The U.S. spends billions on programs designed to fight poverty, but it appears that much of that money is actually making corporations richer instead of helping people. This week, Nick and Goldy sit down with Anne Kim, author of Poverty for Profit: How Corporations Get Rich off America’s Poor, to talk about the vast industry that siphons public dollars from anti-poverty programs.. From tax prep companies skimming off the Earned Income Tax Credit to private Medicaid contractors denying care to boost their bottom line, Kim exposes the hidden ways corporations profit off economic hardship. How did we end up with an anti-poverty system that enriches shareholders instead of helping people? More importantly—how do we fix it?
Anne Kim is a writer, lawyer, public policy expert, and contributing editor at Washington Monthly. She’s also the author of Poverty for Profit: How Corporations Get Rich off America’s Poor and Abandoned: America’s Lost Youth and the Crisis of Disconnection.
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Further reading:
Poverty for Profit: How Corporations Get Rich off America’s Poor
Abandoned: America’s Lost Youth and the Crisis of Disconnection
The TurboTax Trap: How the Tax Prep Industry Makes You Pay
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Nick Hanauer:
The rising inequality and growing political instability that we see today are the direct result of decades of bad economic theory.
Goldy :
The last five decades of trickle-down economics haven’t worked, but what’s the alternative? Middle-out economics is the answer, because the middle class is the source of growth, not its consequence.
Nick Hanauer:
That’s right.
Announcer:
This is Pitchfork Economics with Nick Hanauer, a podcast about how to build the economy from the middle out. Welcome to the show.
Goldy :
Today, Nick, we’re going to talk about, for one of a better term, the poverty industrial complex, the way private corporations, often extremely large monopolistic corporations, make billions off of anti-poverty programs in the United States.
Nick Hanauer:
And it’ll be a really interesting conversation. We’re talking to Anne Kim, who has a new book out, Poverty for Profit: How Corporations Get Rich off America’s Poor, and I’m going to be very interested to hear about it. I definitely am sympathetic to this argument. But on the other side, there’s a lot of moving parts to the economy and these intermediaries who are doing this stuff. I mean, it’ll be interesting to see what the practices actually are.
Goldy :
Right. I mean, I think a lot of us are familiar with how, and we’ve talked about it a lot, how exploitive and extractive various industries are. We’ve written about what we call the parasite economy. These parasitic companies that don’t pay their workers enough that they can get by without food stamps and Medicaid and housing vouchers and so forth. And we’ve been critical of that.
Goldy :
This is a more specific conversation about how corporations enrich themselves directly off of our anti-poverty programs and get between the government and the recipients, the people that these programs are supposed to help, and make a lot of money off of that. But I think Anne can do a better job of explaining her thesis than you or I could.
Nick Hanauer:
Yes. So let’s talk to Ann.
Anne Kim:
My name is Anne Kim. I’m a contributing editor at Washington Monthly Magazine, and I’m the author of two books on social policy, most recently Poverty for Profit: How Corporations Get Rich Off America’s Poor.
Nick Hanauer:
So Anne, no one is completely surprised given that we live in America, given that we live in America, that there are people who earn profits off poverty. But your book, I think, goes farther and lays out in gory detail how pervasive this is. So tell us just generally about the thesis of your book, and let’s go on to some examples.
Anne Kim:
So the central irony here is just the sheer amount of money to be made from poverty. Governments spend a lot of money on anti-poverty programs. In fact, the federal government alone spends nearly a trillion dollars a year. A lot of it on healthcare, but also tax credits and workforce development programs and a whole slew of programs that disproportionately affect people who are low income or who are directly targeted to people who are poor.
Anne Kim:
And I think there’s a lot of public frustration that these programs don’t seem to work. They do work, but my thesis is that there’s a hidden reason for why some of these programs aren’t as effective as they could be. And that reason is what I call poverty inc. It’s this vast layer of for-profit companies and contractors that have basically hijacked anti-poverty programs for their benefit.
Goldy :
So to be clear, this book focuses more on how corporations are profiting off of our anti-poverty programs than say just the good old private market exploiting poor people.
