Laissez-Faire or Laissez-Fail?

June 21, 2012

Prisons, Privatization, Patronage

By PAUL KRUGMAN

Over the past few days, The New York Times has published several terrifying reports about New Jersey’s system of halfway houses — privately run adjuncts to the regular system of prisons. The series is a model of investigative reporting, which everyone should read. But it should also be seen in context. The horrors described are part of a broader pattern in which essential functions of government are being both privatized and degraded.

First of all, about those halfway houses: In 2010, Chris Christie, the state’s governor — who has close personal ties to Community Education Centers, the largest operator of these facilities, and who once worked as a lobbyist for the firm — described the company’s operations as “representing the very best of the human spirit.” But The Times’s reports instead portray something closer to hell on earth — an understaffed, poorly run system, with a demoralized work force, from which the most dangerous individuals often escape to wreak havoc, while relatively mild offenders face terror and abuse at the hands of other inmates.

It’s a terrible story. But, as I said, you really need to see it in the broader context of a nationwide drive on the part of America’s right to privatize government functions, very much including the operation of prisons. What’s behind this drive?

You might be tempted to say that it reflects conservative belief in the magic of the marketplace, in the superiority of free-market competition over government planning. And that’s certainly the way right-wing politicians like to frame the issue.

But if you think about it even for a minute, you realize that the one thing the companies that make up the prison-industrial complex — companies like Community Education or the private-prison giant Corrections Corporation of America — are definitely not doing is competing in a free market. They are, instead, living off government contracts. There isn’t any market here, and there is, therefore, no reason to expect any magical gains in efficiency.

And, sure enough, despite many promises that prison privatization will lead to big cost savings, such savings — as a comprehensive study by the Bureau of Justice Assistance, part of the U.S. Department of Justice, concluded — “have simply not materialized.” To the extent that private prison operators do manage to save money, they do so through “reductions in staffing patterns, fringe benefits, and other labor-related costs.”

So let’s see: Privatized prisons save money by employing fewer guards and other workers, and by paying them badly. And then we get horror stories about how these prisons are run. What a surprise!

So what’s really behind the drive to privatize prisons, and just about everything else?

One answer is that privatization can serve as a stealth form of government borrowing, in which governments avoid recording upfront expenses (or even raise money by selling existing facilities) while raising their long-run costs in ways taxpayers can’t see. We hear a lot about the hidden debts that states have incurred in the form of pension liabilities; we don’t hear much about the hidden debts now being accumulated in the form of long-term contracts with private companies hired to operate prisons, schools and more.

Another answer is that privatization is a way of getting rid of public employees, who do have a habit of unionizing and tend to lean Democratic in any case.

But the main answer, surely, is to follow the money. Never mind what privatization does or doesn’t do to state budgets; think instead of what it does for both the campaign coffers and the personal finances of politicians and their friends. As more and more government functions get privatized, states become pay-to-play paradises, in which both political contributions and contracts for friends and relatives become a quid pro quo for getting government business. Are the corporations capturing the politicians, or the politicians capturing the corporations? Does it matter?

Now, someone will surely point out that nonprivatized government has its own problems of undue influence, that prison guards and teachers’ unions also have political clout, and this clout sometimes distorts public policy. Fair enough. But such influence tends to be relatively transparent. Everyone knows about those arguably excessive public pensions; it took an investigation by The Times over several months to bring the account of New Jersey’s halfway-house-hell to light.

The point, then, is that you shouldn’t imagine that what The Times discovered about prison privatization in New Jersey is an isolated instance of bad behavior. It is, instead, almost surely a glimpse of a pervasive and growing reality, of a corrupt nexus of privatization and patronage that is undermining government across much of our nation.

Again??

This article appeared in the New York Times.

July 3, 2012

Want to Buy a Mutual Fund?

Sometimes it seems as though there’s nothing big banks won’t do to earn people’s mistrust.

Susanne Craig and Jessica Silver-Greenberg reported in The Times on Tuesday that since the crash, several banks have built up their financial advisory businesses to cater to ordinary investors. The aim is to generate steadier returns than those on trading desks — in effect, turning to mom and pop to make up for lost boom-era profit.

Unlike other banks, however, JPMorgan Chase has focused on selling mutual funds that it creates, in the process becoming the only bank among the nation’s 10 largest fund companies.

Some current and former JPMorgan brokers told The Times that they felt pressured to recommend those proprietary products to customers, even when other options were better performing or less expensive. “It said financial adviser on my business card, but that’s not what JPMorgan actually let me be,” said one former broker. “I had to be a salesman, even if what I was selling wasn’t that great.”

