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This Week’s Outsourcing Scan 1-3-2017

1) National: Comprehensive efforts are under way to track and engage the incoming Trump administration and Republican Congress’ radical efforts to privatize public services and assets, undermine public interest regulations, and seed the federal bureaucracy with right wing operatives bent on implementing the anti-government agenda they have been pursuing for decades.

“Donald Trump ran on improving the lives of working families, yet he’s surrounding himself with people that want to line the pockets of corporations and the politically connected,” says Donald Cohen, executive director of In the Public Interest. John Tirman, executive director of MIT’s Center for International Studies, foresees an unprecedented attack on the “commons.”

As David Dayen reports in The Nation
, “In the Public Interest, a research organization monitoring privatization, has compiled a list of 32 different members of the Trump transition team or formal nominees for top agencies who have either close ties to privatization groups, or demonstrated support for the philosophy. If these officials get their way—and there’s no reason to think they won’t—America’s schools, roads, air-traffic-control systems, prisons, immigrant-detention centers, and critical social-insurance programs will soon fall into private hands.”

2) National: The battle over privatization of Medicare will likely become one of the major political battles of 2017 (see Legislative Issues below). “The biggest change the Better Way is proposing is known as ‘premium support,’ which would take effect in 2024 and would be a massive transformation to Medicare benefits as we know them. Simply put, Ryan wants to phase in a privatization of Medicare by 2024, shifting the health insurance of millions of people to the private sector. In addition, President-elect Donald Trump’s nominee for secretary of health and human services, Rep. Tom Price (R-Ga.), has also been in favor of premium support, which could help the House Republicans pass legislation to achieve this goal.”

The Machinists are urging people to contact their representatives tomorrow and tell them to resist the privatization of Medicare
.  “Paul Ryan and Donald Trump’s nominees for Secretary of HHS and Director of the Office of Management and Budget are preparing to measures to privatize and voucherize Medicare in early 2017. They want to cut taxes for the wealthiest Americans and big corporations and plan to gut seniors’ health care to pay for it. Our elected representatives need to hear that a vote to privatize Medicare is a betrayal of their constituents. We have paid for Medicare’s guaranteed health benefits throughout our working lives and we will fight to protect it for current and future retirees. Please click and sign up to call Congress on Wednesday, January 4.”

And Gene Sperling, the former director of the National Economic Council, warns us not to take our eyes off Trump’s plan to gut Medicaid. “Without an intense focus by progressives on the widespread benefits of Medicaid and its efficiency, it will be too easy for Mr. Trump to market the false notion that Medicaid is a bloated, wasteful program and that such financing caps are means simply to give states more flexibility while ‘slowing growth.’ (…) Democrats at all levels of government must aggressively communicate the degree to which these anodyne-sounding proposals would lead to an assault on health care for those in nursing homes and for working families straining to deal with a serious disability, as well as for the poorest Americans.”

3) National: Despite determined opposition by major veterans’ groups and their allies in Congress, the incoming Trump administration is determined to begin privatizing veterans’ healthcare. “‘It’s one of the options on the table,’ said the transition official. ‘Definitely an option on the table to have a system where potentially vets can choose either or, or all private.’ The New York Times reports that Trump recently ‘met with several executives of private hospital systems at his Mar-a-Lago estate,’ and Trump bragged about meeting with ‘the best people’ from the Mayo Clinic, Cleveland and Johns Hopkins at his impromptu press chat on Wednesday night. Major veterans groups oppose the potential, insisting that a privatized program would force veterans to wrestle with a system unable to cater to the specific medical needs of former military members. Earlier this year, dozens of veterans groups met with Trump’s transition team and stressed their opposition to any privatization. ‘The American Legion absolutely opposes privatization,’ American Legion Executive Director Verna Jones said after the meeting, ‘We strongly advocate for a healthy VA health care system for veterans.’”