Anne Kim:
Correct. And you can think of the poverty industry in three big buckets of profiteers. I think of them as the skimmers, the monopoly contractors, and the opportunists. So the skimmers, for instance, are people like paid tax preparers. The federal government spends about $52 billion a year on the earned income tax credit for working poor families.
Anne Kim:
But that credit is so complex that you cannot really access it unless you go to a paid tax preparer. And not just H&R Block, but you also have Jackson Hewitt and Liberty Tax, two franchises that are specifically targeted at low-income taxpayers and grabbing a share of that EITC.
Nick Hanauer:
What share of do they grab?
Anne Kim:
Well, it’s hard to know. I mean, that’s something that we actually don’t know, the scale of the skimming that’s going on. Anecdotally, we know that tax prep fees via National Consumer Law Center has done research on the scale of the fees, they often charge between 5%, 10%, sometimes as much as 20% as someone’s tax refund.
Anne Kim:
It really depends on whether the person also opts for a fast cash product, like a refund anticipation loan or a refund anticipation check. Those are the kind of products that the CFPB has really tried to crack down in recent years. But of course, the CFPB no longer exists as of a few days ago. So the amount of pillaging of tax credits for the working poor is probably quite high.
Nick Hanauer:
Interesting. Tell us a little bit more about the skimmers. So these are people who are intermediaries between the working poor and the government programs and facilitate it and take a cut.
Anne Kim:
Oh, right. Okay. So the paid tax preparers are probably the best example of the skimmers because it’s so direct. They really are intermediating that tax credit. So many people actually cannot get access to the EITC without actually going through one of these paid tax preparers. Another example is housing. We provide low-income housing through a series of vouchers, and there are real estate management companies that specialize in Section 8.
Anne Kim:
Now it’s called the Housing Choice Voucher Program, but it’s popularly still known as Section 8. So you have these real estate portfolios that are primarily Section 8 properties, landlords that specialize in catering to Section 8 tenants. So they don’t necessarily always provide the best quality housing, but they’ve captured the market for that. You can think of even Walmart in a way as a skimmer because they capture 26% of food stamp dollars in 2023.
Anne Kim:
So there are huge companies that are involved in the provision of services and goods to low-income people, and some of them are these larger companies you would not expect.
Goldy :
And some of those food stamp customers are their own employees.
Anne Kim:
No, that’s absolutely right. That’s absolutely right. Walmart is actually the largest employer of people on Medicaid as well.
Nick Hanauer:
I mean, obviously the root of the problem on, for instance, the EITC is that the damn forms are too hard to fill out.
Anne Kim:
That’s right.
Nick Hanauer:
Right?
Goldy :
Well, the government could do it for you. There’s no reason why we’re still filling out our own. Now, you’re different, Nick. Your taxes are complicated. It’s hard work for a billionaire to figure out how to pay as few taxes as possible. For most people, it’s very easy, and the IRS has all of your information. They could just do your taxes for you and say, “Hey, we think it’s this. You’re free to do your own return, but otherwise take this refund.”
Anne Kim:
Yeah, no, that’s absolutely right. And the Direct File program, which the Biden administration rolled out a couple years ago, is a really effective pilot program that does exactly that. But the thing is, guess who is trying to sabotage that program in its tracks, and it’s the paid tax reparation industry. ProPublica did this amazing investigation finding just the tens of millions of dollars that Intuit, which makes TurboTax and H&R Block, have spent to block these efforts to have the government do your taxes.
Nick Hanauer:
Right. Okay. So let’s go on to the next category of evildoers.
Anne Kim:
Right. The monopolist contractors.
Nick Hanauer:
Okay. Okay.
Anne Kim:
So these are the companies that administer programs for the states. Like in particular, we’re talking about welfare and Medicare and Medicaid, that kind of thing. Medicaid primarily. So an example of that is a company called Maximus. So they had revenues of about 4.9…
Goldy :
I’m just laughing at the name.
Anne Kim:
Oh yeah. Right. Right.
Goldy :
They call themselves Maximus.
