Food stamp participation has increased at 10 times the rate of job creation

[Adam Wood]

Where do you get your information on this? I would love to see the actual figures.

Good grief. It's common knowledge. Do you actually think that the federal government can do ANYTHING more efficiently than private industry?


Lots and lots of examples of savings through contracting out benefit programs, and not just to JP Morgan (they just happen to be the ones to hate at the moment):

http://spacecoastdaily.com/2013/01/f...card-contract/
http://www.paybefore.com/assets/0/58...8243FD91D7.pdf
http://investor.shareholder.com/jpmo...leaseid=397042

Even liberals agree that this is a better way of doing things, even if they have to do so in a backhanded manner:

Administrative costs for the food stamp program are at the lowest they've been since the 1990s.

Guess what happened in the '90s. That's right: food stamps moved to EBT cards administered by private companies instead of paper coupons issued by the federal government.



This is just a start. There are plenty more. And even if there weren't, it's a no-brainer: private administration is, almost without exception, vastly less expensive that the federal government doing something.

[Elspeth]

Good grief. It's common knowledge. Do you actually think that the federal government can do ANYTHING more efficiently than private industry?

When private industry does things on its own, I agree with you. But when private industry acts as middleman between the government and the people, it actually makes things MORE expensive and inefficient, not less. Remember, our taxes pay for the government to provide a service. As slow and inefficient as government is, the private contractor makes it worse because the private company has shareholders to pay and profits to make. You actually compound the problem. I know whereof I speak on this.


I will, however, do you the respect of actually reading your sources. I can see you haven't read mine, but that's ok.

I will read yours and get back to you.

[Elspeth]

Ok let's start here:

Florida Negotiates New EBT Card Contract

By Space Coast Daily // January 3, 2013 // No comments

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Will Offer Savings of $21 Million Over Three Years

TALLAHASSEE, FLORIDA – A new Florida Department of Children and Families contract to process Electronic Benefit Transfer services for clients who receive food and cash assistance will be implemented in 2013, saving taxpayers at least $8.6 million for the next fiscal year and an estimated $21 million over the span of the next three years.

A couple of comments here:

1. The savings are estimated, not actually demonstrated.

That isn't a problem if honest people are doing the estimating. But the government ALWAYS overestimates what it is going to need. There is an issue in government: use it or lose it. If you work for a government agency and have actually (God forbid!) saved money over the year, Congress or the state legislature will give you that percentage less the following year. That is why there are year end buying sprees on shit nobody needs to use up those dollars. There is simply no incentive for underestimating or even accurately estimating needs. So my educated guess is that Florida is not saving nearly as much as it is claiming.

2. It is possible that what there is of cost savings is labor based. Instead of paying state workers a decent salary, health insurance, and a pension, JP Morgan moved the call centers to India and has cut its labor costs to the bone. Not necessarily bad, but think about the product: food stamps are for people with economic need. If you cut all those state workers, you put them in the position of actually needing food stamps instead of being self sufficient. In the end, that costs society more.

3. Inertia: Once a private company has the contract, and it exercises a monopoly (like JP Morgan), it can raise rates on future contracts to whatever it wants. This is because the state infrastructure for handling food stamps has now been dismantled, and it would take just as much money (or more) to start it up again as it would to pay JP Morgan's higher and higher rates. Think of JP Morgan's "cost savings" for the next few years as the way foreign companies gain American markets. First, you underprice your product to undercut the American competitor. Then, once you have the American competition out of business, the foreign company can jack up its rates to MORE than the American competitor was charging. Since the American company is gone, people are forced to pay the foreign company's rates, especially if they are a monopoly. I imagine that JP Morgan was willing to take less in exchange for gaining the food stamp monopoly. Don't be surprised if in a few years JPM jacks up the rates.

You have to understand my philosophy:

I believe that the public and private sector should remain absolutely separate. That was one of my big big beefs with Obamacare (among many others). You have a beast with two backs there. Once the government and private insurance became aligned as one, the insurance rates actually WENT UP instead of going down, as we were promised. My own insurance jumped 85% since Obamacare: I pay for my own. I am all for private industry on its own and amazingly efficient. I am all for a limited public sector that can do non-profit kinds of things for the public good--but in a limited fashion. However, once you join the two in an unholy alliance, you get the absolute WORST of both worlds: government (socialist) control with unlimited profiteering (uncontrolled by real market forces). That to me is practically demonic.

[DumbAss Tanker]

Yay for the Obama recovery! Just think how bad it would be if he hadn't saved or created 57 gazillion jobs!

[Adam Wood]

Ok let's start here:



A couple of comments here:

1. The savings are estimated, not actually demonstrated.

That isn't a problem if honest people are doing the estimating. But the government ALWAYS overestimates what it is going to need. There is an issue in government: use it or lose it. If you work for a government agency and have actually (God forbid!) saved money over the year, Congress or the state legislature will give you that percentage less the following year. That is why there are year end buying sprees on shit nobody needs to use up those dollars. There is simply no incentive for underestimating or even accurately estimating needs. So my educated guess is that Florida is not saving nearly as much as it is claiming.

Your own logic doesn't follow even itself.

Florida DCS, we'll say, estimates that they will spend $100M on food stamp administration for 2013 (keep the numbers round for easy math) by administering it themselves. JP Morgan-Chase estimates that they can do the same job for $80M. As you yourself noted, even if the state could manage to do the job for $80M, they have a gigantic incentive to find a way to spend the remaining $20M before the year is out so that they can get at least that much next year. So how are the taxpayers getting anything other than a lower cost of getting something done by letting JP Morgan-Chase do the same thing for 20% less than the state would do it for themselves?

