Privatization increases or decreases the cost to the consumer?

[begin_within]

I believe privatization invariably increases the cost of a product or service to the consumer. Yet I state this and someone always posts a reply arguing against it, such as:

"Actually Yahoo user. The cost to the consumer goes down everytime. Because the Government has a 41 percent operating cost. A private business operates with a maximum of 18%. That leaves a profit margin on 23% which is very high. Walmart is 3%, oil is 8%, grocery stores 16% . You obviously have no clue!"

Are there any studies on what happens to consumer prices after privatization?

[WinkyDink]

1. Seriously?

[arcane1]

2. Wouldn't government have a 100% operating cost?

[hollysmom]

5. I guess I don't get the joke here.

[upaloopa]

3. Look at history. We privatized lot's of military jobs

and the cost have gone up.

[sinkingfeeling]

4. Here's one on privatizing liquor sales....

http://blog.oregonlive.com/myoregon/2012/09/washington_liquor_privatizatio.html

Washington liquor privatization increases consumer cost

The Wall Street Journal recently reported that Washington shoppers are paying 17 percent more for distilled spirits since the Costco initiative was passed.

http://www.imf.org/external/pubs/ft/wp/1999/wp9968.pdf

The IMF says this, "In the short run, however, it can lead to job losses and wage cuts for workers and higher prices for consumers."

And here's something to disprove the statement you quoted:



http://www.motherjones.com/kevin-drum/2012/01/chart-day-federal-programs-surprisingly-well-run

[tk2kewl]

6. even if you were to concede that operating costs are greater

the profit margin is zero for government, whereas the sky is the limit for the privateers' profits

and the government's operating costs are higher because they don't treat people as if they are just another operating expense like staples or pencils

[louis-t]

7. Wow, the quote is so full of bs.

The poster 'assumes' that there is some sort of magical limit on how much private business spends on operating cost. Poster makes a statement that cost to consumer goes down every time, then completely fails to prove it.

[Fire Walk With Me]

8. Privatization removes the people's right to choose and to redress grievances, the ultimate cost.

When privatization affects government systems, this comes into play:

“Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power”

~Benito Mussolini

[KansDem]

9. Equine excrement

Just take Medicare, for example:

Study: Privatized Medicare would raise premiums

By RICARDO ALONSO-ZALDIVAR, Associated Press

WASHINGTON (AP) — Nearly six in 10 Medicare recipients would pay higher premiums under a hypothetical privatized system, with striking regional differences leading to big hikes in some states and counties, a study released Monday finds.

The report by the nonpartisan Kaiser Family Foundation immediately became ammunition in the presidential campaign.

Republican Mitt Romney and his running mate, Wisconsin Rep. Paul Ryan, have proposed changing Medicare to a "premium support" system dominated by private plans that are paid a fixed amount by the government. President Barack Obama says replacing the current open-ended Medicare benefit would shift costs to seniors.

--more--
http://www.usnews.com/news/politics/articles/2012/10/15/study-privatized-medicare-would-raise-premiums

and...

Study: Privatizing government doesn’t actually save money

The theory that the federal government should outsource its operations to private firms usually rests on a simple premise: It saves money. But why should we believe it saves money? Often the argument is made by pointing to salaries for public- and private-sector employees in comparable jobs and noting that the private-sector employees make less. So outsourcing the task to the private worker should be cheaper, right? That’s the theory, at least. But a new study from the Project on Government Oversight suggests that this theory is quite wrong. In many cases, privatizing government turns out to be far more costly.

For its study, POGO decided to do something different than the usual method of comparing public- and private-sector salaries. Instead, the group scrutinized the actual contracts that were awarded to companies for specific tasks and compared them with what it cost the government to do the same job in-house. They looked at 550 contracts — all deemed “fair and reasonable”— for 35 different jobs across government agencies, from auditors and engineers to food inspectors and groundskeepers.

As it turned out, the private contractors cost more in 33 of those 35 jobs. On average, the service contracts paid private employees 83 percent more than the government would pay a federal employee doing the same job (and that’s even taking into account health care benefits, pensions, and so on). There’s a long debate about whether workers in the private sector actually make less than their federal counterparts, but it turns out this is all beside the point. The POGO analysis found that private contractors working with the government make, on average, twice as much as a comparable private-sector worker.

--more--
http://www.washingtonpost.com/blogs/ezra-klein/post/study-privatizing-government-doesnt-actually-save-money/2011/09/15/gIQA2rpZUK_blog.html

Taxes go to the government which then come back as services. Period.

Anytime you insert a "middleman" as you do when you "privatize" government, you have increased costs since the middleman needs to take his cut. The person who posted the "answer" in you OP is the one without a clue.

[begin_within]

10. OK thanks

[ieoeja]

11. My reply would be:

"Are you actually claiming that when a business gets a government contract they do their utmost to keep costs down instead of sucking up all the taxpayer money they can?"

[Luminous Animal]

12. You are referring to the cost borne by citizens. It appears that the OP is referring

to the end user. Which can also be citizens.

[ieoeja]

16. They are still granted a government mandated monopoly.

They are still going to charge their "customers" out the ass.

When Chicago privatized lakeshore parking garages, LAZ Parking immediately doubled the rates while adding nothing.

When Chicago privatized street parking, LAZ Parking did upgrade meters to lower costs. So the Rightist argument is right! By saving costs LAZ Parking was able to quadruple rates.

Oh, that's right. The rates INCREASED 400%, not decreased. But then LAZ Parking has a 75 year lease and a monopoly on street parking with the full backing of the government. So why *not* raise rates?

[justabob]

13. +1

[TheKentuckian]

14. Depends if you have progressive taxation and if you are wealthy or not.

Privatization is far cheaper for the wealthy because most people have to be able to afford the service provided or shit breaks down and quickly their compounds are surrounded by angry folks and walking over bodies (living or dead) to move about outside the enclave.

Of course for the average person and certainly for the large chunk that falls below that, costs go up and services become unobtainable for a significant minority.

The argument is about who is going to do the heavy lifting on the cost of a service in general demand.

Sure control, ability to make a buck, and various interpretation on systemic efficiency are important but a lot of that can be and is negotiated either way. The burning question is who is going to pay the tab and to what degree.

[Samantha]

15. In 2003, when George W. Bush* wanted to privatize Social Security

Economists then estimated a 3 trillion dollar transition fee. The Government would not pay that fee. Neither would the party handling the new account. The only way it could be accomplished would be to make the participants pay for it. That would necessarily come from a reduction in benefits, with each person paying a share.

If the estimate was 3 trillion dollars in 2003, what do you estimate it would be in 2013?

Sam