Monday, February 28, 2011

Private Sector Croynism Seeks to Replace Government in Wisconsin: Might New York Be Leading the Way?

I am writing something else right now so . . . .
. . . I didn’t really wanted to be distracted by writing this.

But the thing is, as I am working on other things*, topical events keep getting reported in the news – far faster than I can write to keep up with them– that bring back memories of my earlier career and I find myself wondering whether I should take time out to comment on some of them. And then I read Paul Krugman’s column at the end of last week and that did it: I really have to say something now.

(* You may have a feel for some of what I up to, someday to made much more clear, if you have been paying attention to the idiosyncratic and ongoing augmentations to my earlier post, Adding A few More Off Topic Notes (Or Are They Really?), updating additions that pertain to everything from the dates for Shepley Metcalf’s upcoming performances at the Metropolitan Room in March, to “Over the Rainbow,” to more on Jean-Paul Vignon.)

Bagging Sachs?

One of the things reported in the news recently that caught my attention was the front page story in the New York Times and ensuing editorial (a carefully-“Times-ed” one day later) about Governor Andrew Cuomo’s close friend and advisor, Jeffrey A. Sachs. (See: Cuomo Adviser Takes Pay From Health Industry, by Nicholas Confessore, February 22, 2011 and Editorial: Gov. Cuomo’s Friend, February 24, 2011 plus this follow-up article Pressure Put on Adviser to Cuomo, by Nicholas Confessore, February 23, 2011.) Back in the day, I worked with Jeffrey when he was involved in Cuomo’s HELP projects that provided housing for the homeless. I rather liked him, which is not to comment in any way on the Times articles or to say that I ever got to know Mr. Sachs very well.

Looking For The Silver Lining When It Comes To Public Employee Unions

What has brought back far more memories for me are the stories about Wisconsin Governor Scott Walker’s effort to take collective bargaining rights away from that state’s government workers. I used to negotiate on behalf of management with public employee unions of the New York State’s public finance authorities. I actually have a perspective from both sides because, before I did that, I was a member of one of those municipal unions.

All the same, I didn’t think I had much to say that would add enough to the debates such that it would be worthwhile to write it up and post. How exactly, after all, would it relate to the Noticing New York concerns that I try to make my focus?

I figured that, if I wrote, I could point out that public employees should have a basic right to organize and that they should also have a right to participate in politics, but there are problems when they have both: It can be a form of unfair extra power during the negotiation process. I know it is problematic because I have been in the situation of being told from on high (as in from a political on-high), not to negotiate a deal that management considered was fair, workable and the most conducive to a good workplace environment. Instead we were told to capitulate to union demands. By quirk of fate and electoral fortune the capitulation didn’t actually happen. I am sure there are corrective fixes for concerns about such meddling but I don’t offer them here.

I am sympathetic to some things that unions negotiate for; I am not sympathetic to all of them. I remember having a special personal antipathy to the idea that pay escalations, beyond cost of living, should be awarded for longevity of service. I think that the pay increases that individuals receive should be handed out by management and earned only in connection with promotions and recognition of merit. On the other hand, negotiating for general benefits is entirely fair. More important, last-in-first-out layoff rules and protections against improper dismissals are especially appropriate, given the uglier vicissitudes of politics. I am sure that little "p" politics can also get rough in the private sector, but at least in the private sector people are supposed to be keeping their eye on the bottom line, not political affiliations.

The last thing I was going to point out was that government unions, pain in the ass that they might be, can be a bulwark against senseless privatizations of government functions that far too often involve some politically connected private company lurking in the background ready to shaft the taxpayers.

The Krugman Revelation

That was about all I figured I was going to be able to say until I read Paul Krugman’s Friday Op-Ed column: Shock Doctrine, U.S.A., by Paul Krugman, February 24, 2011. Krugman points out that Governor Walker is not only trying to bust the government unions but that the 144- page-long piece of legislation with which he is attempting to do it has “hidden deep inside” some “extraordinary things,” among them:
“Notwithstanding ss. 13.48 (14) (am) and 16.705 (1), the department may sell any state-owned heating, cooling, and power plant or may contract with a private entity for the operation of any such plant, with or without solicitation of bids, for any amount that the department determines to be in the best interest of the state. Notwithstanding ss. 196.49 and 196.80, no approval or certification of the public service commission is necessary for a public utility to purchase, or contract for the operation of, such a plant, and any such purchase is considered to be in the public interest and to comply with the criteria for certification of a project under s. 196.49 (3) (b).”
In other words, as Krugman points out, the proposed law contains a “setup for cronyism and profiteering” whereby the governor could sell the state’s public facilities and capital assets (plants supplying heating, cooling, and electricity to state-run facilities):
without taking bids, to anyone he chooses. And note that any such sale would, by definition, be “considered to be in the public interest.”
How to Outfox the Fox That Has Invited Itself In

Privatizing the government’s functions without taking bids? One of my jobs while in government was to fend off the improper privatization of government functions and one of the ways we did that was to initiate a bid process that would be followed if and when functions might be privatized. That was enough; we didn’t have to actually go forward with the bid process (and there wasn’t any ensuing privatization) because once those on the outside who were pressing for the privatization knew it would be subject to a bid process they stopped pressing for the privatization. They apparently didn’t believe that the business would land in their lap if they had to prove through a bid that they could do it better and at less cost than anyone else. Land in their lap? They probably didn’t think they had a chance to get the business at all.

