October 14, 2004


Europe's Private Affair: From prisons to hospitals to toll roads, the next chapter in the dismantling of the public sector has arrived (Carol Matlack, with Raphael Kahane, 10/18/04, Business Week)

The inmates won't feel any freer. But the French government could get a little more fiscal breathing room as it opens 18 new prisons over the next four years. The prisons will be built and run by private contractors who will be responsible for maintenance, food service, even staff training -- although the prison guards will remain on government payroll. France's Justice Ministry predicts the new facilities will cost at least 8% less to operate than traditional state-run prisons. And the contractors, rather than the government, will have to line up the estimated $1.23 billion financing needed for construction. "If the current experiments prove successful, we could well expand [them] to other infrastructure projects," says Guy Garcin, who oversees the projects for the justice ministry.

Get ready for the next chapter in European privatization: public services. From hospitals and schools to airports and toll roads, governments are turning to the private sector for public-works projects traditionally handled by the state. These so-called public-private partnerships are long established in the U.S. and have been growing rapidly in Britain, where $18 billion in such deals has been sealed since 2000. But until recently, they have barely made a dent on the other side of the English Channel because of opposition from public-sector labor unions and greater public acceptance of big government. All that's changing fast, as cash-strapped governments adopt new laws and regulations.

From 2000 through the end of last year, Continental governments approved nearly $4 billion in partnership agreements. Planned contract awards in France, Germany, and elsewhere will add billions more in the next few months. "The potential is huge," says Alain Madelin, a French parliamentary deputy who sponsored legislation that took effect this year, allowing several projects to go forward.

Transcript: Third Presidential Debate (Arizona State University, Tempe, Ariz., October 13, 2004, Debate Transcript From FDCH E-Media, Inc.)
SCHIEFFER: Mr. President, the next question is to you. We all know that Social Security is running out of money, and it has to be fixed. You have proposed to fix it by letting people put some of the money collected to pay benefits into private savings accounts. But the critics are saying that's going to mean finding $1 trillion over the next 10 years to continue paying benefits as those accounts are being set up.

So where do you get the money? Are you going to have to increase the deficit by that much over 10 years? [...]

PRESIDENT BUSH: I believe that younger workers ought to be allowed to take some of their own money and put it in a personal savings account, because I understand that they need to get better rates of return than the rates of return being given in the current Social Security trust.

And the compounding rate of interest effect will make it more likely that the Social Security system is solvent for our children and our grandchildren.

I will work with Republicans and Democrats. It'll be a vital issue in my second term. It is an issue that I am willing to take on, and so I'll bring Republicans and Democrats together.

And we're of course going to have to consider the costs. But I want to warn my fellow citizens: The cost of doing nothing, the cost of saying the current system is OK, far exceeds the costs of trying to make sure we save the system for our children.

SCHIEFFER: Senator Kerry?

KERRY: You just heard the president say that young people ought to be able to take money out of Social Security and put it in their own accounts.

Now, my fellow Americans, that's an invitation to disaster.

The CBO said very clearly that if you were to adopt the president's plan, there would be a $2 trillion hole in Social Security, because today's workers pay in to the system for today's retirees. And the CBO said -- that's the Congressional Budget Office; it's bipartisan -- they said that there would have to be a cut in benefits of 25 percent to 40 percent.

Now, the president has never explained to America, ever, hasn't done it tonight, where does the transitional money, that $2 trillion, come from?

He's already got $3 trillion, according to The Washington Post, of expenses that he's put on the line from his convention and the promises of this campaign, none of which are paid for. Not one of them are paid for.

The fact is that the president is driving the largest deficits in American history. He's broken the pay-as-you-go rules.

I have a record of fighting for fiscal responsibility. In 1985, I was one of the first Democrats -- broke with my party. We balanced the budget in the '90s. We paid down the debt for two years.

And that's what we're going to do. We're going to protect Social Security. I will not privatize it. I will not cut the benefits. And we're going to be fiscally responsible. And we will take care of Social Security.

SCHIEFFER: Let me just stay on Social Security with a new question for Senator Kerry, because, Senator Kerry, you have just said you will not cut benefits.

Alan Greenspan, the chairman of the Federal Reserve, says there's no way that Social Security can pay retirees what we have promised them unless we recalibrate.

What he's suggesting, we're going to cut benefits or we're going to have to raise the retirement age. We may have to take some other reform. But if you've just said, you've promised no changes, does that mean you're just going to leave this as a problem, another problem for our children to solve?

It's not easy to fall behind the French in recognizing that Statism is dead.

Posted by Orrin Judd at October 14, 2004 11:41 AM
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