Our Long National Nightmare is Over

The nation will no longer be without a Secretary of Transportation. In a shocking development, Bush's pick is an advocate of privatizing government services, in this case highway construction. My understanding of the matter is that privatization of government services has been a fiasco.

There really are certain pathologies associated with government work. When money is allocated by a political process rather than a market process it tends to be allocated less efficiently. The trouble with privatization as a remedy to this problem is that it . . . doesn't remedy the problem, the money is still being allocated by a political process. The only change is to generate profits for a series of well-connected contracting firms that, in turn, give money to the GOP. The only real alternative to having some inefficiency would be to just not have the government finance road construction, which is a nonstarter.

9/6/06 12:20AM del.icio.us this incoming links

Comments

How exactly would privatized road construction be different? Don't we already have independent contractors bidding for construction work? Road construction workers aren't government employees, are they?

Posted by: John Biles on September 6, 2006 03:09 AM

You want efficiency? Advocate for complete transparency in te whole process. Transparent bidding, transparent budgeting, tranparent billing. If you can't hide whose hands are on the till then they can be held accountable when things go wrong. Hence doing things wrong becomes expensive rather than remaining profitable and efficiency goes up.

In the past transparency was a none starter because you neede Noam Chomsky levels of intellect to assemble all the details to come to a reasonable analysis. And then you had the problem of getting the resulting conclusions widely disseminated. However, now with the internets thousands of self interested wonks will swarm all over the details as they are published and report the results via the web, solving both problems at near zero public cost. This will attract others for the purposes of online discussion of these ideas with these experts and will broaden the thought sphere of the important ideas. The ideas will then seep into larger internet and medis consciousness much more effectively than it would have otherwise.

This blog is a case in point of this effect. If we could get wider coverage of the unfiltered internet video debates between people like Josh Marshall and Mickey Kaus we can get beyond the manufactured Green Room status quo and back into the business of doing things.

Speaking of which Matt, why don't you make video blog your thoughts on Health Care reform to add some substance to the ideas you introduced in the most recent TAPPED essay?

Even if you only post it here. Other people can refer to it as they are ready to digest it, it can be remixed and redistributed as needed as the debate gains momentum and of course you could publish more and interesting stuff on the idea whenever you liked.

Posted by: patience on September 6, 2006 04:44 AM

It appears that she is advocating for private companies to essentially take over control of roads from the states, take over maintainance responsibilities and charge tolls as the source of income.

I was with a road construction company that operated in over forty states. We built and repaired roads and bridges. While our company got it's work through a strict bidding process, the process was corrupt in that in order to get much of the work, one had to bid below cost; then through a series of change orders, profit was restored.

As you point out, the inefficiency of allocating money for political effect rather than need is a serious one and is not addressed by this "reform".

Posted by: GregPStone on September 6, 2006 07:49 AM

By the way, was your title "Our Long National Nightmare Is Over", a reference to the Onion headline of January 17, 2001, "Bush: 'Our Long National Nightmare Of Peace And Prosperity Is Finally Over'"?

Posted by: GregPStone on September 6, 2006 07:56 AM

"My understanding of the matter is that privatization of government services has been a fiasco."

Do you have a citation for that interesting comment? My understanding is that your understanding is just plain wrong. There have been many volumes written on the subject, and most studies find that privatization is usually successful. See, for example, and not surprisingly, the Reason Foundation (http://www.reason.org/privatization/).

Posted by: ostap on September 6, 2006 08:32 AM

I confess that I fail to understand Matthew's point.

Isn't the CURRENT system that private construction companies bid for contracts with the government to build roads? And the process by which we determine which roads to build (and which public moneys to disburse) is political? If so, then what is Matthew's second paragraph all about? What he describes is what we currently do, no?

It appears to me that what Peters advocates, at least in part, is having the entire process privatized - including determining which roads to build AND raising and disbursing moneys for it (the companies would recoup their investment through tolls). Am I off base?

Posted by: Al on September 6, 2006 09:22 AM

Privatizing isn't necessarily bad or good. In the case of highway construction it can be very good, but only if proper oversight is administered. Boston's oversight for the Big Dig was piss poor and they ended up going way over budget and taking much longer to produce a crappy product that's managed to kill people driving through it. Compare that to the construction of the new Wilson Bridge (one of the largest construction projects in the country), where they are under budget and ahead of schedule. I'm confident MD and VA are excercising good oversight, given their past performance on large projects, so there's no reason to think they're just cutting corners.
Done with the proper oversight, highway construction can and should be privatized.