The result is more money for JPMorgan and less for the investor. The more assets there are in the funds, the more fees the bank collects for managing them. In one large proprietary portfolio, the bank levies an annual fee as high as 1.6 percent of assets, compared with 1 percent typically charged by independent financial planners.

A JPMorgan spokeswoman said customers want access to proprietary funds and benefit from in-house expertise. She also said the bank always puts clients first.

Be that as it may, what investors have to realize is that the nation’s securities laws still do not impose a fiduciary duty on brokers who give investment advice, which would require them to act in the best interest of their clients. Brokers have to recommend “suitable” investments, but that standard gives them leeway to pitch investments that boost their firm’s profits, exposing investors to misleading pitches and overly expensive products.

Unfortunately, attempts by the Securities and Exchange Commission to write a rule to impose a fiduciary duty have been stymied by financial-industry opposition and weak Congressional support. Trust is essential, but the nation’s laws and rules have not yet raised the standard to a level that fosters trust.

The Poor Stay Poor and The Rich Stay Rich

“We end up balancing the budget on the backs of the poorest people in society.” Why am I not surprised? This articl appeared in the New York Times.

July 2, 2012

Poor Land in Jail as Companies Add Huge Fees for Probation

By ETHAN BRONNER

CHILDERSBURG, Ala. — Three years ago, Gina Ray, who is now 31 and unemployed, was fined $179 for speeding. She failed to show up at court (she says the ticket bore the wrong date), so her license was revoked.

When she was next pulled over, she was, of course, driving without a license. By then her fees added up to more than $1,500. Unable to pay, she was handed over to a private probation company and jailed — charged an additional fee for each day behind bars.

For that driving offense, Ms. Ray has been locked up three times for a total of 40 days and owes $3,170, much of it to the probation company. Her story, in hardscrabble, rural Alabama, where Krispy Kreme promises that “two can dine for $5.99,” is not about innocence.

It is, rather, about the mushrooming of fines and fees levied by money-starved towns across the country and the for-profit businesses that administer the system. The result is that growing numbers of poor people, like Ms. Ray, are ending up jailed and in debt for minor infractions.

“With so many towns economically strapped, there is growing pressure on the courts to bring in money rather than mete out justice,” said Lisa W. Borden, a partner in Baker, Donelson, Bearman, Caldwell & Berkowitz, a large law firm in Birmingham, Ala., who has spent a great deal of time on the issue. “The companies they hire are aggressive. Those arrested are not told about the right to counsel or asked whether they are indigent or offered an alternative to fines and jail. There are real constitutional issues at stake.”

Half a century ago in a landmark case, the Supreme Court ruled that those accused of crimes had to be provided a lawyer if they could not afford one. But in misdemeanors, the right to counsel is rarely brought up, even though defendants can run the risk of jail. The probation companies promise revenue to the towns, while saying they also help offenders, and the defendants often end up lost in a legal Twilight Zone.

Here in Childersburg, where there is no public transportation, Ms. Ray has plenty of company in her plight. Richard Garrett has spent a total of 24 months in jail and owes $10,000, all for traffic and license violations that began a decade ago. A onetime employee of United States Steel, Mr. Garrett is suffering from health difficulties and is without work. William M. Dawson, a Birmingham lawyer and Democratic Party activist, has filed a lawsuit for Mr. Garrett and others against the local authorities and the probation company, Judicial Correction Services, which is based in Georgia.

“The Supreme Court has made clear that it is unconstitutional to jail people just because they can’t pay a fine,” Mr. Dawson said in an interview.

In Georgia, three dozen for-profit probation companies operate in hundreds of courts, and there have been similar lawsuits. In one, Randy Miller, 39, an Iraq war veteran who had lost his job, was jailed after failing to make child support payments of $860 a month. In another, Hills McGee, with a monthly income of $243 in veterans benefits, was charged with public drunkenness, assessed $270 by a court and put on probation through a private company. The company added a $15 enrollment fee and $39 in monthly fees. That put his total for a year above $700, which Mr. McGee, 53, struggled to meet before being jailed for failing to pay it all.

“These companies are bill collectors, but they are given the authority to say to someone that if he doesn’t pay, he is going to jail,” said John B. Long, a lawyer in Augusta, Ga., who is taking the issue to a federal appeals court this fall. “There are things like garbage collection where private companies are O.K. No one’s liberty is affected. The closer you get to locking someone up, the closer you get to a constitutional issue.”

