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Sunday, September 21, 2014

Privatization can reduce the National Debt -- Harry Hipps

The $17 trillion and rising debt that we, as citizens of the USA have amassed is a mind boggling figure that is so large that most people can’t really relate to it. But the debt, along with the dysfunctional political system and the ideological divide we have today has nearly everyone worried about our future and what kind of country our kids and grand kids will have. I wish I had a buck for every time a heard phrases like: “We are saddling our grandkids with a debt that will make it hard for them to enjoy the lifestyle we enjoyed.” Well, spending is out of control, we are a divided nation, and there are some serious problems we need to deal with to reinvigorate our democracy and adapt to a fast changing world. But can I inject a bit of optimism here?

Rarely mentioned in the ongoing angst in the media is a simple, but overlooked fact - we have some assets! The average person has probably at some time sold some of the stuff that is cluttering up the house and garage. The garage is cleaner and easier to get around in. And a few bucks were put in the pocket. And this simple idea can work for the over sized garage that is our federal government.

According to Bob Micklethwait and Adrian Wooldridge, in their recent book “The Fourth Revolution, The Global Race to Reinvent the State” selling public assets and businesses could virtually eliminate the debt. Amtrak lurches from crisis to crisis despite having some lucrative routes and could be sold to a private company that would probably figure out how to make it profitable. The feds own 900,000 buildings, some that are in some very expensive real estate markets and around 45,000 are unused or underused. The Bureau of Land Management has jurisdiction of around 260 million acres of land, and while no one would advocate selling our national parks, much of this land is agricultural or unused land with shale deposits that could contribute an estimated $14.5 trillion dollars to the economy by 2050. The government also has their hands in numerous businesses.

Recently, President Obama suggested selling the Tennessee Valley Authority but was immediately confronted by Republican politicians objecting to the move. One can only imagine the Gipper looking down from the Shining City on a Hill and wondering what the heck is going on here. We should seriously study whether selling the TVA as well as some other government agencies to private entities. Let them do what businesses do, try to find efficiencies and run them profitably. With the regulatory apparatus we have today the public’s interest can be managed without the cost inefficiencies that inevitably come with government run operations. And the revenue from the sale of public assets could shrink, if not eliminate that huge debt.

We Americans have a lot of work to do to retool our democracy for the modern era. The entitlement programs aren’t sustainable, health costs continually grow, and globalization and technology are both causing dislocations and offering new opportunities. The challenges are large and our dysfunctional system is slowing our response to them. Selling assets could change our fiscal situation dramatically, but would only be a temporary fix if we only use our decreasing debt burden to justify more out of control spending. But I wouldn’t write off the kids’ future just yet. There are answers if we can only find the will and the leadership.


Anonymous said...

Maybe it can, at least, for the short term. But then what? What happens after you sell off your assets and you’re still found to be lacking? The assets are gone and the money is gone.

What happens if you keep adjusting your revenue streams down so that you’re taking in less revenue but spending more? Cut spending is it? I can see this same scenario playing itself out in just a few years post debt elimination. The United States has become the world’s ‘go to’ nation for protection, money, and aid. Are we just going to say no and cease being the world’s sole hegemon? We haven’t yet. And in decades past, we’ll even go in and create our own form of government if we don’t like yours; all in the name of democracy.

The property, real and personal, held by government are done so in the public trust and for the proper conduction of the governments’ business. I realize that is a alien concept in Hickory, but that is the way it’s supposed to work. Places open to all, unless they prove themselves to be disruptive to the comportment of that business or other citizens who are likewise exercising their rights.

Government does not exist for the generation of profit. It exists as the organization that formulates and enforces the boundaries within which we live. It isn’t for the benefit of the few, but the protector of the many; or so it should be. Government provides things that aren’t fiscally feasible for the private sector to provide; water, sewer, police and fire protection. And we have a say in the direction that is supposed to go; or we should. So using public land for mining, drilling, or natural resource allocation shouldn’t be allowed unless those resources are cultivated as revenue neutral. Cover the costs and provide a cheap resource to the public but you will not be allowed to profit from it. Listen to the clamor for utilizing public lands for resource debasement dwindle to a barely audible squeak.

