use CompSource. Why would they do so if private insurance companies can provide better service and lower rates?

 According to an expert in comp insurance 2: “ CompSourse  is an insurance carrier of last resort when all other insurance companies turn down a company for coverage.  If they privatize, the competing insurance companies cannot just dump the employers over to Compsource. I think there will be an overall price increase. Instead of having CompSource as a safety net, more companies will be put into the risk pool. The risk pool forces carriers to insure the higher risk employers.  This sounds good, except the downside is the rates are 40% -70% higher than the regular insurance market. “

 There you have it. If CompSource is privatized, it will cost the companies it now insures  and the State of Oklahoma more  to provide workman’s comp. That sounds like a bad idea. 

Privatization for ideological reasons often fails as a practical way to lower costs. Privatizing Social Security increased the cost to the government by 14% and created the infamous “donut hole“ that costs seniors an additional $25 billion annually. After the recent economic downturn, we should all be grateful that the plans to privatize Social Security failed.

Finally, Sullivan doesn’t know who would get the proceeds from the sale of CompSource. He says he plans to file a bill that its assets belong to the state in the hope that it will result in a lawsuit which will let the courts decide the matter. That seems like a stange plan from Sullivan, who promoted Tort Reform to end frivolous lawsuits.

(1)Tulsa World , August 7, 2009

(2) James Moore at J&L Risk Management