The real alternative to small government and low taxes is a more equitable distribution of wealth, Part I.

The two constants that unify the Republican party and the right-wing since the ascension of Reaganism in the late 70’s are the calls for lower taxes and less government.  These are the two pillars of the right that unify the wing-nuts, the Christian right, the libertarians and the dwindling number of what used to be called “Main Street Republicans” or “Rockefeller Republicans” (most of whom have fled to the Democratic party, driving that political party rightward).

The pull of these two ideas is obvious:  On the surface when there is less government and lower taxes people have more freedom and more money. 

Over the next few blog entries, I want to take a look at what the alternative is to less government and lower taxes.  I think at the end of the day, we’ll find that less government and lower taxes do not lead to more wealth, but instead, to a transfer of wealth from the poor and middle class to the extremely wealthy.

Let’s start with less government, not as a to-die-for philosophical concept, but as an option to address problems and challenges.  Are public schools better or private/charter schools?  Should governments or private businesses run prisons?  How much should our military do in the war and how much should it job out to consultants such as Blackwater and KBR? Should we regulate industries or let them set their own standards?

One of our leading beliefs over the past 30 years embedded in virtually every media story about business and economics is that the private sector can accomplish any task much more efficiently and with a higher-quality solution than government can.  Comedians joke about government workers and journalists assume the private sector always is the first choice.  Both Republicans and Democrats rail against big government when running for office.

But if businesses were inherently so superior to governmental bodies, why would it be the case that 56% of all new business fail within four years? By contrast, the number of municipalities that have ever gone bankrupt in the United States is infinitesimally low. 

Some will immediately realize that one main reason for the low rate of government failure is that it is easier for a stable government to raise taxes or borrow money than it is for an unstable business to find financing to continue operations, but that is exactly one of the advantages of having government address broad social needs like building and repairing roads, protecting our communities, educating our young or providing health care to the elderly and poor.  A government, while it must bend to the will of the people, can think and act long term and therefore not break under the momentary pressures of the marketplace.

Let’s go beyond philosophy now and look at performance:

• Virtually all studies on charter school performance demonstrate that charter schools almost always fail to improve student performance and often worsen it.  Here is one of many examples: a recent Stanford University study found that the math performance of 46% of charter schools is indistinguishable from public schools, 17% had substantially higher scores and 37% of charter schools had substantially lower scores than their public school equivalents.
• The privatization of our prisons over the past 25 years has been a festering scandal of prisoner abuse and fraud.
• Did you prefer how our wars went when we used relatively few contractors as in World War I and II, or now that we’re making massive use of military contractors in Iraq and Afghanistan?  
• When the government loans money to students for college and career training, the terms are significantly better than when the private sector was allowed to do so between the early 90’s and this year. 
• We all hear jokes about trying to interact with government workers, and I can honestly say that every call I have ever made to a government agency that didn’t know me already was an extremely frustrating experience.  But why don’t you spend the afternoon trying to talk with your cable system provider, telephone service provider, a company that sold you your computer, the electrical power company and one airline, and then tell me that the private sector is any better.

So let’s look at what happens every single time a private for-profit company does something that government can do or traditionally has done: Whether for schools, prisons, or cooking and delivering meals to soldiers, the private company makes (or sets its budget with the intention to make) profit for its key executives and shareholders. 

Now it’s a simple fact that low level government workers, many of whom are unionized, typically make more money than their peers in the private sector, most of whom aren’t unionized, whereas private sector presidents, officers and senior management make far more than department heads and other civil service executives.  

Some government contracting makes sense, e.g., to manufacture tents for soldiers or provide a special social service to an “at-risk” population.  In fact, some very successful government programs; for example, Medicare and Medicaid are really public-private partnerships in which government uses private insurance companies for claims processing and quality control.

But whether successful like Medicare benefit management companies or a sheer failure like privatized schools, prisons and war-making, when the government awards a contract out instead of doing it with its own resources, it is taking money from lower paid employees, who tend to be middle class, and giving it to executives and investors, who tend to be wealthy.

In the case of education, lower-paid nonunionized charter school teachers replace higher-paid unionized teachers.  The idea that this transfer of wealth from workers to management will increase student performance goes completely against the grain of basic U.S. thought.  Remember, an ideological tenet we hold especially dear is that people who make more money generally do a better job than those who make less money in any given field.  If it works for attorneys, marketing executives, athletes, movie stars, architects, engineers, physicians, accountants, business leaders and other professionals, why doesn’t it work for school teachers?  Shouldn’t the basic economic flow of money in charter schools from school teacher to executive by definition produce a decline in performance? Of course it should, and the statistics prove it does.

So whenever politicians are making a case for smaller government that involves one of the basic goods and services that have traditionally been a task of democratic governments in the U.S. or Western Europe, part of that case always involves a massive transfer of wealth up the economic food chain, typically from the middle class to wealthy.

Tomorrow I’ll look at that other sacred cow of conservatives: lower taxes.