NCPA - National Center for Policy Analysis


August 21, 2007

Despite the fact that state government agreements with private companies are generating revenue and bringing greater efficiency to the provision of government services, federal lawmakers continue to lead an anti-privatization charge, says Stephen Goldsmith of the Manhattan Institute's Center for Civic Innovation.

Consider the recently passed "farm" bill:

  • Through a $1.16 billion, 10-year contract to a consortium led by IBM, the state of Indiana is attempting to streamline the process of applying for welfare, Medicaid and other benefit programs that give assistance to almost one million residents.
  • Despite analysis showing that privatization of these functions would result in more convenience and less waste, fraud and abuse, a provision in the House farm bill dictates that Indiana and other states cannot work with private companies to administer such programs.

If this provision -- which has nothing to do with farming -- becomes law, it would essentially kill Indiana's innovative antipoverty effort and block other state and local governments from following the Hoosier State's lead, says Goldsmith.

Congress is also attempting to stall innovation and protect the status quo in public infrastructure:

  • For example, last year Indiana Gov. Mitch Daniels raised $3.8 billion in capital by leasing the Indiana Toll Road to a private consortium and is now using the proceeds to finance other critical infrastructure needs.
  • These efforts have prompted widespread examination by other cash-strapped governors and mayors faced with major infrastructure improvement needs which are projected to total $120 billion nationwide.
  • But rather than applaud these innovative experiments, the House sent a letter to state officials threatening to undo any future state public-private partnerships.

Unfortunately, congressional leaders still wrongly insist that they have a role in what clearly should be state-level policy decisions, says Goldsmith.

Source: Stephen Goldsmith, "The Feds vs. Innovation," Washington Post, August 18, 2007.

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