It was good that the functions were never privatized. The ideological vision of privatization was, at the time, a newly promoted idea in the air, but the notion of privatizing these particular functions didn’t originate within the government. It was politically connected schemers on the outside looking for something easy to pick off, but the proposed privatization, a transfer for mortgage portfolio management would have created a disjuncture similar to what ultimately helped cause Wall Street’s financial crisis: Those who were originating a mortgage portfolio would have lost touch with feedback and accountability for the product they were creating, whether it was a successful one or met its intended public purpose.

Fending off this kind of privatization involved sailing through very treacherous waters. There were, of course, the wishes being communicated, politically from on high. I also found that I had to watch out for subordinates theoretically working under me (and the others officially in charge of the Agency) who, paying attention to the political tea leaves, looked to curry favor with the outside schemers by trying to get past us things they suspected would be stymied if they came to my attention. Was our New York State Governor at the time involved when pressure came from on high? I am not saying he was or that he wasn’t, but I will say that even if you are the governor, when faced with external pressure for such privatizations you need political cover and tools to fend them off when the proposals harm the public and don’t make sense. That’s why you want competitive bids to be in your defensive arsenal.

Incredible Legal Fictions

Here above all else is what caught my eye in the Krugman piece: That when these privitizations are done without bid, which is clearly NOT in the public interest, they will by law be deemed “by definition” to be “in the public interest.” It just seems impossible that sensible Wisconsinites could propose to indulge in such legal absurdities and fictions. Then I realized how closely this situation parallels one of the worst abuse situations in New York:
• The Atlantic Yards mega-monopoly was handed out to developer Forest City Ratner at Ratner’s initiative and without any bid. (Ratner is winding up with contiguous ownership of about 30 acres of Brooklyn real estate over the subway lines and a monopoly on about 50 acres of interrelated high-density real estate total.)
• The megadevelopment is essentially a privatization of the much of Brooklyn together with (through abuse) what is supposed to be the public function of eminent domain.
• In order to allow Ratner this cronyistic seizure, New York State public officials, with New York State court justices affirming their pretextual fiction, have similarly had to legally deem this privatization to be “in the public interest.”
So whatever fight is going on in Wisconsin, maybe New York led the way. (The proposed expansion of Columbia University into West Harlem involves a set of misdeeds quite similar to Ratner’ s Atlantic Yards.)

Question for Our Times: Does the Public Get “Sach”ed?

Back to Andrew Cuomo’s friend Jeffrey A. Sachs: I suppose I should care about what the Times is claiming are the questionable things Mr. Sachs has used his inside influence to lobby for. As my family resides in Brooklyn Heights, I should probably care in particular that Sachs is accused of lobbying to close Long Island College Hospital rather than have it merge with SUNY Downstate Medical Center because “Brooklyn Hospital Center, a Sachs client . . . . stood to absorb most of LICH’s patients should that hospital close down.”

The many visits our family members have suddenly needed to make to the emergency room have all been to LICH. The Brooklyn Heights Association (whose annual meeting is tonight) has fought to keep LICH open. I could expand this discussion to go into some Noticing New York how-the-city-is-shaped background about LICH: community parks and playgrounds that were reaarnged to give it needed space, how its recently donated-to endowment is no longer there, the proposed sell-off of LICH buildings to create more condos and co-ops. . . . But I won’t.

The Times’ Blind Eye Toward Blatancy

Let me instead note this: The Times has gotten on its editorial high horse about Jeffrey Sachs. The position on LICH attributed to Sachs in the Times (by vicarious report) is “‘You’re dealing with one hospital. We have four or five there. Why are you dealing with one hospital when the others are falling like dominos?’ ” I’ve worked in the health care area (in fact, in government, I worked on the financing of LICH). I have also worked in the area of more straightforward subsidized development like Ratner’s. The difficult issues respecting which hospitals to close are far more nuanced. (The fingerprints of lobbyists are, consequently, probably harder to detect.) Here though is what the Times editorial on the subject had to say about Cuomo’s ethics in the Sachs situation:
As he pushes for ethics reform, he should call for a tougher lobbying law — one without loopholes. He must also ensure that his good friend does not get — or appear to get — special treatment.
But the Times has had a blind eye when it comes to the issue of “special treatment” when it comes to the more blatant exploits of Forest City Ratner, its real estate business partner in building the Times building. When it comes to Atlantic Yards the issues of abuse are far more stark. And just in case anyone is forgetting: Forest City Ratner is also lobbying Mr. Cuomo. During his campaign for governor Mr. Cuomo took money from Ratner that was never returned by Cuomo despite a number of conflicts of interests pursuant to which it should never have been accepted at all.

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