2. It is possible that what there is of cost savings is labor based. Instead of paying state workers a decent salary, health insurance, and a pension, JP Morgan moved the call centers to India and has cut its labor costs to the bone. Not necessarily bad, but think about the product: food stamps are for people with economic need. If you cut all those state workers, you put them in the position of actually needing food stamps instead of being self sufficient. In the end, that costs society more.

That's a tautology that simply does not exist. You're effectively claiming that people would be on government assistance but for their over-paid and essentially non-productive government jobs. That's just not true in reality. SOME of those government workers may instead decide to draw welfare, but certainly not all, or even a majority. Most would instead find jobs in the private sector, jobs that actually are productive to GDP, as opposed to government jobs, which have, on balance, a negative effect on GDP.

3. Inertia: Once a private company has the contract, and it exercises a monopoly (like JP Morgan), it can raise rates on future contracts to whatever it wants.

False. Abjectly false. JP Morgan-Chase does not have a monopoly. As one of the articles clearly states, they won a competitive bid, out-bidding Citibank, who formerly administered the program in Florida. These contracts are subject to routine competitive bids, meaning that anyone can get in and do the job, and the competition will be fierce, since, as you've already noted, this is pretty lucrative for JP Morgan-Chase (it's not actually that lucrative in the grand scheme of things; this represents pretty much a tiny drop in the bucket for someone the size of JP Morgan-Chase, but that also means that they have the infrastructure in place to make it happen at a very low cost to the consumer, which is the taxpayer). JP Morgan-Chase doesn't even have all of the contracts in the nation to process EBT; I believe they have about 40% of the total state and county contracts out there.

This is because the state infrastructure for handling food stamps has now been dismantled, and it would take just as much money (or more) to start it up again as it would to pay JP Morgan's higher and higher rates.

But they're not going to be able to demand higher and higher rates. This is subject to competitive bidding, so anyone can get in on the game. Have you any idea how many players there are in the electronic money game these days? Thousands. I get offers literally every day at my office from people offering to process card transactions at some ever-lower rate.

Think of JP Morgan's "cost savings" for the next few years as the way foreign companies gain American markets. First, you underprice your product to undercut the American competitor. Then, once you have the American competition out of business, the foreign company can jack up its rates to MORE than the American competitor was charging.

When has that ever happened? Did Toyota somehow do that and no one noticed? Nissan? BMW?

About the closest possible approximation to that happening has been steel. What happened there? Well, the steelworker's union priced itself right out of the market and now it's cheaper to get steel from overseas. Did they jack up their prices after the fact and make steel unaffordable? Nope. They can't, because someone would just open up a new (or even an old) steel mill and compete with them at the inflated prices that they're charging.

Since the American company is gone, people are forced to pay the foreign company's rates, especially if they are a monopoly. I imagine that JP Morgan was willing to take less in exchange for gaining the food stamp monopoly. Don't be surprised if in a few years JPM jacks up the rates.

You're trying to portray this in a vacuum. It doesn't work that way. The economy is dynamic, particularly the world economy. It's not a zero-sum game.

You have to understand my philosophy:

I believe that the public and private sector should remain absolutely separate. That was one of my big big beefs with Obamacare (among many others). You have a beast with two backs there. Once the government and private insurance became aligned as one, the insurance rates actually WENT UP instead of going down, as we were promised. My own insurance jumped 85% since Obamacare: I pay for my own. I am all for private industry on its own and amazingly efficient. I am all for a limited public sector that can do non-profit kinds of things for the public good--but in a limited fashion. However, once you join the two in an unholy alliance, you get the absolute WORST of both worlds: government (socialist) control with unlimited profiteering (uncontrolled by real market forces). That to me is practically demonic.

That is a very, very nice set of principles ... that are ridiculously impractical.

How will the Army get planes and tanks with a complete wall of separation between private industry and the government? The Army doesn't manufacture tanks, guns, bullets, helmets, uniforms, boots, humvees, or indeed pretty much anything else it uses, and never has. The Navy does not build ships. Police departments do not manufacture guns, kevlar, police cars, or even the pads that cops use to write traffic tickets.

Government doesn't build courthouses, jails, and hasn't actually built a road in 80 years. Government didn't build the Hoover Dam, or set up the TVA. Government didn't build Ellis Island. It didn't build the Enola Gay, the P-51 Mustang, the Jeep, the Tommy Gun, the Higgins Boat, the M-16, or the Panama Canal. Government didn't even build the Natchez Trace Parkway or the Interstate Highway System. Government didn't build the White House, Congress, or the National Mall, with all it's wonderful monuments. Government contracted that out to be done. Contracting out the administration of food stamps is not in the least bit different.

Like it or not, it continues to be vastly more efficient than the government trying to do it, and there most definitely is competition involved to keep the price to the consumer (the taxpayer) as low as possible. Just because JP Morgan-Chase is making some money off of it doesn't mean that they're ripping anyone off. They're not.

[RobJohnson]

When private industry does things on its own, I agree with you. But when private industry acts as middleman between the government and the people, it actually makes things MORE expensive and inefficient, not less. Remember, our taxes pay for the government to provide a service. As slow and inefficient as government is, the private contractor makes it worse because the private company has shareholders to pay and profits to make. You actually compound the problem. I know whereof I speak on this.


I will, however, do you the respect of actually reading your sources. I can see you haven't read mine, but that's ok.

I will read yours and get back to you.

There are several examples where private companies are more efficient then the gov't, which ends up in cost savings and more bang for the buck for the end user. Medicare Advantage plans are one of these items.