The Washington Monthly
 has weighed in to criticize media coverage of the issue, especially that of the New York Times, saying that it has failed to report that the VA, despite its problems, “in study after study … is shown to be generally at least as good, and on most metrics better than the rest of the health care system, as was just recently reconfirmed by this major survey of the peer-reviewed literature on health care quality. Wouldn’t it be nice if the Times would share that non-fake news with its readers as it chronicles the Trump administration’s war on veterans?”

4) National: The incoming administration’s plans will likely include, Dave Lindorff reports in Counterpunch, an effort to privatize Social Security. The last major Republican attempt to achieve this was during the George W. Bush administration, when the effort was defeated in Congress by a determined coalition of labor, retirement security groups and Democratic lawmakers. “It comes in the form of release of a new report by the Congressional Budget Office, which of course these days is a wholly owned subsidiary of the Republican Congressional Caucus. (…) 

‘The Republican strategy is to destroy this universal support by convincing the young that their FICA taxes are going into a black hole and that those funds won’t be available for them when it’s their turn to retire. The idea is to pretend that Social Security is like an investment in stocks and bonds, and that the return is not very good in comparison to investing money in privately managed accounts (that’s what the Wall Street financial community wants: to get their hands on all those FICA funds totaling nearly a trillion dollars a year!).”

5) National: Writing in Truthout, James Kilgore raises the question of how to fight back against the incoming administration’s plan to expand the role of private prison companies in immigration detention, “community corrections,” and electronic monitoring. “Trump’s immigration agenda has deep ties to his desires to expand the role of private prisons. While private prisons remain small shareholders in the state and federal carceral market, they control over 60 percent of ICE detention beds. If Trump wants to undertake massive deportations, the feds will need places to hold people who are being sent across the border. This opens the door to a wide range of new construction, as well as rental agreements with jails or prisons with idle capacity. As Grassroots Leadership’s Bob Libal told Truthout, ‘Trump’s victory has certainly given the private prisons reason to celebrate.’”

Kilgore says, “while developing local plans of action is crucial, many activists also advocate broadening the scope of the movement against mass incarceration. Elizabeth Hinton emphasizes the need to form ‘new alliances and coalitions on the ground.’ She notes that opposition to Trump has ‘galvanized new groups of people’ who can be drawn into action. New Jim Crow author Michelle Alexander, a long-time advocate of the need for a social movement to end mass incarceration, now argues that such a movement needs to be ‘multiracial’ and ‘multiethnic.’”

6) National: Writing in the American Prospect, Donald Cohen of In the Public Interest warns that the Trump administration’s plans for infrastructure investment, a form of “stealth privatization,” could raise costs, enrich financiers, and fleece the public. “The battle in D.C. will be over four things: Whether and how much we decide to invest in public infrastructure at all, how we pay for it, where investments are focused, and who controls it—private investors or public interests.  It’s a debate with enormous consequences for the country’s future and the looming challenges of economic inequality and climate change. It’s also about much more than physical assets and the economics of infrastructure. At its core, it’s a battle over the fundamental role of government and control of basic public goods, how we grow as a nation, how the responsibilities are shared, and how the benefits are distributed.”

7) NationalPublic Works Financing has gone into overdrive polling its constituency—the private infrastructure construction and financing industries, and pro-privatization think tank activists—about where they think the Trump administration is going, and should be going, in its infrastructure investment program. Among their preferences are for an integration of asset management decisions on the one hand and design and construction decisions on the other (many economists and public policy experts argue the opposite, and have even suggested separate bidding and vetting processes for the various components of P3s); the elimination of federal restrictions on user fees, which they seems to think would be a much bigger boon for them than either an infrastructure bank or repatriating corporate profits; this would include a major expansion of interstate tolling and all forms of P3 user fees; and a huge expansion of the Private Activity Bond program by a radical rewriting of IRS rules on what constitutes public use. [Public Works Financing, November 2016 (published early December)].