Anne Kim:
Maximus. I know, I know, I know. Well, they’re kind of under the radar, which is why not enough people know about them to mock their name. But it’s a huge company. They made $4.9 billion in revenues last year, and they run Medicaid programs and workforce development programs in a lot of states. For instance, if you’re in Texas and you’re trying to get Medicaid or welfare or a slew of government benefits and you call in to try to get your eligibility determination, you’re actually dealing with Maximus.
Anne Kim:
The state welfare agency is Maximus because Texas has contracted it out. And then you have about 40% of Medicaid dollars are going to Medicaid managed care companies. That’s another contractor. UnitedHealth is one of the biggest Medicaid contractors. And Project 2025 and the GOP, they’re really encouraging a lot more of this privatization, so that programs for the poor, large ones like this, are more and more in the hands of private contractors who are making the crucial determinations about, do you qualify for benefits?
Anne Kim:
Are you going to get the healthcare that you just got? Are they going to deny your claims? All of those decisions are being made by private for-profit companies, not by government workers who may have someone’s interest at heart.
Nick Hanauer:
So just playing this back to you, these companies are taking a 40% bite out of the Medicaid dollars?
Anne Kim:
No, no, no. I’m sorry. So about 40% of Medicaid dollars are routed through private, through Medicaid managed care.
Goldy :
Right. Not in Washington State where we have the state run Apple Health, but in other states like Texas where they have a private contractor do it.
Anne Kim:
Correct. Correct. Where they have a Medicaid contractor who may be operating on a capitated basis and given X amount of money to care for X number of lives. And that has been encouraged, I think, by Republican administrations, and they are grabbing a larger share of Medicaid dollars year by year.
Nick Hanauer:
What are other examples of that, those big contractors?
Anne Kim:
Yeah, the biggest ones are actually really in Medicaid is the big one, workforce development. Maximus is actually in this space too. So they run workforce development training for the City of New York, for instance. So if you’re on TANF and you’re subject to work requirements, you probably get sent to some agency that’s going to allegedly help you try to find a job.
Anne Kim:
Chances are that that agency actually is Maximus. They also run one-stop centers for people who are getting workforce training through the Workforce Investment Act, for instance. So they have a lot of fingers and many different pies, pots of government money.
Nick Hanauer:
And then there’s the third category.
Anne Kim:
Right. So the third category, you can think of them as opportunists, and these are just industries that make their living off of the existence of persistent poverty. So one example I like to give of that is dialysis. Dialysis is the only disease condition where you are entitled to get Medicare coverage. And a lot of people who are experiencing end stage renal disease kidney failure who are on dialysis are also on Medicaid.
Anne Kim:
We actually spend about 1% of the federal budget on caring for people who are on dialysis because they’re extremely expensive patients. And of course, because of decades of disparities and access to healthcare, the people who are most likely to experience kidney failure and end stage renal disease are low income and often minority. If you just go to Google Maps and google dialysis centers, you will see where they pop up in your area, typically in lower income neighborhoods or heavily minority neighborhoods because that’s where their market is.
Anne Kim:
There are only two large for-profit companies that supply most of the dialysis in the country, DaVita and Fresenius. And DaVita, for instance, had made $12 billion in 2023. They’ve been subject to all manner of investigations and settlements. And the industry is a volume business, and I have to say that about a lot of the industries that are involved here that operate on volume, the dialysis is a great example of that because they get paid per treatment.
Anne Kim:
If you are diagnosed with kidney failure, the best option for you is to get a transplant. Your five-year survival rate if you get a transplant is about 90%. If you are on dialysis, your five-year survival rate drops to about 40%. These dialysis centers have machines that they need to keep busy. It is in their interest to keep people on dialysis and not “lose them to transplant.”
Anne Kim:
In fact, I’ve spoken to transplant surgeons who’ve told me that they’ve had patients who’ve been told, “Why don’t you go on dialysis for a couple of years and we’ll see where you are?” And of course, the longer that you’re on dialysis, the less likely you’ll have a successful transplant. So there are all sorts of shady practices that often go on in order for some of these industries to maintain their market.
Anne Kim:
We’ve already talked about the lobbying that some of the industries do, but then you have some of the practices that dialysis companies have been accused of by the Justice Department and others with inflating claims or discouraging transplants. In other places, you have just substandard services like healthcare and housing.