The issue of using the courts to produce income has caught the attention of the country’s legal establishment. A recent study by the nonpartisan Conference of State Court Administrators, “Courts Are Not Revenue Centers,” said that in traffic violations, “court leaders face the greatest challenge in ensuring that fines, fees and surcharges are not simply an alternate form of taxation.”

J. Scott Vowell, the presiding judge of Alabama’s 10th Judicial Circuit, said in an interview that his state’s Legislature, like many across the country, was pressuring courts to produce revenue, and that some legislators even believed courts should be financially self-sufficient.

In a 2010 study, the Brennan Center for Justice at the New York University School of Law examined the fee structure in the 15 states — including California, Florida and Texas — with the largest prison populations. It asserted: “Many states are imposing new and often onerous ‘user fees’ on individuals with criminal convictions. Yet far from being easy money, these fees impose severe — and often hidden — costs on communities, taxpayers and indigent people convicted of crimes. They create new paths to prison for those unable to pay their debts and make it harder to find employment and housing as well as to meet child support obligations.”

Most of those fees are for felonies and do not involve private probation companies, which have so far been limited to chasing those guilty of misdemeanors. A decade or two ago, many states abandoned pursuing misdemeanor fees because it was time-consuming and costly. Companies like Judicial Correction Services saw an opportunity. They charge public authorities nothing and make their money by adding fees onto the bills of the defendants.

Stephen B. Bright, president of the Southern Center for Human Rights, who teaches at Yale Law School, said courts were increasingly using fees “for such things as the retirement funds for various court officials, law enforcement functions such as police training and crime laboratories, victim assistance programs and even the court’s computer system.” He added, “In one county in Pennsylvania, 26 different fees totaling $2,500 are assessed in addition to the fine.”

Mr. Dawson’s Alabama lawsuit alleges that Judicial Correction Services does not discuss alternatives to fines or jail and that its training manual “is devoid of any discussion of indigency or waiver of fees.”

In a joint telephone interview, two senior officials of Judicial Correction Services, Robert H. McMichael, its chief executive, and Kevin Egan, its chief marketing officer, rejected the lawsuit’s accusations. They said that the company does try to help those in need, but that the authority to determine who is indigent rests with the court, not the company.

“We hear a lot of ‘I can’t pay the fee,’ ” Mr. Egan said. “It is not our job to figure that out. Only the judge can make that determination.” Mr. Egan said his company had doubled the number of completed sentences where it is employed to more than two-thirds, from about one-third, and that this serves the company, the towns and the defendant. “Our job is to keep people out of jail,” he said. “We have a financial interest in getting them to comply. If they don’t pay, we don’t get paid.”

Mr. Bright, of the Southern Center for Human Rights, said that with the private companies seeking a profit, with courts in need of income and with the most vulnerable caught up in the system, “we end up balancing the budget on the backs of the poorest people in society.”

Can’t We All Just Get Along….

This appreared in the New York Times.

July 4, 2012

Neighborhood Tensions Flare at Reopened Pool

By LISA W. FODERARO

When McCarren Park Pool reopened in Brooklyn last week after 28 years, it was hailed as a grand civic achievement and, perhaps, a milestone for a new social dynamic in the city, one in which people of different racial, ethnic and class backgrounds could socialize — or at least pursue the same activity — together.

A place where the children of hipster artists, attracted by the upscale restoration with its designer flourishes, would play Marco Polo with youngsters from public housing.

As Jonathan Marvel, the project’s architect, put it, “As architects, it is our goal to contribute spaces that inspire community involvement and face time with each other.”

But within days, that excitement has been replaced by apprehension. Two fights at the pool and a handful of arrests confirmed the fears of some residents that the giant pool, with a capacity of 1,500, might draw an unruly crowd to a neighborhood divided among older residents of Italian and Polish descent, gentrifying newcomers and Hispanic families.

What should have been a simple kickoff to summer in New York City has turned fraught, with capacity crowds and racially charged debates and complaints that the city should have committed more resources to the opening, from sanitation to security.

“I’m not happy and not because of the pool, but because of the fighting,” said Tony Otero, 71, who has lived near the pool for 25 years. “It’s not good for the community, it’s trouble. All kinds of kids are coming here.”

Hot weather and the pool’s reopening generated so much interest that by Friday, a day after its opening, the place was reaching its capacity early in the day. With a line of hundreds snaking around the block on the weekend, the crowd outside grew restless. Nearby merchants complained that pool visitors tossed litter on the ground, tagged buildings with graffiti and relieved themselves in public.