The privatization industry sees the Trump election as a game changer, potentially radically expanding the ‘public private partnership’ market. “It’s a real WOW,” exclaimed Joe Aiello of Meridiam Infrastructure, who says “the action is dramatically and quickly evolving.” For Aiello, “a challenge for developers is how to find the quality within what will be an expanded pipeline across so many potential clients. A challenge for government entities will be how to stand out and attract the best in class to compete on their visions.” [Public Works Financing, December 2016 (just published)]. Heavy income streams and commission payments from taxpayers (shelling out to either public conduits or private corporations through user fees) will naturally define who “stands out” to the “best in class” Wall Street firms.

On a pedagogical note, Samara Barend of AECOM Capital writes that “the trick will be for the industry to ensure that the administration and Congress understand that PPPs are not only for revenue producing assets, like toll roads and energy projects. But that water infrastructure, public buildings, and all forms of transportation projects—toll or no toll—can all move forward cheaper, faster and better as PPPs.” [Public Works Financing, December 2016]. Others, of course, disagree.

8) National: The New York Times publishes a major investigative piece on the role of private finance in America’s public water systems. “For residents, the financial trade-offs from these water deals can be painful. The Times analyzed three deals in which private equity firms have recently run a community’s water or sewer services through a long-term contract. In all three places — Bayonne, and two cities in California, Rialto and Santa Paula — rates rose more quickly than in comparable towns, which included both publicly and privately run water systems. In Santa Paula, where Alinda Capital Partners controlled the sewer plant, the city more than doubled the rates. A fourth municipality, Middletown, Pa., raised its rates before striking a deal. Now, some of these cities are trying to take back their water. Missoula, Mont., wrested away its water system, which had been owned by the Carlyle Group. Apple Valley, Calif., whose waterworks were also owned by Carlyle, has filed a similar lawsuit. Santa Paula bought its sewer plant from Alinda last year.”

But the water privatization industry is pushing ahead, hoping to build on the new Water Finance and Innovation Act, a five-year federal $17 million pilot loan window which opened the door to some private financing of water/wastewater projects. The industry is somewhat unhappy about WIFIA, feeling it doesn’t go far enough, though they like the idea that WIFIA will put “EPA’s endorsement on the PPP model.” A “West Cost PPP vendor” hopes that through this program, municipalities “will be forced to get their act together” on projects that need financing. Their real hope is that Congress will lift the cap on Private Activity Bonds for water/wastewater. “The upcoming session may provide another opportunity to try.” [Public Works Financing, December 2016]

9) National: Donald Trump’s election has given heart to those Wall Street investors who have been betting for years that they will get a big payout from the privatization of Fannie Mae and Freddie Mac, whose shares they bought on the cheap after the federally-backed housing lenders were bailed out by taxpayers at the beginning of the financial crisis. Now that the GSEs are making money, they are, as David Dayen puts it in The Intercept, “expecting a return on their investment in Donald Trump.” John Paulson “cozied up to Trump. He hosted a $50,000-a-plate fundraiser in New York City. He served as an economic adviser to the Trump campaign. And he personally gave $330,000, the maximum donation, to the effort. Since the election, the market has recognized that this close relationship to Trump likely equals an end to the Fannie and Freddie profit sweep, a partial or total privatization of the mortgage giants, and a personal benefit for John Paulson.”

But Paulson’s bet is not a lock. “Allowing the companies to retain some portion of their profits is a long way from restoring them back to some semblance of their pre-bailout status, which is the real prize sought by investors. To take that big step, advocates will have to overcome the GOP’s deep ideological opposition to Fannie’s and Freddie’s reliance on government guarantees. That reliance lowers their borrowing costs vs. other private-market players while putting the government on the hook for any excesses in pursuit of profit. Even worse, in many Republicans’ view, is that the companies are subject to Democratic marching orders in pursuit of their affordable housing goals.”

