Privatization's purpose: Showering campaign contributors with taxpayer money

Decades of corporate and Republican rhetoric convinced many — if not most — Americans that governments are fat, bloated bureaucracies whereas free markets solve most of the world’s ills.

One corollary: Government is always the problem, never the solution.

A corollary to that corollary: Most/all government functions should be outsourced to private industry. Taxpayers “obviously” benefit from ripping functions out of government bureaucracies and handing them over to profit-focused private firms.

Although politicians sell privatization as a money-saver for taxpayers, privatization almost always raises the cost of providing those services because politicians' true motive is not cost saving but rewarding their private industry bribers campaign contributors. The reward is government contracts larded with profit and paid for with your tax dollars.

For example, the government deployed even more private, corporate mercenaries in Iraq than U.S. soldiers. And these private mercenaries earned many times more U.S. soldiers doing equivalent work:

If you’re a former Navy Seal or a Delta Force guy working for Blackwater, you can make about 600 dollars a day for your work in Iraq. I mean, we’re talking six figure salaries. Some of these guys working for private military companies make as much as General Petraeus if not more.

Even more, the companies employing these private mercenaries made fat profits on top of their soldiers' fat salaries.

(Of course, legislators also wanted to use private mercenaries rather than U.S. troops to maintain a fiction that our “troop” levels and death count were low in Iraq.)

Gail Collins writes about another taxpayer scam perpetrated in the name of saving taxpayers money, paying financial companies to sell loans the U.S. government could sell directly to students at much lower cost:

The Obama administration is trying to reform the current loopy [college loan] system in which the government pays private companies to do the lending. The loans are then guaranteed by the government so the private companies are sheltered from loss. Then the government buys the loans back so the private companies can go out and do it all over again.

The White House believes that if it cuts out the middlemen, and just gives the loans to the students directly, it can save $94 billion over 10 years.

Hell hath no fury like a middleman scorned. The lenders have been rallying the troops, waving the banner of choice.

Citigroup sent a call to arms to its student borrowers, which is currently posted on Talking Points Memo. It warns darkly that if the Obama Armageddon comes to pass, “students and their families will not enjoy the benefits that competition has made possible for more than 40 years.”

…Since the government-guaranteed loans are regulated by Congress, they have virtually identical terms.

To understand how much banks love the free government money they’re receiving through this program, consider the lengths to which they go to ingratiate themselves with college loan officers:

The real competition among the lenders is not to win over students so much as the school financial aid officers. This has led to unfortunate but deeply unsurprising instances of thinly disguised bribes and kickbacks.

Posted by James on Thursday, June 04, 2009