Entitlement elimination. First of all, people are paying into these funds so I can hardly consider or label them as entitlements. The only group that stands to profit from their elimination is the business/corporate sector since they are required to match the payments deducted from each employee. Let’s call it what it is. Just like privatization of those funds. The investment of billions if not trillions of dollars into Wall Street with absolutely no guarantee of a return on the investment is a real winner for whom?

No sir, I can’t condone such an endeavor. It is certainly sound in theory. The practice is much more vile in nature. There is nothing to be gained long range from the sale of the assets and much more at stake from the privatization.

It’s time we separate government from corporate and monetary influence if you want to do something positive. Start locally. Look at who is in charge in the local community and who they have ties and influence with. That is where you will begin to make a difference. By doing what you propose, it will merely play into a larger more foreboding scenario of the future. One in which the people are co-opted even more, culminating into their being reduced to miniscule subservience.

On the current path, that future isn’t that distant either.

Harry Hipps said...

Well, as I said in the article, this proposal wouldn't work if we don't reform our retirement and medical programs and use the debt relief as a way toward stabilizing our fiscal situation. I don't advocate continuing on the same spending path or tax structure.

As I said as well, some assets, such as national parks should continue to be owned by the government for the good of all. But are you saying we can't let go of Amtrak? Are you saying we can't sell unused buildings in the most expensive areas of the country? And I don't see where you come up with the idea that I advocate getting rid of police and fire protection or water an sewer services. If you'll re read the article you'll see no such suggestion.

I also didn't advocate entitlement elimination. The path we are on is unsustainable. Now the solutions could be a combination of approaches that come from the liberal or conservative camps or even less ideological approaches. Some do advocate privatization, but there are many ways to fiscal solvency, such as means testing, raising the retirement age gradually, eliminating the caps on income subject to SS taxation and others.

You do bring up some possible concerns that may indeed arise if serious restructuring were to happen. But many of your points had nothing to do with what I actually wrote in this post.

Anonymous said...

Fair enough. I do tend to ramble and go off on tangents from time to time.

However to the point, reform how? How are we to reform retirement and medical programs? I addressed the one reform oft mentioned in political discourse which is privatization. No, I’m not for it. No, I don’t think it is a grand idea nor do I see it being good for the people it is supposed to benefit, likewise healthcare and medical programs. There has been a continuous uproar to repeal. Countless bills have been introduced to repeal. Medicare and Medicaid are not driving up the costs of healthcare.

In addition why is it just retirement and medical programs that require overhaul? Why is it only social programs that help and benefit the people here, rightly or wrongly, deserved or expected, the only things that must be reformed in order to bring the ledger sheet into balance?

Look at how this nation was run from 1933 forward to the war years. Public debt abounded, but it put money back into circulation, back into peoples’ pockets, and back into goods and services. And it was the Great Depression and classical economic theory leaving millions penniless and destitute that spurred the social safety net we know as Social Security.

I never said that you advocated for getting rid of or advocated for privatizing or getting rid of police, fire, water, or sewer. I used those as shining examples of the types of service provided by government for which there is no profit margin; real or expected.

Yes, you certainly did say that parks should remain within the domain of government. You did however speculate that land could be used for more tenable purposes. If you raised cattle and used that land to graze, ok. Selling or giving mining and mineral rights so that companies can do what they do, which is to make profit; no, I don’t think so. Too much of what is wrong today are the idiots that try to run government like a business. Does government need to be accountable, sound, principled? Certainly they do, but profit is not the sole consideration.

As for Amtrak, my ambivalence abounds. Traveling Amtrak is more expensive than flying and slightly more tedious. Perhaps the folks in Washington envisioned a high speed rail system like the one that exists in Europe. If that is the case, that certainly hasn’t come to fruition.

In that regard, let us look to Raleigh and the miles and miles of railroad right of way currently owned by the State. When was the last time you saw a train going down a spur line to a factory in order to load freight? Been a long time for me too.

