Matt Lewis is a federal fiscal policy analyst at OMB Watch, a nonprofit, nonpartisan government watchdog organization in Washington.
In the wake of the Blackwater shooting scandal, P.W. Singer of the Brookings Institution is making the case that private contractors harm military counterinsurgency campaigns. The same could be said of privatization of government services back home.
Singer's basic premise is when contractors run amok, it's harder to win "hearts and minds." Similarly, privatization—through corporate subsidies, contracting and even some tax breaks—makes it much more difficult for the government to win the "hearts and minds" of the public. As a result, public confidence in government is at rock bottom.
Singer argues that a successful counterinsurgency effort requires the support and cooperation of civilians. Blackwater USA, a security contractor embroiled in controversy over an incident in which its employees killed 17 Iraqi civilians, does more harm than good with its cruel treatment of the Iraqi public. As an Iraqi official commented to Singer:
"They [Blackwater] are part of the reason for all the hatred that is directed at Americans, because people don't know them as Blackwater, they know them only as Americans"
Privatization often undermines programs in much the same way that Blackwater has harmed the counterinsurgency campaign in Iraq. Private companies deliver services as a part of government programs. But these programs need popular support to be effective. When contractors alienate the public, they do more harm than good in terms of achieving program goals, and in terms of affecting public confidence in government.
In 2004, for instance, Congress mandated that the IRS outsource some of its tax collection responsibilities. Since then, private companies have been asking thousands of taxpayers to pay their taxes. These companies can keep 24 cents of every dollar they collect and have been shown to use abusive tactics during operations. The IRS itself has admitted that private tax collectors are four times less efficient than government workers.
But the greatest concern with this wasteful program is not inefficiency, but that Americans will come to believe their taxes only line the pockets of a few well-connected companies—not contribute to the common good. Voluntary compliance with the tax code could decrease as the IRS loses the "hearts and minds" of the American public.
Also, these and other concerns can embed themselves much deeper in the public consciousness, leading to a loss of public confidence in government as a whole. And there's some evidence they already have.
Here's how: The public understands that private companies and government have distinct missions. Government is supposed to serve the public interest, while companies are primarily concerned with their own interests. The public supports some privatization, of course, because some of it is quite necessary and serves the public interest. But inappropriate and excessive privatization builds on the public's suspicion that government is not on their side.
Indeed, when companies routinely overcharge and underperform with impunity, it reinforces the suspicion that government is beholden to the few and undeserving.
Some indirect evidence that privatization has damaged public confidence in government can be found in public opinion surveys. One poll, by Greenberg Quinlan Rosner, found that by a margin of 57 to 29 percent, people thought government made it harder for them to get ahead. Sixty-two percent said government officials didn't care about what they wanted, and a similar percentage thought the government ran things inefficiently. As a result, high percentages of the public still don't support governmental intervention in the economy.
Greenberg mostly advocates better budget management and tightened political rhetoric. All well and good, but Congress would be wise to focus on excessive levels of privatization as well. It should start by changing the policies that have been built to accommodate wasteful privatization through subsidies, contracting and tax breaks.
To its credit, Congress has begun taking small steps in this direction. It is likely to agree to proposals to stop the IRS private debt collection program. It just passed a large expansion of the Pell Grant program and axed student loan interest rates—all paid for by reduced subsidies to the student loan industry. And the House originally passed a reauthorization of the State Children's Health Insurance Program (SCHIP) that would have given health care to five million more children—in part paid for by cutting a wasteful Medicare privatization program.
The House had to back down on the Medicare reform bill. But there is plenty more waste in privatization programs for Congress to clean up. Ineffective tax subsidies, the Medicare prescription drug program, and Medicare and Medicaid in general all rely on the private sector to deliver public goods, and all generate billions in wasted tax dollars.
Citizens who believe in government as a tool to advance the public interest ought to be concerned about excessive privatization of public services. Contractors like Blackwater USA are alienating would-be friends abroad and the public back home. Instead of rushing to privatize public services at every turn, our government should carefully review the services it currently oursources—keeping in mind the role of government should be to serve the public interest.
