Spending money… to spend more money

Printed from: http://newbostonpost.com/2016/10/31/spending-money-to-spend-more-money/

“You must spend money,” observed Roman playwright Titus Maccius Plautus, “to make money.”

That constitutes sound advice for investors and business owners. In government, politicians effortlessly twist the proverb into: “You must spend taxpayer money to justify spending even more taxpayer money.”

In the Commonwealth of Massachusetts, such reasoning seems endemic, particularly when the MBTA is involved. Massive capital expenditures inevitably engender greater operating costs. The expansion or modernizing of the T foreshadows interminable hikes in the costs of operation, long after construction projects and capital outlays are completed.

Some politicians and bureaucrats naively dream that increasing budgets today will actually save taxpayer money tomorrow. In abstract economic theory, “spending to save” possesses a certain innocent appeal. By “investing” in this-or-that update or renovation today, the bureaucracy will surely cut costs in some mythical political future. Predictably, government spending increases immediately, yet far-off savings never materialize; at best, the alleged savings are redefined as “slowing down” the rate of future increases, not measurable reductions. Should any funds be recaptured, they are inevitably sidetracked to yet another “essential” government program.

It’s a zero sum game in which the house – in this case, state government – always wins, while hapless taxpayers get squeezed more-and-more. It’s wise to remember that whenever politicians substitute the euphemism “investing” for the hard reality of “spending,”  working taxpayers should hold dearly onto their wallets.

Most recently, the Baker Administration decided to spend $1 million in taxpayer dollars, hoping to find savings at the MBTA. To accomplish this task, the administration has hired McKinsey & Company, a highly-respected, 17,000 strong, multi-billion dollar international consulting firm that extends its tentacles into dozens of nations. Under the clouds of the T’s interminable “structural deficit,” McKinsey’s assignment involves evaluating practices at the T in order to “explore and implement new operating models.”

Why outside consultants are required for such a task is a bit mystifying. One imagines that after years of experience and observation, regular MBA commuters could compile long lists of needed improvements. And they could be be paid off in Charlie Cards rather than seven figures.

Respectfully referred to in the media as “professional” or “nonpartisan,” the McKinsey workforce reveals distinctly Democrat leanings. As is so often the case, the anodyne term “nonpartisan” masks underlying liberal leanings, while conservative oriented businesses or institutions get labeled “highly partisan” or “ideological.”

According to the Open Secrets website of the Center for Responsive Politics, persons employed by or connected with McKinsey & Co. have contributed over $131,000 to Hillary Clinton in the current presidential cycle, while the top Republican campaign cash recipient remains the long-forgotten Jeb Bush, tallying a meager $12,800. Apparently, establishment insiders clearly prefer the nouveau riche Clintons to the blue blood Bush legacy.

In the Congress, where Republicans hold the power, one might expect management consultants to “hedge their bets” by contributing lavishly to GOP incumbents.  But here again, contributors connected to McKinsey & Co. are all-in for Democrats. The Open Secrets figures show more than $165,000 directed to Democrats in congressional races, while GOP candidates must settle for a paltry $38,000. Overall, pro-Democrat political contributions rise above $650,000, even as Republicans barely scratch the $200,000 level. Looks like the Democrats own a lopsided campaign lock on well-compensated consultants who prosper at taxpayer expense.

From its earliest days, the Obama Administration has recruited McKinsey alumni, including United Nations Ambassador Susan Rice, Director of the Office of Management and Budget Peter Orszag, head of the Small Business Adminstration Karen Mills, and Treasury Under Secretary Lael Brainard. Even first daughter Chelsea Clinton is credited as a former McKinsey consultant. Significantly, President Obama appointed McKinsey alumna Sylvia Burwell to the cabinet position of Secretary of Health and Human Services, where she promotes and administers Obamacare. If her former McKinsey colleagues do for the MBTA what Burwell has done for Obamacare, than bus and train fares – like health insurance premiums – will soon be skyrocketing.

Perhaps Governor Charlie Baker figures McKinsey’s political ties will soften up the Democrat power-brokers who rule the state legislature.  Because the forthcoming report is expected to recommend some so-called outsourcing or privatization, Baker will have to overcome significant legislative opposition to such a course of action. Hiring consultants may act as a kind of political mitigation.

In itself, the use of private sector consultants symbolizes a prime example of outsourcing. Taxpayers foot the bill for experts to stamp their certification of professional approval upon the policy choices of elected politicians. It’s a two-way street upon which business contractors can become successively more dependent upon the public purse.

Perhaps, a combination of self-interest and liberal ideology explains the preference of high income consultants for spendthrift Democrats. Or it may simply reflect the broader national trend of affluent elites moving away from small government Republicans and toward big government Democrats.

In contrast, working taxpayers earned a median household income of $70,628 in Massachusetts during 2015. That’s markedly less than the individual business analyst who draws above the $80,000 mark or a management consultant who easily crosses the six-figure threshold.

In addition to its generous salary structure, the consulting firm offers benefits that would make even a T worker envious. The company’s own employees refer to their health insurance benefits as “ridiculously good,” and praise the company’s “flexibility to work from home.” One hardly expects them to recommend similar solutions to fix the MBTA’s problems.

Originally founded in Chicago during the 1920s, McKinsey & Co. rose to be first among the “Big Three” management consultancy firms that advise business, government, and non-profits. In our modern bureaucratic state, the overlap among the three sectors seems ubiquitous. What were at times antagonists, competitors, or rivals have become ensnared in a symbiotic relationship.

As they devise “new operating models” for an ever-growing bureaucracy, politicians and their taxpayer-subsidized consultants would do well to remember another bit of wisdom from Plautus. “Practice yourself,” he admonished, “what you preach.”

Joseph Tortelli

Joseph Tortelli

Joseph Tortelli is a freelancer writer. Read his past columns here.

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