December 6, 2002

Should it come as any surprise that President Bush has decided to privatize 800,000 federal jobs, decrease the pay raise of those federal employees who earn on average less than $35,000 a year, while at the same time re-introducing a Reagan-era policy of giving bonuses to political appointees, who on average earn more than $100,000 annually?

This decision is wholly ideological, and displays real understanding on the part of the administration. By privatizing career federal jobs, the government will be more flexible in terms of adding and subtracting whole sectors of jobs at once. What will be the consequences?

1. We can't say from the onset whether wages for those privatized jobs will be higher or lower; the market will decide, and probably in the short term wages will go up, although there will certainly be a redistribution of people and jobs. What we can say with certainty, however, is that job security will decrease, and from the ideological position that "the market knows best," job insecurity is a plus, not a minus. So the first consequence we can see is that soon to be former federal employees will lose job security and may lose or gain income.

2. Do we think that 800,000 in-house jobs will be replaced by 800,000 of the same jobs but outsourced? Probably not. The flexibility allowed by outsourcing is the main goal. The Bush administration probably wants to eliminate whole sectors of jobs, and by 'privatizing' them and then refusing to actually re-engage those sectors as contractors, the Administration will have found a politically shielded way to downsize, since they won't be firing people, they will "not be picking up those contracts." And of course, we should expect the downsizing to follow the political agenda: fewer regulatory employees; fewer service sector employees.

It will be tough for the anti-Bush camp to follow the data and pin job losses on the policy. Why? Because federal jobs are spread across all the States, because the 'downsizing' will happen over time (based on the renewal or termination of contracts), and because it happens under the American mantra of 'privatization.' So the policy implementation inherently carries with it a layered smoke screen which will deflect criticism from and filter blame for the rise in national unemployment which, all things being equal, can be attributed to this policy.

3. The policy is an anti-union measure. Unions can only put pressure on firms internally. They can't win external contracts. So even if former federal employees remain in one union or another, they will have lost significant power because a market-contract stands between them and their principle client, the government. Herein lies the most blatant attack on Bush's enemies, the unions, and the least savvy aspect of this policy. This suggests that Bush is willing to risk the political fallout from unions, but there is no love lost there anyway. It underlines, in fact, the impotence of the unions.

4. Outsourcing work to contractors requires an increase in the number of in-house managers who will oversee the contractors. These in-house people are political appointees, and they are the ones subject to the in-house bonuses that Bush has reinstated. Bush is effectively firing 8 years of Clinton-followers who swelled the ranks of the civil service, while paying off his political friends who will oversee the implementation of his political vision - which itself does not amount to much more than helping his friends and punishing his enemies.

5. The Bush policy displays a real understanding of the value of 'market' and 'privatization,' on the one hand, and 'in-house hierarchy' on the other. Bush effectively is leaving his enemies to the stormy weather of the market, which we know right now is terrible (national unemployment is at 6%), while bringing his friends in-house, protecting them from the market. This tells us above all that the Republican agenda is not about free-markets, but rather about steering the ravages of the free-market to undermine its enemies. In Chicago, we recognize this for what it is: patronage.

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