The View From 1776
Thursday, July 12, 2012
Why Government Opposes Outsourcing To Private Companies
Since the 1930s New Deal, nearly all Democrat/Socialists and far too many Republicans consider it their job to expand the government as a way to buy votes.
Read Cal Thomas’s review of John Stossel’s weekly TV program.
In government-funded ventures, the venturers and the source of money are one and the same — the government itself. There is no hard-eyed outside investor to critique the project. Solyndra and President Obama’s many other failed, but lavishly government-subsidized, green energy projects are among the latest examples.
It is reasonable to argue that many services provided by government are not the sorts of things that should be measured against the criterion of profitability. Our armed forces and homeland security spring to mind. But remember that leading liberal-progressive theorists state explicitly that such things as profit and salary differences should play no role in a social-justice society. They do not want private business for profit. So we have to look at government ownership or total regulatory control of all production and distribution facilities in the socialist picture of social justice.
There is little reason to hope that, under complete socialization of the economy, government management would be any more efficient or effective than private management.
In present circumstances, little if any thought is given to whether a government project would be commercially profitable, that is, whether enough buyers would be willing to buy enough of the output at prices that would return a profit. Instead, altogether different criteria come into play. Congressmen and Senators in whose district the project is to be located will look only at how many votes they will get by creating jobs and spending Federal money in their home districts.
Thus, from the outset, efficiency is a negative criterion in a government project. Remember that the Employment Act of 1946 committed the government to maintaining full employment. From the politicians’ viewpoint, it is better to employ excessive numbers of people, at higher costs, to enhance the image of helping the people. There is the added benefit that Federal projects employ members of labor unions, and those unions are big contributors to liberal-progressive-socialist political campaigns.
Additionally, under the Davis-Bacon act, workers on Federal projects have to be paid union-scale wages, no matter how much higher than local wages they may be. This forces local governments and private-business employers to pay higher wages, if labor is in tight supply, and in some cases forces them to lay off workers if the resulting costs are too high for profitable operation.
What politicians at the Federal level are doing is grabbing for their districts more than their share of tax revenues at the expense of taxpayers in other states. This involves the time-honored practices known as pork-barreling, back-scratching, and log-rolling. Such practices appear historically to be ineradicable. The only true solution is to minimize Federal spending on everything to reduce opportunities for mischief.
Of one thing, however, we can be certain. To the extent that the Federal government undertakes ventures normally handled by private business, the result will always be inflation. Government projects inherently and inevitably are more costly and wasteful than those of private business, simply because private business has limited resources that must be employed effectively if the private business is to survive. The Federal government, in the short run before inflation completely destroys the value of the dollar, has a bottomless well of funding via fiat money created by Federal Reserve bookkeeping entries. This meets the definition of inflation: increasing the supply of money more than the available output of useful goods and services.