Taxpayers benefit when government contracts with private businesses

by Governor Mitch Daniels (as printed in the Northwest Times of Indiana, January 2, 2007)

This week, after two years of study, competition and negotiation, I signed a contract to reform Indiana's welfare system. Although this proposal has been under constant attack for weeks, it is one of the most straightforward and obvious decisions our administration has faced. Here's why.

Today's welfare system, as run by the monstrous bureaucracy known as the Family and Social Service Administration, is totally indefensible.

Its clients know it: In surveys more than two-thirds of them condemn its customer service as poor.

The federal government knows it: Because of chronic high error rates and the worst welfare to work record in America, Indiana is facing the loss of millions of federal dollars in penalties if the system is not fixed soon.

Indiana prosecutors know it: Over the last few years, they have brought dozens of cases against welfare workers who were defrauding the public through various scams or outright theft.

The only folks who may not have known how miserably the system is performing are Hoosier taxpayers, but many of them have suspected the truth.

For Hoosier taxpayers, reform means enormous savings: a half billion dollars over the next 10 years, and that's only on the administrative side. When today's high rates of errors and fraud are brought down, savings will probably exceed a billion dollars.

For those who actually do deserve food stamps, Medicaid, or welfare assistance, this change means far better service, with many additional phone and Internet options. No longer will they have to contact the system only at places and times convenient to the bureaucracy, then wait a month or longer for an answer or a decision.

For employees of the system, their new private sector employment with IBM or one of its partners means equal or better pay, benefits, pensions and career prospects superior to any state government can offer them. It also means they will be freed of pushing paper and able to spend more of their time helping citizens achieve self-sufficiency.

And for the Indiana economy, the bargain we struck with IBM commits the company to bring an additional 1,000 quality jobs to our state. Without any question, this change is squarely in the public interest; leaving the system as it is would have been not just wrong but immoral.

Since the status quo lobby cannot really defend the mess they created, they resort to broadside attacks on "privatization." Again, taxpayers beware.

There is absolutely nothing new about government delivering a service by contracting rather than hiring more people on government payrolls. That's how we build highways, train employees, service computers, and purchase plane tickets, for example.

Almost all of Medicaid is already "privatized": The doctors, substance abuse counselors and hospitals are not government-owned, they are private businesses. The billing and back office functions are all under private contract, exactly as welfare's now will be. Overall, more than nine out of 10 FSSA dollars are already spent through contracts with the private sector.

We contract for service for only one reason, to get a better deal for the taxpayer. We saved $12 million a year when we "privatized" the cooking of prison food, millions more by hiring private janitorial services and collection agencies to pursue tax evaders. We "privatize" functions to save tax dollars, but each time we do there is a secondary benefit: The Indiana private economy gets a little stronger.

The private sector that some interest groups and politicians love to bash is where most Hoosiers work, and thank goodness. That's where the money to fund government comes from; without a strong private sector, there are no taxes for government to spend in the first place.

I wince when I hear Indiana politicians bad-mouth the private sector, using words like "profit" and "private" as though they were cuss words. Every day, we are talking to companies around the nation and the world about in-sourcing new jobs to Indiana. All of them have other options, and few will take their dollars to a place where business is the target of contempt and abuse.

Indiana deserves a government run for the benefit of the taxpayer and not special interests. When you consider the source, the howls you've been hearing only underscore the extent to which our upcoming welfare reforms put taxpayers first.

I recieved this today and thought it worth sharing. Govenor Mitch Daniels has brought IN from an economy in the red to now in the black.

Some people still think he is bad because he forced the state to go with daylight savings time.

Privatization is often a good thing, but there are exceptions. When government privatizes some particular work, such as road construction, that's a good thing. Capitalism still works, because if the company does a bad job you hire their competitor.

But when government signs contracts to allow private companies to build private toll roads, promising in the contract that the state will not build public roads in competition with the private company, that is a very bad thing. The private company is given a literal monopoly on transportation over a given route. If the company provides a bad road, or charges too much, or does not maintain it sufficiently, there are no political repercussions to the toll road owners. They still own it, and they won't face re-election if they don't run the road correctly. This breaks the competitive feedback mechanism and is a very bad thing.

Unfortunately, some governments, like Texas, have been listening to the siren song of toll road salesmen and lobbyists, and are pushing this very bad idea.

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