Anne Kim:
We haven’t talked about the Medicaid dentists yet, but that’s another boutique industry that’s really captured the market for children who are on Medicaid who need dental care and where the practices have been just horrific. Because again, it’s a volume business paid for per treatment. And that has encouraged a lot of, frankly, fraud and malfeasance on the part of the providers. And that, of course, leads to a lot of inefficiency and poor treatment of people who are low income.
Goldy :
These Medicaid dental providers are largely not individual practices. They are chains owned by private equity.
Anne Kim:
That is correct. Corporatization has really taken control of this industry, and the private equity firms that own a lot of these franchises have learned that this is really the only way that you can make a profit. And here’s where there’s a public policy failure because the reimbursement rates are so low that the only ones who can make a profit are folks like these franchises that have figured out volume and scale.
Nick Hanauer:
So what is the alternative to this arrangement? I mean, let’s start with dialysis. Like dialysis sounds terrible, but I reckon some people need it. If these companies did not provide it, who would provide it?
Goldy :
Who used to provide it? Because this has changed a lot of our economy. It has changed a lot over the last 40 years, so pre-Reagan.
Anne Kim:
Yeah, that is right. I mean, dialysis is its own animal. I mean, 30 years ago, there were a lot of non-profit providers, but they’ve all been chased out of the market. Like in every industry, you’ve seen a huge amount of consolidation. And that’s why you’ve got this duopoly of DaVita and Fresenius at this point because you have these two chains buying up other chains.
Anne Kim:
I remember back I think in the late ’90s, 2000s, there were a lot of healthcare roll-ups, and those included a lot of smaller dialysis chains, and those got bought up by the great big dialysis chains. So this is where we’re at now. So you’ve got antitrust enforcement could probably help a little bit, except there’s no competitors, so I’m not sure what you can do there. The biggest thing here, I think, is to slow the role of privatization.
Anne Kim:
The first rule of holes is to stop digging, and we need to stop digging the hole of privatization. Now that hole’s been dug since Reagan, as you pointed out. So it’s going to be difficult to stop digging and then fill that hole back in. But that is the first thing. The second thing is that there’s a reason for all this complexity in government programs that has led to the rise of so many intermediaries, and it is this perception of the “undeserving poor.”
Anne Kim:
We set up a lot of hurdles for people to access benefits because we want to make sure that the money’s going to the right place. We want to make sure people are working. So the ITC is restricted to working folks. We want to make sure people are spending money on housing. That’s why we give them a voucher, we don’t give them cash, give over for food stamps. But that is what creates the complexity, and that is what creates plenty of opportunities basically for arbitrage by companies to come in and look for inefficiencies in programs and exploit them.
Goldy :
We’ve talked about this before, Nick, and you know this, it’s hard work being poor.
Nick Hanauer:
Yeah, yeah, yeah, for sure, for sure. This company Maximus, who administers these programs, I mean, I presume that the people who hired them believe that… I mean, you’re going to have to administer it anyway unless the rules changed.
Goldy :
You’re saying, Nick, that we should trust the motives of the government of Texas in hiring Maximus to administer their Medicaid?
Nick Hanauer:
No, but I know what their reasoning was, which is somebody’s got to do it. And either we’re going to have to hire a bunch of people to do it, or we’re going to contract it out and have a private company do it, right? Those were the two options available to you. And they would claim if they were here that there may be some downsides to Maximus, but if they had to hire up that group of people to do it themselves, they would’ve done a worse job and spent more money doing it.
Goldy :
Okay, so that’s a good question, Anne. As we talked about, not every state hires Maximus to administer their Medicaid. Some of them administer Medicaid themselves. Do you know how they compare in terms of costs and how much of the benefits are passed straight through to the customers?
Anne Kim:
Yeah. So I can give you an anecdote example with what happened in Iowa, which privatized its Medicaid in 2015. So first of all, the company that they hired was called Wellcare. Four of their executives were actually convicted of Medicaid fraud, and they had to pay $137.5 million…
Goldy :
Well, that’s how you know that they really understand Medicaid because you really have to have a lot of knowledge of the system to commit fraud at that level.
