Privatization For Amtrak?

When I said in my recent post about Republican economic policies that privatization can sometimes be a good idea, I could have been referring to proposed solutions for improving rail service along the Northeast Corridor.

Now, I'm not sure this is the way to go. Certainly, any private operator would have a lot of convincing to do, and need a lot of public help, if necessary infrastructure improvements and service upgrades were to come to the aging rail system.

But something needs to be done. There were three system shutdowns in the last few days, one of which stranded me at Penn Station for two hours on Thursday.

These are not like airport delays, almost always caused by weather conditions. These problems were the result of stress on a system built over a century ago and chronically underfunded by Washington.

Even Republicans in Congress acknowledge that, in the Northeast, Amtrak is vital to mobility and commerce, though that didn't prevent some of the usual jackass-ery when a privatization proposal for the Northeast Corridor was floated this week. Rep. John L. Mica, head of the House transportation panel, cited "40 years of costly and wasteful Soviet-style operations." (My guess is Soviet trains probably ran better.)

Could private operators do a better job? It's worked well for freight rail. The demand is there. It should be on the table.

The Inquirer printed a useful editorial on the subject this week.

A Shield for Wal-Mart

Congratulations to Justice Antonin Scalia for trumpeting a blueprint for large corporations to get by with discriminatory practices! According to the New York Times, he had this to say this week about Wal-Mart's strategy of granting local managers great leeway in hiring and promotions while officially having a corporate policy forbidding gender discrimination:

“On its face, of course, that is just the opposite of a uniform employment practice that would provide the commonality needed for a class action. It is a policy against having uniform employment practices.”

I wonder if Scalia is aware that Wal-Mart has long been accused of using local managerial autonomy as a shield to protect itself against claims of unfair worker practices. A company that micromanages every aspect of store appearance, inventory and accounting is said to have a wink-and-nod understanding with managers when it comes to bending labor rules.

According to Nelson Lichtenstein's "The Retail Revolution: How Wal-Mart Created a Brave New World of Business," the folksy, we're-one-big-family ethos promoted in stores has enabled individual managers to do things like casually tell employees to straighten up a messy department after they've clocked out, almost as if they're just asking for a friendly favor. Lichtenstein points out that Wal-Mart's high volume, low-margin business model puts enormous pressure on store managers to shave every possible penny off labor costs. Rather than being a written policy, practices like off-the-clock work are "built in" to the culture of the company.

None of this proves Wal-Mart discriminates against women, or even that the same incentives are there to avoid promoting women as are there to pay employees less. But it should raise a red flag that the lack of, as Scalia puts it, "a common answer to the crucial question, why was I disfavored?" does not mean Wal-Mart does not discriminate. It could mean the exact opposite.

For a good summation of the history and practices of Wal-Mart, see my write-up about Lichtenstein's book.

Eight things I wish people would understand about the Republican approach to economic policy.

1. Deficit reduction does not lead to economic health. Economic health ENABLES deficit reduction—a la the Clinton administration. When George W. Bush took office, the federal budget was in the black.

2. Slashing the federal budget will not lower your taxes. It shifts the burden of service provision to local and state governments, which then must pick up the slack by raising taxes—if not immediately, than eventually. Just look at the mess unfolding in Texas. Denial cannot drive their budgeting approach forever.

3. Lower taxes do not automatically equal job creation by freeing up more money. If this were true, big business in this country—flush with cash from the recent run-up on the stock market—would be on a hiring spree. They aren't.

4. Job growth from lower taxes cannot wipe out the federal deficit. It did not work in the Reagan years, and it won't work now.

5. Privatization does not necessarily mean greater effectiveness or efficiency. Look at for-profit prisons or the outsourcing of security and other contracts in Iraq. While privatization of public services is sometimes a good idea, as a blanket policy it's a terrible plan. With privatization comes a loss of transparency that can create its own web of corruption and special interests rivaling anything that has ever occurred in the public sphere.

6. Much of the rhetoric coming from Republicans in Congress is based on false assertions about the recent past. It seems ridiculous to even have to point this out, but the 2009 Obama stimulus is not the primary reason for our debt situation. That would be the two Bush tax cuts (2001 and 2003), the wars in Afghanistan and Iraq, and the recession. Also—just to be clear—TARP passed under Bush.

7. The Obama 2009 stimulus does not disprove Keynesian economics. Nearly 40 percent of the money spent on the plan went to tax cuts. In addition, many economists feel the effort was too timid overall to achieve its goal of kick-starting the economy. More generally, drawing conclusions about the correlation between government spending and economic growth is difficult and the debate among economists continues (unlike what some conservative bloggers would have you believe). Some very good empirical studies conclude there is a positive correlation between government spending and GDP growth. Certainly, robust government spending—and even large deficits—do not necessarily prevent economic expansion, as was proven in the immediate aftermath of World War II.

8. The vaunted prosperity created by Reagan was a house built on sand. Since the '80s, our economy has been propelled by 1) The housing market; 2) The rise of two-income households; and 3) Rising consumer debt, with an added boost from ever-cheaper goods from China. Well, housing is a bust; in most households, there are no more adults to go to work (unless you practice polygamy); Americans are maxed out credit card-wise; and the price of imported goods is starting to rise. There is no Republican plan that can bring to the table what the country most needs: real wage growth. (Not coincidentally, the only uptick in real wages in the last 35 years occurred during the Clinton administration.)