Thursday, September 15, 2011

Does privatization save the taxpayers' money?

The biggest justification for selling the jobs of public employees to private corporations is that it will save money for the taxpayers. From school custodians to health insurance professionals, the story is that corporations can somehow hire employees for important public services and still make money for their shareholders.

The obvious ways to accomplish this feat are by reducing the salaries and benefits of the employees, and by shortcutting the public on the services for which the corporations are being paid.

Then there are the inevitable cost increases when time comes to renew the contract.

Even so, many people are willing to go with privatization because they are convinced that it does save money.

Now comes this report in the New York Times about a new study showing "that the government actually pays more when it farms out work."

That's right. As reporter Ron Nixon puts it, "The study found that in 33 of 35 occupations, the government actually paid billions of dollars more to hire contractors than it would have cost government employees to perform comparable services."

The study, produced by the non-partisan Project on Government Oversight, focuses on contracts issued by the U.S. government. Today, though, an article appeared on POGO's Web site saying that states are overpaying for privatization as well.

In the article, Dana Liebelson wrote, "state governments faced with budget pressure are making mistakes similar to the federal government, privatizing and contracting for services on a large scale without determining whether the decisions make fiscal sense."

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