Anne Kim:
Yeah. Well, it turns out also that the Iowa State auditors did an audit of how much money that Medicaid privatization allegedly saved, and it was less than half of what was projected. And that audit also discovered that the rate of illegally denied claims increased by almost 900%. So not only did they not save money, they denied people care, and they hired a company that had executives that were not the most terribly ethical people on the planet. So that’s an example.
Anne Kim:
I don’t know that it’s even an outlier of an example of what can happen with privatization, because the for-profit motive, I think, does conflict with the social service mission of these programs that we’ve set up. And fighting poverty is really hard. People have very complex challenges, and it’s really difficult to construct a contract where you’re looking for the right outcome.
Anne Kim:
For instance, some of these workforce training contracts, they are allegedly structured around performance. So say you pay Maximus for every person you place. Great. They place a bunch of people, the people get fired or they leave, or they’re phony contracts in some way, and the people are not there anymore in a month. Is that a success under the terms of contract? Sure, but not a successful society as far as where that money went.
Goldy :
Right. It’s also, am I correct that it’s harder to audit these private firms than it would be a government agency?
Anne Kim:
Oh yeah, absolutely. And part of the problem is that there just aren’t enough people to do it. One of the things that’s happened as a result of privatization is that, and people don’t know this I think and people should know this given what’s happening with federal workforce now, but there’ve only been two million federal workers for the last 30 years. The number of federal workers really hasn’t changed, even though our population has grown.
Anne Kim:
And what’s happened is that contractors outnumber workers by at least three to one, depending upon the agency. In the Department of Health and Human Services, which administers a lot of these programs, the ratio of contractors to workers is actually 36 to one. And that’s according to an analysis by Paul Light, who’s a professor at NYU, who spent most of his career actually trying to quantify the size of this shadow government that’s really running things.
Goldy :
A lot of it, Nick, it’s old news. Like you remember Ross Perot? This is how he made his fortune off of government contracts in the medical area, right?
Anne Kim:
He’s actually one of the first contractors to bid for running the Texas welfare system after the welfare reform legislation passed in 1996. One of the things that the welfare reform legislation did was to remove a prohibition on states privatizing their welfare systems.
Anne Kim:
And so you had a situation where you had companies like Lockheed, Electronic Data Systems, which Ross Perot ran, and other huge companies trying to sweep in to grab these contracts because you’re talking about database management, a lot of information technology that’s involved in here, and they saw the money. And that’s exactly what’s happened over the years.
Nick Hanauer:
So what should we do? What’s the prescription for change?
Anne Kim:
Right. So number one, as I’ve already said, we’ve got to stop privatization. Number two, we actually don’t know how much of the money that we’re spending on anti-poverty programs are going to third parties like this. If you can’t measure it, it doesn’t exist. We don’t have a handle on how significant this problem is. Three, so related to that is more transparency, especially when it comes to private equity and where they’re getting their revenues.
Anne Kim:
So I mentioned Liberty Tax and Jackson Hewitt, the two large tax preparation firms that target low income people. They got bought up by private equity firms within the last five years. They used to be public. So if you look at their public filings, if you look at their 10-Ks and all of that, you knew how much of the revenue was coming from bank products versus the actual fees. All that information is gone.
Anne Kim:
We have no idea how much they charge. We have no idea what their revenue structures are. So I think some reform of securities laws to some extent to crack open private equity would be helpful. I know that’s not necessarily a popular prescription, I apologize, but I think that is really necessary, especially if it’s taking public dollars. You can argue that they’re arguably public companies if a huge amount of their revenues are coming from public monies.
Goldy :
I think that’s a compelling argument, that if a large chunk of your revenue is coming directly or indirectly through government programs, you’re a public company and therefore need to be subjected to some of the same disclosure rules. I don’t know. What do you think, Nick? How do you think that would play…
Nick Hanauer:
Oh, they’d love that.
Anne Kim:
I’m sure.
Goldy :
Yeah.
Nick Hanauer:
So Anne, this is the benevolent dictator question. If you were in charge, what would you do to fix all this stuff?
