Summary of "The Truth about 'Government Waste,' Privatizing Public Goods, & Turning Citizens into Customers" – The Money with Katie Show

Release Date: February 26, 2025

Introduction

In the February 26, 2025 episode of "The Money with Katie Show," hosted by Katy Gaddytasan of Morning Brew, the discussion centers on the intricacies of government waste, the privatization of public goods, and the transformation of citizens into customers. Joining Katy is Donald Cohen, author of "The Privatization of Everything" and Executive Director of the Research and Policy Center in the Public Interest. Together, they explore how economic, cultural, and political forces intersect with personal finance and public services.

Overview of Privatization and Government Waste

Katy opens the conversation by critiquing the long-standing narrative that portrays government as inefficient. She argues that this perspective has been a 40-year campaign to divert public funds into private hands, masking ulterior motives with seemingly common-sense beliefs. At [00:33], Katy states:

"They wrap it in a set of beliefs that have become common sense in America. Government is bad. We're inefficient... they really just have their hand in the cookie jar."

Donald Cohen concurs, highlighting the misrepresentation and amplification of misinformation in media coverage regarding privatization efforts.

Examples of Privatization in Action

The episode delves into specific instances where privatization has significantly impacted public services:

1. Chicago Parking Meters ([15:46] - [17:43]):

   • Katy: Explains how Chicago's decision to privatize parking meters led to exorbitant rate increases as contractors sought profit margins.
   • Donald: Analyzes the financial implications, noting that a company’s 20% profit margin resulted in $1 billion annually being redirected from public funds to shareholders.

2. Medicaid Privatization in Iowa ([17:43] - [19:52]):

   • Katy and Donald: Discuss how privatizing Medicaid did not reduce government expenditure but instead funneled money into private profits. Donald emphasizes that despite claims of efficiency, costs remained unchanged or even increased.

3. EBT Card Management ([21:38] - [22:24]):

   • Katy: Highlights the issue of exorbitant executive salaries in companies managing EBT cards, pointing out that high fees are imposed on recipients.
   • Donald: Illustrates the disconnect between government contracts and private profits, emphasizing how public funds are misallocated.

4. Private Prisons ([21:50] - [22:53]):

   • Katy and Donald: Examine the negative consequences of privatizing prisons, including reduced wages for corrections officers, increased violence, and substandard living conditions for inmates.

Theoretical Perspectives

Donald Cohen presents his thesis that American capitalism is fundamentally about state-funded corporate power rather than true free markets. He argues that what is often touted as market efficiency is actually the government's substantial funding of large corporations, enabling them to extract value without direct public benefit.

At [01:10], Donald states:

"American capitalism is not really about free markets, it's about state funded corporate power."

This perspective challenges the conventional wisdom that privatization inherently leads to better efficiency and cost savings.

Elon Musk's Role in Privatization

A significant portion of the discussion focuses on Elon Musk's contradictory stance on government involvement. Despite Musk’s companies, SpaceX and Tesla, having benefited from at least $18 billion in federal contracts, he advocates for slashing government spending and reducing its size.

At [10:17], Katy observes:

"Billionaire businessman and Austin resident Elon Musk is leading an unprecedented effort to slash government spending, even though his own companies have benefited from government contracts over the past several years."

Donald Cohen criticizes Musk's hypocrisy, pointing out that Musk is one of the greatest beneficiaries of public funding while simultaneously pushing for privatization and reduced government expenditure.

Historical Context of Privatization

Katy provides a historical overview of privatization efforts in the United States:

1. New Deal Era and Post-WWII ([32:55] - [35:02]):

   • Massive public investments like the GI Bill fostered a robust middle class through state involvement in the economy.

2. Reagan Administration ([35:02] - [37:08]):

   • Despite attempts, Ronald Reagan's efforts to significantly privatize large segments of the federal government largely failed, but they set the stage for future privatization initiatives.

3. Clinton's Policies ([37:08] - [38:12]):

   • Bill Clinton advanced privatization through policies like the Temporary Assistance for Needy Families (TANF), which allowed states considerable discretion in allocating federal funds, often diverting them to politically motivated projects.

Public vs. Private Control Over Public Goods

Katy and Donald explore the fundamental differences between public and private control of essential services:

• Public Control: Ensures equitable access, accountability, and that services meet the collective needs of society.
• Private Control: Prioritizes profit margins, often leading to increased costs and reduced service quality.

Katy defines privatization as:

“Private control over public goods,” [40:23]

They discuss how privatization shifts responsibility from public to private sectors, often resulting in higher costs and limited access for the general public.

The Impact of Privatization on Public Services

The conversation highlights the tangible impacts of privatization on various public services:

• Infrastructure ([15:46] - [40:52]): Privatized roads and bridges lead to looming tolls with added profit margins, burdening taxpayers without proportional improvements.
• Healthcare: Privatization in sectors like Medicaid doesn't achieve cost savings but redirects funds into private profits, undermining public health objectives.
• Education: Privatizing aspects of education can lead to fragmented systems where public oversight is weakened, often to the detriment of educational quality and accessibility.

Privatization of Federal Agencies

The episode touches upon ongoing efforts to privatize federal agencies, such as the Department of Veterans Affairs (VA). Katy and Donald discuss how these moves are often politically motivated, aiming to dismantle government roles while benefiting private interests.

At [43:24], Katy remarks:

"Privatize the big stuff. No question about that."

Donald adds that the Truman administration has long pursued such agendas, but recent efforts under Trump and Musk are more aggressive.

Conclusion and Takeaways

In their concluding remarks, Katy and Donald emphasize the necessity for citizens to reclaim control over public goods and services. They advocate for a paradigm shift from viewing services through a consumerist lens to understanding them as collective responsibilities essential for societal well-being.

Donald Cohen highlights the urgency of rebuilding trust in government and reinforcing the concept of public vs. private interests to ensure policies benefit the broader population rather than private elites.

Katy encapsulates the discussion with:

"We have to rebuild trust and government. But I think the more important part is we have to rebuild trust and commitment to the public, to the idea of public that there are things we gotta do together." [72:21]

Notable Quotes with Timestamps

• Katy Gaddytasan [00:33]:

  "They wrap it in a set of beliefs that have become common sense in America. Government is bad. We're inefficient... they really just have their hand in the cookie jar."

• Donald Cohen [10:37]:

  "For the person who benefited from that much public funding to be now taking a hacksaw to the federal government, it is almost too much to bear."

• Katy Gaddytasan [26:43]:

  "Are you spending the money in the right place?... there is a poverty industry like EBT cards, like Medicaid, we're not spending enough of it, but we're spending, you know, we're taking some off the top and all of that."

• Donald Cohen [36:34]:

  "I'm from the government and I'm here to help."

• Donald Cohen [68:59]:

  "...the profit motive is not like a benign and benevolent force. It's not something that you can overlay over something. A market is just simply not the best way to provide something that everybody needs."

Final Thoughts

The episode serves as a compelling critique of the ongoing privatization trend in the United States, underscoring the consequences of shifting public responsibilities to private entities. By dissecting real-world examples and providing historical context, Katy Gaddytasan and Donald Cohen advocate for a renewed commitment to public control over essential services, emphasizing that the well-being of society depends on collective investment and shared responsibility.

For listeners interested in further exploring these themes, Donald Cohen’s book "The Privatization of Everything" offers an in-depth analysis, while future episodes may feature discussions with experts like Stephanie Kelton on Modern Monetary Theory (MMT) and its implications for public finance.

This summary aims to provide a comprehensive overview of the podcast episode, highlighting key discussions, insights, and notable quotes to inform and engage those who have not listened to the show.