Wayne M. O'Leary

Needed: A Public Sector

It used to be said of Mussolini's fascist Italy that at least the trains ran on time. In that respect, il Duce (the Leader) was one step ahead of the Decider. Increasingly, in George W. Bush's America, nothing runs on time, and very little works as it should.

There is a reason for this dubious distinction; it can be summed up in two words: privatization and deregulation. Recent examples abound of the failures resulting from the private sector's takeover of public functions and the concurrent diminishment of government oversight and responsibility. Everyone is aware of the biggest fiasco, the Hurricane Katrina aftermath.

New Orleans remains a disaster area after two years, despite presidential assurances at the time that no public effort would be spared to rebuild the city. Instead, recovery was largely turned over to corporate interests operating in accordance with marketplace priorities and often with unaccountable taxpayer subsidies. Meanwhile, the logical instrument to do the job, the Federal Emergency Management Agency (FEMA), having been crippled by a shrunken budget, a loss of independent authority -- it's now part of the Department of Homeland Security -- and a diversion of energies from its primary disaster-relief function to a preoccupation with domestic terrorism, is an empty shell of its former self. FEMA currently exists mostly as a conduit for no-bid construction contracts.

But the sorry state of the Big Easy is only the most visible manifestation of America's new "can't-do" spirit. Another is the virtual implosion of the deregulated air-transportation system, which has gravitated toward slipshod safety standards, outsourced maintenance, crazy-quilt scheduling and price setting, and nonexistent customer service. In recent months, the usual overbooking, lost luggage, and delayed flights have been joined by the bizarre spectacle of trapped passengers unable to disembark, a clear expression of systemic gridlock.

Added to the airline mess is the looming unraveling of the nation's ground-transportation network, symbolized by August's highway-bridge collapse in Minneapolis. According to a 2005 Federal Highway Administration report, 75,000 of the country's 600,000 bridges (13%) were then structurally deficient, and the interstate highway system's 47,000 miles of road were in rapid decay. It's worse now. An estimate by the American Society of Civil Engineers suggests that $190 billion will be required over the next two decades just for essential bridge repair. Meanwhile, the Bush administration is proposing that the states, responsible for upkeep of the nationwide network using federal transfer funds, explore the possibility of replacing the long-standing federal-state partnership with a profit-driven arrangement of private-sector highway maintenance, potentially taking a system already starved for public investment from the frying pan into the fire.

The growing abdication of government responsibility for a decaying and dysfunctional infrastructure extends to the energy sector. Since the Energy Policy Act of 1992, which gave the Federal Energy Regulatory Commission (FERC) the authority to gradually open wholesale electrical-power markets to free-market competition, the national electrical-energy trajectory has been downward. Major power outages have doubled annually since deregulation began in 1996, as large regulated companies have been broken up into competing units focused on increasing profits and not on observing voluntary guidelines for safety and maintenance. Consumer rates have inevitably risen, averaging increases of 30% for those states exercising the deregulation option. Although seven states have repealed deregulation, 15 remain in thrall to market forces. One is Illinois, which just last spring endured a utility-rate emergency that prompted consideration of a price freeze.

The FERC, meantime, has instituted "soft" price caps on electricity to the benefit of energy investors. These floating caps, which replaced the former "hard" or strict price caps based on cost-plus, can rise daily according to what the market will bear. In 1999-2000 alone, they helped spur a 20% jump in utility stocks. Deregulation, in other words, has been good for Wall Street, but not for Main Street.

Unfortunately, it's not merely in the area of infrastructure that rampant privatization and deregulation are having a deleterious effect on American life. Their impact extends even to aspects of the Iraq war in the form of the outsourcing of military security and intelligence functions to overcompensated and unsupervised rogue mercenaries, as well as to the disastrous privatization of medical facilities at Walter Reed Army Medical Center, where 350 federal workers were replaced by 100 employees of a private contracting firm with predictably scandalous results.

More recently, the privatization-deregulation bug has infiltrated such domestic areas as the college-loan program, whose federally chartered SLM Corporation (a.k.a. "Sallie Mae") was fully privatized in 2004, leading to excess profits at the expense of student borrowers and charges of business corruption. The bug has also burrowed into the suddenly endangered national food supply, where an overstressed Food and Drug Administration (FDA) -- its few hundred food-safety personnel are spread among 400 points of entry -- can only inspect 1% of imported food, rather than the 80% it is charged with examining.

The beat could go on -- the subprime home-mortgage convulsion originating with the under-regulated financial-services industry, the imported-toy scare arising from a lack of Consumer Product Safety Commission oversight -- but it's all of a piece. The difficulty in each case lies with an over-reliance on private market forces on the one hand and a radically diminished regulatory capacity on the other. The number of FDA inspectors, to cite one instance, has fallen, while food imports have skyrocketed. Much of this is deliberate, a conscious policy of ruling conservatives aimed at crippling the federal government, which they hate, and unleashing the corporate sector, which they love.

The answer lies with an alternative policy that would do exactly the opposite. We need increased government enterprise (more public-power facilities, for instance) along with increased budgets and responsibilities for the government's existing regulatory agencies. How would this public-sector expansion be paid for? you might ask. Here's a suggestion: Raise the corporate income tax. In 1940, American corporations paid 60% of all income taxes; in 2003, they paid 16%. Over half of all US corporations paid no income taxes at all from 1996 to 2000; their share of total federal tax payments is now the lowest it's been in decades -- second lowest as a percentage of GDP since 1936. It's time they shared the load.

Wayne O'Leary is a writer in Orono, Maine.

From The Progressive Populist, November 1, 2007

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