Posted by: j_flo on September 6, 2006 09:45 AM

"The only change is to generate profits for a series of well-connected contracting firms that, in turn, give money to the GOP"

Don't forget the union-busting.

Posted by: Nicholas Beaudrot on September 6, 2006 10:25 AM

Why is it a non-starter? The first highways in the country were private. They financed the roads by obstructing the entrance with large pikes and would only "turn" them up once someone paid. (Hence "turnpike" and relatedly "shunpikes" which were little roads to circumvent the toll, I know theres still a road by the name in NJ.)
Then states had the idea to charge people a fee to use roads to finance construction, they had to pay for a license. The driving test came later, at first licenses were just about paying for roads.
With the advent of EZ pass and other technology that makes user fianced roads easier than ever, how can you say its a non-starter? How do you get to Dulles Airport? Do you not drive on the Dulles Turnpike? A privately financed highway.

Posted by: m on September 6, 2006 10:35 AM

Privatize the roads! Next we'll kill the fire department!

Posted by: JP on September 6, 2006 11:27 AM

JP and other's hysteria is understandable, but privatization is not some secret code-word for elimination of all government services. What Matt describes is a) the *inherent* weakness of government building and b) the *current* weakness of a privitized process. Requesting bids, etc. for a government contract doesn't have to be corrupt; we as a society have just let it become so. And I don't think for one minute we can assume that Republicans have a lock on no-bid contracts; did Chicago never have jobs for private contractors?
I think that transparency and accountability can work; it's just that the government which is drawing up the plan tries to game the system to avoid it. All solvable problems. To cling to the admitedly wasteful and inefficient (on the order of billions of dollars wasteful and inefficient) government-run building process simply because it avoids the messiness of the market doesn't seem the best response.

Posted by: torrentprime on September 6, 2006 01:02 PM

I work as an engineer in the highway transportation industry. At this point, the state DOTs control the pursestrings and provide mostly just review & oversight. Almost all construction, be it maintenance, new roads or rehabilitation is performed by private contractors with engineering performed by consulting companies. Costs are now up over $1 million per mile and costs soar when right-of-way is required, in complex interchanges or for environmental safeguards. We hear about all the sexy big projects where public/private partnerships might be able to work. But what about the widening of a stretch of local road? Or replacement of a small bridge in a rural setting? Who is going to pay for all of this?

Take a small bridge replacement in a rural setting. With engineering, construction and the attendant inspections, maybe the state would spend $4 million on the project. Maybe you have 500 vehicles a day crossing the bridge. If you made every little stretch of road private and charged for each crossing, you'd easily require over $20 a vehicle to pay for this small project in one year. Or over $1 a vehicle for 20 years.

Getting on a big 6 lane toll road & cruising 70 mph to get from A to B is one thing, but having to pay a dollar here, a dollar there will just nickle & dime people to death.

A problem with user fees is that the people who use the roads are not the only ones who benefit from them. If I never drive, I still benefit from the ease of travel of everyone. The food I eat, the paper I use at work, the electricity I use all utilize transporatation at some point. No matter how much we personally drive or how much gas we personally use, we are all dependent on the infrastructure.

My own thoughts is that we will see more & more privatization. There will be too many toll roads, there will be too many corners cut by unscrupulous contractors and people will get fed up. We'll end up coming back to the idea of having one authority who collects money while also providing oversight for the safety & welfare of the public.

Posted by: Sean on September 6, 2006 01:12 PM

"There will be too many toll roads, there will be too many corners cut by unscrupulous contractors and people will get fed up."
Couldn't we build in liability and other fail-safes into the contracts such that quality and to-be-discovered construction errors are the responsibility of the building company, backed by a bond? Conversely, make a bonus available for one-time or early completion. By making the penalties for screwing up massive and the bonuses for finishing on or under time and budget enticing, couldn't the market deal with these issues? I realize the devil is in the details, but it seems like avenues have not yet been explored.

Posted by: torrentprime on September 6, 2006 04:11 PM

Elliott Sclar wrote the book on this subject. Literally. It's called "You Don't Always Get What You Pay for: The Economics of Privatization."

Sclar doesn't oppose contracting out and he doesn't favor it either. In the book he offers a level-headed examination of many of the problems faced by governments that contract out services, such as road construction and maintenance.

For those of you who've bought into the pro-privatization ideology, Sclar will make you reconsider.

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