And no, you didn’t advocate entitlement elimination. But that has certainly been a topic of late, hasn’t it? Why we can’t keep doing this and pay all that money back we’ve borrowed out of the funds with people living longer. Let’s divest ourselves and be rid of it. It’s a circular argument/logic. Raise the retirement age? People are already working into the 70’s and 80’s because they can’t afford to retire. Now, if you’re able and want to stay busy, that’s certainly ok with me. But this carrot/stick approach of keeping retirement perpetually just out of reach; no.

I realize that quite a few things I broached were beyond the pale of what you had touched on in your piece. As a generalized and discourse provoking work, it certainly did that; at least for me. I tried to look beyond those however which should help to explain some of my rambling.

Harry Hipps said...

talferris, fair enough. The intent of my post was to point out that the debt doesn't automatically doom the coming generations. It's a shame the debt is so high and like all debt, the cost of the interest takes money away from other things that would help folks instead of the investors that hold our debt.

The entitlements are the parts of the federal budget that have to be dealt with because they are so huge and will soon consume almost all of the budget. Unfortunately, they are the hardest to get the will to change because they affect everyone, and people have paid in their whole lives and are counting on them. If we would lower the debt, as I described in my post, we would have more options in restructuring our retirement and medical programs.

Handling the medical system is going to be hard no matter what. With the increasing cost of technology, the aging population, economic distress which is leading more people to eat cheap, fattening food, and the rotten, mish mash of employer based insurance, Obamacare, private pay, and charity care, we have a system now which is too expensive to finance and still lets a lot of people fall into the horrible situation of not being able to get care.

The emphasis on healthy lifestyles is a simple, but potentially game changing idea, but we have to have a system where everyone is on the same page. The situation we have here in NC, where we have Obamacare, private insurance, but people are left out because they are not poor enough to get free coverage, but can't get medicare because NC didn't expand Medicare. While the feds and the states battle this out, people will lose out because we have this gridlock. I don't have an easy answer on this one, but we can't hang people out in limbo forever.

We are going to have to come up with compromises that will leave the extreme right and left with something to gripe about and come up with a solution. The solution will inevitably have its problems and deficiencies, but we are in looney land right now.

On retirement, some mix of means testing (that is not giving benefits to the richer folks), which Democrats oppose because they believe it will lead to an erosion of support for the program, and lifting the caps on the income that is subject to SS withholding (which the Republicans oppose because they don't want more taxes on the rich), are going to have to be considered to achieve long term viability of the program. The public may have to accept the idea that Social Security won't be able to fund their whole retirement, and we may have to start saving again (which most don't do to the degree we need to). There are always exceptions of course, but many people now are already doing this. Huge numbers of people, especially younger folks, don't believe Social Security won't be there for them or won't be a substantial check, so the younger generation seems to have more of a saving ethic than the beloved baby boomers. We can't betray the promises we have made to people, but the SS system originally was for the few people who lived long enough to get it and only live a few years on it before they passed on. Now it has grown to about a 30 year long series of payments that will soon be funded by only two workers. that won't work.

I don't have the solutions, but we have to stop dividing the country into rigid ideological groups that won't discuss the issues or be willing to use a multifaceted approach. If we don't we won't solve the biggest issues then the sale of some of our assets to reduce the debt will not help us for long.

Anonymous said...

Part I:

First, let me say that is one of the most lucid and cogent things I think you’ve written to date.

My approach here is from that of people. Our institutions, organizations, and reason for doing all that we do and don’t do is about people. Without them, we have no need for a constitution, a government, or a country. Ergo, the things that are done, I sincerely believe should be done with that focus and concern uppermost in mind and to the direct benefit of the most people.

We have no qualms about dropping billions and trillions of dollars on ill-conceived and irresponsible sorties into other sovereign nations on the basis of our own unique perspective. I’m saying that because when you look at the money that has been squandered by DoD, what we spend in the other areas pales. I’m not saying defense needs to be negated, but it does need to be managed. It’s like a bunch of high school kids with a pocket full of Christmas cash waiting on the latest igadget to hit the market. They are going to have it. So it is with DoD and the Military Industrial Complex. And while I’m here, let me say that the VA needs to be removed from under DoD. Because when those cuts come, as they are bound to, the VA suffers first. We made promises and for the first time in our lives, we need to abide by the promises we made instead of just being a fair weather friend.