Inside the pool on Friday, teenagers scuffled with a lifeguard who had ordered them to stop doing back flips and the pool closed an hour early. On Monday, two police officers were injured by swimmers who also persisted in doing backflips. Three men were arrested and charged with assault in the second degree, inciting to riot, criminal nuisance and menacing.

Meredith Chesney, owner of Mousey Brown beauty salon near the pool, said she came out Saturday morning to discover three new tags on her roll-down security gate.

“I thought, ‘O.K., it’s Brooklyn, it’s not that surprising,’ ” she said. “But then, 30 minutes later, I went outside to water my plants and I found someone had defecated right in front of the salon. It’s shocking.”

Still, Ms. Chesney did not fault the would-be pool users; she was holding city officials responsible for not thinking through the potential trouble. There are bathrooms inside McCarren Pool, on Lorimer Street, and in the park itself, but she urged portable toilets for the line outside. (On Wednesday, signs were installed directing those waiting in line toward the park bathrooms.)

“It’s almost Machiavellian how our public administration thinks they can realize these grand ideals for giant public pools without real infrastructure, like bathrooms,” she said. “It’s really setting the public up to fail. It’s very disheartening.”

McCarren Pool, which holds a staggering 1,057,914 gallons of water, is one of the biggest in the city and has a complicated history. It opened along with 10 others in 1936 in the depths of the Depression with Works Progress Administration money, under the auspices of Mayor Fiorello H. La Guardia and the parks commissioner and master builder Robert Moses. After sliding into disrepair, McCarren was shuttered in 1984.

While the other 1936 pools were all renovated, McCarren remained stubbornly closed, its reopening delayed not only by lack of money, but also by a debate over its future. Some preservationists lobbied for a full-scale restoration, while neighborhood activists demanded its demolition, in part to prevent outsiders from using it.

Some of the blog posts and comments in recent days have echoed the racially tinged dialogue of the 1980s, with neighbors of the pool blaming teenagers from outside the community. In fact, two of the men arrested came from a public housing complex, the Marcy Houses, on the border of Williamsburg and Bedford-Stuyvesant. The other lives across the street from the pool.

The area around the pool has changed significantly in the past few years. Census data show that both the Williamsburg and Greenpoint neighborhoods, which border the pool, have had an influx of white residents in the past decade.

For example, in Williamsburg, which has attracted waves of artists in recent years, the non-Hispanic white population increased by 24,000 from 2000 to 2010, while the Hispanic population fell by 10,000. Hispanics now make up 33 percent of the 111,000 residents, with blacks representing 6 percent.

Some of the pressure on McCarren reflects the fact that the neighboring communities of Bushwick and Bed-Stuy lack large outdoor pools. On Tuesday, a number of visitors to McCarren were from Bushwick, waiting on a long line after the pool filled to capacity.

“Just because you come from another neighborhood or another borough or the other side of Brooklyn doesn’t mean you’re the one causing trouble,” said Luis Morales, 42, of Bushwick. “It has to do with a few individuals who are spoiling it for everybody. There are good ones and bad ones, from every neighborhood. Judging isn’t right. You could be black, white, green — it doesn’t matter as long as you’re not bothering anyone.”

The city’s Parks Department defended the pool’s first week. “Thousands of New Yorkers are enjoying McCarren Park Pool’s beautiful renovation, getting exercise and keeping cool during this heat wave,” said Kevin Jeffrey, the Brooklyn parks commissioner. “The few minor incidents have not impacted the vast majority of pool attendees, just as similar incidents at pools across the city don’t stop New Yorkers from enjoying themselves.”

Still, the problems at McCarren Pool have prompted the Police Department to put plainclothes officers at the site, and one of the police’s “temporary headquarters vehicles” is parked nearby.

Alexander D. Garvin, a professor of urban planning and management at the Yale School of Architecture and the author of “Public Parks: The Key to Livable Communities,” credited the public pools with providing a critical outlet for all New Yorkers. “The swimming pools are one of the great legacies of Robert Moses,” he said. “They were designed to be very grand, on a level of the public works of ancient Rome.”

He added: “People say that in those days residents lived in tenements and they were crowded and that the pools were an extraordinary release in the hot summer. But guess what? The summer of 2012 is a hot summer, and we have immigrants living several families to one apartment because there is not adequate housing. I don’t see an extreme difference between the need for these pools then and now.”

Additional reporting was contributed by Joseph Goldstein, Juliet Linderman and Eric P. Newcomer.