Wealth redistribution on steroids

Forty percent of the national wealth in the United States is now owned by 1% of Americans. A vast amount of wealth has been redistributed from the middle class to the top in a relatively short period of time. Discussion about redistribution of wealth is common, but usually in the context of debate regarding social programs. The larger issue is wealth redistribution from the middle class to the top few percent. This vast redistribution has been accomplished largely through privatization of government jobs and with little debate in the public arena.

Government, in and of itself, is a not for-profit enterprise. Private companies exist to make a profit. When government contracts with a private company, the company figures profit into cost of doing business. Profits are distributed to the owners of the company. This has been working quite well for some corporate executives. According to Nobel Laureate, Joseph Stiglitz in a May 2011 Vanity Fair article, over the past twenty five years, wealth distribution in the U.S. has shifted so that 1% of the population has gained control of 40% of national wealth. Just 25 years ago, the top 12% owned 33% of the wealth. This is wealth redistribution on steroids!

It is not clear that taxpayers have benefited from privatization. Theoretically, contracts are competitively bid. In fact, privatization of government jobs has often been accomplished without competitive bids. For example: in late 2001, according to a Sept. 2, 2011 Center for Public Integrity article, “Windfalls of war, KBR, the government’s concierge,” a subsidiary of Haliburton (KBR), was awarded a contract under the Logistics Civil Augmentation Program of LOGCAP. This contract, after the original bid, then awarded subsequent work to KBR without need to bid additional contracts. Many of the jobs privatized under this contract would otherwise have been done by U.S. military personnel. In late 2011, the contract let to KBR had amounted to $37 billion of tax payer money, most for work which was not competitively bid.

It is hard to argue that without competitive bidding, the America public is guaranteed a good deal from private contractors. Interestingly, allegations of overbidding have been brought against KBR. The Center for Public Integrity article states, “The U.S. government is also now in the middle of a $100 million lawsuit against KBR, alleging breach of contract and false claims related to providing private security under the LOGCAP contract.” This information does not support the belief that private contractors are reliably less expensive than the U.S. military. I would imagine KBR corporate officers will, if necessary, pay the relatively small $100 million fine without much hesitation or regret. It is just a cost of doing business.

Another thorny problem which has been overlooked, or at least under debated, is the possibility of conflict of interest. Government employees are directly responsible to taxpayers. Employees of private sector companies are directly responsible to company shareholders. It is conceivable; the best interests of the public may not always coincide with those of private sector contractors. Jobs in national defense, transportation, education, public health and safety are of integral importance to the health, welfare and safety of all citizens. The wisdom of redistributing such jobs from the realm of public responsibility to the private sector seems worthy of discussion.

Since the Bush era, and the wars in Afghanistan and Iraq, an increasing number of military jobs in construction, security and interrogation, have been awarded to private defense contractors such as Haliburton and Academi (formally known as: XE Services LLC, Blackwater USA and Blackwater Worldwide). Instead of U.S. military personnel performing the jobs, as they have in the past, civilians are hired by private contractors do the work. Now, I am sure Academi or Blackwater or XE Services LLC, or whatever they are calling themselves today, are reputable companies. I am sure their employees are patriots. I am sure owners of these companies are more interested in the security of our nation than they are in making money. However, the CEO’s of private sector companies are not subjected to the same scrutiny as are the Joint Chiefs of Staff, pentagon officials, generals and admirals.

Haliburton, which has its main corporate offices in Dubai and Texas, is a publicly traded company. Haliburton must disclose primary shareholders. Academi, on the other hand, is a privately held company. It is not required to reveal shareholders. I am not suggesting there is anything wrong with this arrangement, just that we should be aware that the public sometimes does not have access to information about who owns the companies to which government contracts are let. In the case of companies contracted to perform and oversee American defense, transportation, health and safety jobs, it might be interesting to know to whom the contractor is primarily responsible.

It has not been demonstrated that Haliburton, Academi or any of the other defense contractors are doing work at lower cost to the American public than did military personnel. Since jobs once done by U.S. Navy, Marines, Army, Coast Guard and Air Force personnel have often been contracted to the private sector under a no bid scenario, it is hard to investigate. According to reports and ongoing court cases, performance has often been less than stellar. Corporate officers and stockholders have made a lot of money, taxpayer money, but it is impossible to determine if taxpayers are paying a fair market price.

Conservatives claim private industry performs more efficiently than does government. This is demonstrably not always the case. Government is very good at running some things. For example, the most conservative estimate of the overhead costs of Medicare is from 3.6% to 5%. Insurance companies have an estimated overhead of 11%, at the lowest estimation, and 30% at the highest estimation. Private insurance companies are making a profit, a big profit. I doubt this translates to lower cost for health care consumers. As a point of interest, the Affordable Health Care Act now requires health insurance companies to spend 80% of proceeds on health care for their customers. That law will no longer be in effect if the Supreme Court rules the act unconstitutional.

There is an important role for government when it comes to public security, health and safety. Much of this responsibility has been shifted during the past twenty five years, from the public sector to the private sector. The movement continues with privatization of education, defense, public health and safety, to name a few sectors, as the goal of conservative legislators and of private industry. This movement has made a few individuals very wealthy and contributed to an economy where 1% of Americans own 40% of the country’s wealth. The redistribution has not improved the situation for the majority of Americans.

Of course, if we are going to accept the erroneous premise that privatization of government jobs has a net positive effect for the American public, we should consider privatizing Congress. A notice could be posted in FedBizOpps. Haliburton and Academi would be sure to bid. That’s it! We would let the contract to the lowest bidder. The company will need to make a profit so will diligently negotiate salary, pensions and health care coverage. For example, salary could be contingent on performance and health care coverage on continued good health. Or consider this; we emulate the most successful U.S. companies in retail, oil, production and defense contracting and outsource Congress. What could go wrong? Best yet, the GOP will love it! It is right in line with their philosophy of small government.

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