The social safety net stuff is manageable, I agree. First we have to quit borrowing. If they money borrowed was paid back, with the interest, there wouldn’t be a problem to begin with. Secondly, that money needs to go for the intended purpose it was originally earmarked, not for expanded purposes. The problem is, Congress passes legislation, mandates assistance, and provides no funding stream for it, or castes around and sees a pile of money and decides to tap that, then crow about how they’ve used existing money so as not to raise taxes, etcetera, etcetera. That has only continued to expand, in both users and the level of coverage provided as we have seen.
Do you remember the last budget surplus we had in the Federal budget? Rather than using that money to pay stuff down, well, they began to look for more stuff to spend it on! Well, we’ve got all this money, we need to spend it!!!

The AHC is a compromise product and end result of numerous amendments. Yes, it is branded ‘Obamacare’ and it is his to own, good or bad. It is a start. Like anything, it will take some adjustment to shake the bugs out. I, like you, don’t like the mish mash of coverage. Just as I don’t like the way employers avoided providing coverage or terminating it for their employees. Frankly, I thought it should be required. You can either contract for it with a private carrier or you can buy it through the exchange for the employees, but you’re going to provide it. But it is a start; a necessary start that should have been done a long time ago. Would we have messed it up by now? Hard to say, but at least things like Medicaid and Medicare could be contained under the appropriate banner of healthcare rather than retirement. On that note, the NC legislature needs to do what is best for the people, not what their base wants. How do you just let 500,000 people do without simply because you don’t want to do something that is against your principles? How principled is letting people suffer? Reading what you wrote, I think we can both agree on that point.

Anonymous said...

Part II:

Not that I want or advocate for leaving the lunatic fringes out of the discussion, because God knows, they are citizens too. But we need to merely consider the source and move on. These same groups would dismantle this nation in order form their own demented idea of utopia if given the opportunity.

I don’t know that denying the rich is supported by the 14th Amendment's equal protection clause. A formulary that reduces their payment within a certain income ranges makes good sense so they enjoy the tenets of the benefit, despite that they would perhaps deny others of it. We could argue fair and equitable all day long. But in retirement, I can see maintenance of necessaries; lodging, food, fuel, utilities; those things necessary in the 21st Century to live comfortably. I don’t see Social Security as a means of maintaining a live style resplendent of opulent excess. Maintenance of life’s necessaries; which means enough to live comfortably and not live in want. But not fund a yacht, a 20,000sf mansion with servants, a retirement villa in Cancun, nor pay for ones’ philanthropies.

I likewise have no solutions. I have ideas and concepts; just as you do. And indeed, we need to be willing to look together rather than stand on different sides of a philosophical line and proclaim “I’m right, you’re wrong, deal with it” and then do everything imaginable to foist that point of view on the other. We exist here together. We are going to continue until we really screw it up. We enjoy living in one of the greatest conceptualized nations to ever be in existence. If we just don’t screw it up too badly with ideology.

Along those lines, yeah, if it’s a building or personal property that someone else can make use of, I’m not against it. I am against profiteering and we know how lucrative real estate can become. Would that money go to satisfy debt elimination? That would be anybody’s guess. And I can see paying it down one day and increasing it the next. Congress is just that fickle.

SMJohnson said...

Thank you, talferris for so gently exposing Harry's shallow thinking. We have failure after failure of privatization schemes and "public-private partnerships" that allow the uber-wealthy to rip off taxpayers. (Tolls roads in Indiana, Texas, and San Diego, Chicago's parking meter fiasco, private school vouchers, for-profit prisons, etc.) Of course, the national debt boogeyman has to be foolishly invoked, and "entitlement reform" (aka cutting benefits to the needy) put forth as a key to the solution, contrary to enormous evidence to the contrary.