10) National: Wall Street is not only betting on a possible big payout from the privatizations of Fannie Mae and Freddie Mac, it’s also eagerly anticipating profits from school privatization. Alan Singer looks at how hedge funds might profit from the Trump-DeVos voucher plan if school dollars follow each student. And not only would the hedgies win, according to PoliticoJeb Bush, who has close ties to Trump’s education secretary nominee, billionaire charter school funder Betsy DeVos, is poised to see his network take over the Education Department. “The ties between Bush and DeVos are seen not just through their ideas and state legislative crusades but also through their shared reliance on the same network of policy staffers and experts — some of whom are likely to assume key Education Department posts. A member of Bush’s inner circle, Josh Venable, who has worked as national director for advocacy and legislation at his foundation, is helping DeVos prepare for her confirmation hearing, sources told Politico.”

11) Florida: The City of Miami Beach (City) has hired The Concourse Group, LLC as its ‘public private partnership’ development advisor for affordable and workforce housing projectsat multiple locations throughout the city. Concord specializes in real estate privatization projects, having “participated in 64 federal real estate projects in 37 States, representing over $3 billion in closed transactions.” See the minutes of the November 15 meeting of the Los Angeles Region Community Veterans Engagement Board for more.

12) MassachusettsAn employee of Brink’s, the private company that took over the MBTA cash room, says he was harassed by MBTA employees. “An employee of the company that took over the MBTA’s cash-counting department last week from union workers says T employees harassed him Wednesday by taking photographs as he picked up a money vault in a rental truck, according to a police report. The MBTA said it disciplined at least one employee for posting the photographs on social media. (…) At least one user who tweeted the photographs also posted comments that seemed to suggest Brink’s was providing lax security and could be in danger of being robbed. The MBTA has disputed those claims. The Twitter user, who identified himself as Charlie Kingman on his profile, posted three photos of the rental truck and wrote: ‘This is what happens when you privatize the Money room … Easily can be robbed.’ (…) The episode follows a prolonged fight over privatizing the money room, a department that counts cash from fares paid to the MBTA. It had long been run by union employees, but the MBTA recently signed a five-year, $18.7 million contract with Brink’s to take over the operation.”

13) MichiganA contracting scandal has hit the Detroit urban demolition program as federal criminal investigators are demanding text messages, voicemails, emails, phone records, meeting notes, and schedules of city officials. “The document requests covered demolition contracts for the federal Hardest Hit Fund, which has provided more than $258 million to help the city of Detroit tear down abandoned houses and buildings in the past three years. The city has taken down 10,704 structures since 2014.”

14) MinnesotaSwift County is making another attempt to get the state to buy or lease the Appleton prison from CoreCivic, formerly Corrections Corporation of America. “At the county board’s meeting Dec. 19, Commissioner Gary Hendrickx, District 1-Appleton, reported that he and Commission Chair Pete Peterson, District 3-south Benson, had attended a meeting of representatives of lobbying firm Goff Public and CoreCivic, the owner of the prison.”

15) New YorkThe New York City Housing Authority is making a major push to attract private investment in public housing. “The federal government launched the so-called Rental Assistance Demonstration Program in 2012. A recent report found it had attracted $2.5 billion of financing for repairs to 19,000 public-housing units as of October 2015. New York was slow to participate in the program, which critics say amounts to the privatization of public housing and subjects tenants to the whims of private management companies, which have less accountability than public housing authorities.” [Sub required]

16) Pennsylvania: The Denver Borough Council (Lancaster) has begun discussions regarding draft bid specifications with Suburban Lightings Consultants and Hanover Engineering in a project to purchase their streetlights from PPL and replace all bulbs with LED lights. “Started over two years ago, the initiative has been hampered by PPL responses taking large amounts of time, or responses not being forthcoming. The goal is to have the streetlight privatization and switch to LED bulbs completed by late October 2017.”

17) International: The Ontario Teachers Pension Plan and Canada Pension Plan Investment Board got slammed by the deep devaluation of the Mexican peso after Trump’s election. They had invested in Mexican road ‘public private partnerships’ buy buying pesos for the investments at what turned out to be a huge premium. “Mexico’s woes came just as it unveiled a P3 infrastructure plan under Mexico’s year-old P3 law.” [Public Works Financing, November 2016]. But the cheap peso may encourage foreign capital to buy up more of the country’s assets.