Goldy :
Number one. First step.
Anne Kim:
Number one.
Goldy :
First. No political constraints. You’re like Trump. You get to do whatever you want regardless of what Congress or the court say.
Anne Kim:
Well, the first thing I would do is fire Elon Musk because he is actually an epitome of the problem with the government contractors. But I would actually expand the federal workforce so that it has the capacity to monitor the contracts that it does administer more adequately. A 36 to one ratio in HHS, it’s impossible for those contracts to be administered effectively or for any results to be even… We have no idea actually how well those contracts are doing.
Anne Kim:
So that actually would be the first thing I would do is to stop the privatization, hire back a lot of the federal capacity that’s been taken away. I would actually put back the prohibition on the ability to privatize certain services. I think it’s okay to privatize garbage collection, fine, or IT, fine, but privatizing decisions that really affect the health, well-being, and safety of low-income people, some of the most vulnerable people in the country, I don’t think so.
Anne Kim:
I’m not sure that belongs in the hands of a for-profit contractor. So I would claw back a lot of that authority that has been ceded to the for-profit sector. I’d also fix the tax code so that free tax filing is available to low-income people, and we get the tax preparers out of business because they really shouldn’t exist.
Anne Kim:
A lot of the industry exists because of the inefficiency of the tax code and the unnecessary constraints that we have put on benefits that are intended for working poor folks. It’s a drag on the system. So that’s probably my top two or three. I didn’t quite answer your question on dialysis and what to do about that. A large part of the problem why dialysis exists is because we’re not doing a good job of managing the chronic conditions that lead to kidney failure in the first place.
Anne Kim:
And that means tackling the underlying disparities in access to care. Chronic conditions like diabetes, high blood pressure that lead to kidney disease, that lead to kidney failure, if we can get at the root of that and reduce the number of people who need to go on dialysis, that would reduce the power of these companies over so many lives and change the model of medicine around prevention and management versus rescue, which is what we’re doing with the dialysis industry and the system we have set up so far.
Nick Hanauer:
And one final question, why do you do this work?
Anne Kim:
I do this work because I believe in good government, honestly, and I would like to see programs be as effective as they can be to help people get to where they need to be in life. We have too much inequality of opportunity, too much systemic racism, too much systemic inequity, too many systemic disparities that are completely fixable if we fix the public policy failures that underlie them.
Anne Kim:
And I think, unfortunately, that the situation is going to get worse. I mentioned Project 2025. If you read what that document has to say about why people are poor, it blames the poor. We’re going to be looking at harsher work requirements. We’re going to be looking at we’re much more stringent rules for access to benefits.
Anne Kim:
All the things that will actually worsen the kind of bureaucracies, encourage privatization, and encourage all the terrible things that I wrote about in this book, we’re going to see them multiply by fivefold by the end of this administration if we can’t put a stop to some of the trends we’re seeing now.
Nick Hanauer:
Well, Anne, thank you for your work. It’s really important, and shining a light on this stuff is incredibly important.
Anne Kim:
Well, thank you for having me.
Nick Hanauer:
So the most interesting question for me about this issue, Goldy, is what I’d love to know is what the, I’m just trying to get to it, but what the aggregate VIG is. In other words, if we spend an aggregate, whatever it is, $900 billion or a trillion dollars on these programs, what proportion get to the recipients and what proportion of that money is arbitraged away by the service providers? That would be a really interesting question.
Nick Hanauer:
Because one of the things that Anne said, I think, does make a lot of sense is that when you’re making life and death decisions about service provision, having for-profit companies make those decisions, particularly when the less provisioning they do, the more profit they make, that’s probably a terrible idea. They’re just not likely to end up serving the public good. On the other hand, private companies often are more effective at provisioning services than government agencies.
Goldy :
Yeah. I mean, private companies have areas of expertise. There’s a lot of things you understand being contracted out. For example, if you’re a government agency and there’s a cafeteria in your building and you are the Social Security Administration, you don’t necessarily want to be running your own food service. You want a food service company who knows how to do that. That is different from private death panels essentially administering Medicaid programs that, oh, if we can increase denials by 900%, look at all the money we’ll save.
