Hold on to your wallets, the privatization circus is back in town
If public-private partnerships were such a good idea, our bridges and roads wouldn’t be crumbling and our middle class wouldn’t be facing extinction.
Because public-private partnerships, touted by President Obama in his State of the Union speech as a key tool in his administration’s second term, have been around for a long time.
Fifteen years ago, Pulitzer Prize-winning journalists Donald Bartlett and James Steele, after an 18-month investigation for Time Magazine, called public-private partnerships a form of corporate welfare and raised doubts about their effectiveness [no link].
Too often, public-private partnerships have meant local or state governments handing over valuable pubic assets to private control without adequate public oversight.
These partnerships come in many forms – governments leasing out parking lots, contracting with private firms to build toll roads, funding repairs of bridges with money from union pension funds repaid with public bonds.or the ever-popular public subsidy or tax break for the promise of new jobs or even just maintaining the jobs in a particular location.
In the wake of the financial collapse, politicians across the spectrum from economically strapped cities and states have latched on to public-private partnerships as a way to fund projects that were once paid for wholly out of public funds.
One city that has embraced the public-private partnerships with gusto is Chicago, President Obama’s hometown – with dubious results. In one notorious deal, the city leased its parking meters for 75 years to a Morgan Stanley-led partnership in exchange for $1.6 billion upfront. Later citizens watched as parking rates skyrocketed and the full costs of the deal to taxpayers emerged – the city was obligated to pay the Morgan Stanley partnership $11.6 billion over 75 years.
Another fan of private-public partnerships was the president’s former Republican opponent, Mitt Romney. As a private businessman, his firm, Bain Capital, benefited from many goodies bestowed by government officials, making “avid use of public-private partnerships,” the Los Angeles Times reported. While Romney liked to brag about the jobs Bain created at an Indiana steel mill, he didn’t mention the tax breaks and other subsidies taxpayers gave Bain to create those jobs.
As Chicago attorney Clint Krislov said of his city’s foray into public-private schemes: “I think this is just the latest way for people to make money off state and local governments. This is the new way the investment banks, their lawyers, and consultants squeeze the taxpayers….They’re going around making these deals, and it’s very lucrative. It’s like a circus coming to town.”
The most egregious example of a public-private partnership gone wrong is the 2008 federal bailout of the financial industry: after the bankers’ recklessness and fraud wrecked the economy, taxpayers came to the rescue, as government officials promised that the goal was not to enrich bankers but to restore Main Street. But bankers got billions without any conditions, while Main Street continued to suffer. When we hear the grand promises of everything that public-privatization can do for us, we should remember who won and who lost out in the bailout.