18) Think TanksAustralian economist and anti-privatization expert John Quiggan shares an excerpt on public goods and publicly funded services from his forthcoming book, Economics in Two Lessons. His conclusion: “The issue is not, in the end, one of public versus private. Rather it is the fact that market competition and the profit motive inevitably associated with it is antithetical to the professional and service orientation that is central to human services of all kinds.”

19) Think Tanks: University of Wisconsin-Madison psychology professor Mark S. Seidenberg, who specializes in “how the science of reading can contribute to improved educational performance,” has written a new book analyzing why reading skills are so weak in the United States. Reviewing the book for the New York Times, David Kipen, who runs Libros Schmibros, a nonprofit lending library in Los Angeles, writes, “Mr. Seidenberg seems to have science on his side. Still, as he bends over backward to remind us, who can blame some educators for a certain defensiveness these days? If you were a public-school teacher, besieged by privatizers, union-busters, zealots and profiteers, you might be touchy, too. Far from privatization, Mr. Seidenberg’s specific proposals include transforming insular colleges of education into public, taxpayer-funded institutions; training Teach for America recruits in underfunded schools to become not rookie teachers but supplemental reading tutors; and restoring reading instruction to its rightful place at the heart of traditional literacy. Most of all, as he, teachers and other reading-instruction stakeholders have already joined forces to do in the Wisconsin Reading Coalition, he pleads with those who teach written communication and those who research it to start, at last, communicating with one another.”

20) Think Tanks: Robert Poole of the Koch-funded Reason Foundation has some friendly strategic advice for the privatization industry: “I think the PPP community should take Trump at his word, and work to include PPP-friendly reforms in the tax code and in aviation in 2017, while looking to FY 2018 for more comprehensive action on rebuilding U.S. infrastructure.” [Public Works Financing, December 2016]

Legislative Issues

Useful resource2017 state legislative session deadlines.

1) NationalThe Senate is likely to become the focus of the battle to prevent the privatization of Medicare. “Although Rep. Price is pro-privatization, Trump himself has been adamant during his campaign about not cutting Medicare. However, he may have to compromise if he wants to get his tax cuts pushed through without adding a huge amount to the deficit. In addition, most Democrats (also as you might expect) are adamantly opposed to Ryan’s plans. In fact, the incoming Senate minority leader, Sen. Charles E. Schumer (D-N.Y.), has even gone so far as to accuse Republicans of “plotting a war on seniors” and has pledged to fight tooth and nail against any attempt to privatize Medicare. Because of this, the U.S. Senate is likely Ryan’s biggest roadblock to getting Medicare privatization done. In the Senate, 60 votes are typically needed to pass major legislation like this would be. However, as The Washington Post recently reported, it may be possible to pass Medicare legislation with a simple majority through the budget reconciliation process, which the Republicans have. In other words, there’s a real chance that we could see Medicare privatization become a reality in the not-too-distant future.”

2) Florida/National: 2016 flood events in Florida and North Carolina are impacting the debate on the National Flood Insurance Program, which comes up for renewal in September. The events could cause an uptick in demand for flood coverage, but private insurance will not be enough to satisfy it. “U.S. House Committee on Financial Services Chairman Jeb Hensarling, R-Texas, has expressed his plans to help get it reauthorized, even if it may require a bipartisan effort. The privatization debate is not entirely new to Florida, however. In March 2016, the state House unanimously supported a bill that would let private players into the flood insurance market. But simply having the private sector write more of the risk may not guarantee that more people would purchase coverage, said Robert Muir-Wood, chief research officer at Risk Management Solutions Inc. Florida had 140 claims filed through private insurers, compared with 4,391 filed under the National Flood Insurance Program, according to the state’s insurance regulation office data.” [SNL Insurance Daily, December 28, 2016; sub required]

 

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