Nick Hanauer:
Yeah. But like dialysis, we talked about that for a minute, I mean, of course, it is true that part of the problem with dialysis is that we take such crappy care of people that they end up in dialysis. I acknowledge that. But the question is and secondary issue is because we’ve allowed all of the industries in the United States to consolidate, it’s not just the dialysis companies that have consolidated, the service provision and the pricing is not what it would be if that industry was more competitive, right?
Nick Hanauer:
If there were 10 dialysis companies competing in the market for dialysis customers, you could be sure that dialysis would be cheaper and better than if there’s just one. But that said, would you want the State of Washington running dialysis centers?
Goldy :
Yeah, why not?
Nick Hanauer:
No, I don’t know.
Goldy :
Or not for profits running dial… I mean, look, I think one of the issues, and I don’t think we really talked about it directly is that when Ronald Reagan said that government was the problem, it was a self-fulfilling prophecy. Because one of the things we’ve done by outsourcing all these services to private contractors is we have depleted the government of expertise and institutional knowledge in these areas of provision.
Goldy :
So if you’re not administering your own Medicaid program, you do not have the expertise anymore within state government to administer a Medicaid program, and now you’re locked into these private providers. This is when she talks about how there’s been two million federal employees about that. And really for decades, it’s been unchanged. It’s not that government…
Goldy :
Government has gotten smaller relative to the population in terms of the number of people directly employed by the government, but there are these huge corporations, some of them public, some of them owned by private equity, who are providing these services instead, and they are skimming off the top. They are getting in the middle of what we’re trying to do.
Goldy :
And in many cases, the truth is it would be cheaper and more efficient just to give people money than it is to make them go through hurdles. She talked about the tax preparers, the for-profit tax preparers, and how Intuit in particular has played a terrible role over the past decade, decade and a half in lobbying to prevent the IRS from doing your taxes for you. Even to spend 35 bucks or whatever it costs to buy a copy of TurboTax is something you shouldn’t have to do to pay your taxes.
Nick Hanauer:
Yes.
Goldy :
Literally, the federal government has all your information already for most workers, and it’s even more so since they increased the standard deduction, a very small percentage of the American public itemizes. They just take the standard deduction, and your income taxes are relatively simple. They could be simpler if you didn’t have such a complex program as the EITC, the earned income tax credit, but there’s absolutely no reason for private insurers, and there it’s very clear what the take is.
Goldy :
They’re taking about 20% of your refund, maybe more if you’re getting an advance on your refund, because that’s a lot of what they sell you are advances on your refund. You file now and we’ll give you the money right out the door, and they’re taking a big chunk of that. That’s meaningful to a family that’s expecting $800 back on their refund and they’re giving 200 of that to H&R Block or Jackson Hewitt or whoever it is. The one thing you know, Nick, that if you see all these things heavily advertised to poor people, there’s money to be made off of poor people by these services.
Nick Hanauer:
Yeah, yeah, for sure.
Goldy :
Anyway, I mean, all of this is true, but it’s a complicated issue. I just think you draw a distinction between maybe there’s no reason to have in-house printing when you can contract that out because you don’t need to have government expertise. And that’s the same sort of things that private corporations privatize.
Nick Hanauer:
That’s right.
Goldy :
That they outsource. You have contractors for that. What private corporations don’t do is Amazon isn’t outsourcing Amazon, right? They actually made… You know this. One of the things they did is they’re like, you know what? I don’t think we’re going to outsource our delivery anymore. They took that in-house.
Nick Hanauer:
Yeah, it’s true.
Goldy :
Right? And the exact opposite with the federal government and state governments. Over the past 40 years, they’ve been outsourcing everything. And when it comes to these anti-poverty programs, it’s particularly egregious because these are already the most vulnerable people.
Goldy :
And rather than public servants who are out there sensibly to serve the public, you have private corporations who are out there to serve their shareholders. In any case, if you want to read more from Anne, there is a link in the show notes to her new book, Poverty for Profit: How Corporations Get Rich Off America’s Poor.
Outro:
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Outro:
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