Battle4Liberty

There may be no such thing as a free lunch, but it is often available at a reduced price, especially for governments willing to privatize services.

A number of examples of local government waste have been reported lately. In a less publicized case, a July 19 Wall Street Journal story opened with the following: “Faced with a $118 million budget deficit, the city of San Jose, California recently decided it could no longer afford its own janitors. So the city’s budget staff called for dropping its custodial staff and hiring outside contractors to clean its city hall and airport, saving about $4 million.” If an outside contractor could provide the city with the same services as municipal employees, then why was this job done internally in the first place? Why did it take a $118 million deficit before the city took steps to save $4 million without sacrificing the services provided for the public?

The main problem is that government lacks a profit incentive. In the private sector, organizations must get a job done at the lowest cost. This is not true in government, where politicians introduce competing objectives that can raise costs and create inefficiencies. While often demonizing private enterprise for making tough choices in the interest of the bottom line, governments need not be concerned with profits in the first place. Depending on the entity—federal, state, or local—governments can look to tax increases, deficit spending (i.e., future tax increases), or even printing money as possible solutions.

The Los Angeles boycott of Arizona illustrates this point even when government services are obtained from outside firms. Presumably, LA has done business with Arizona companies because they delivered goods and services the city needs at a higher quality and/or a lower cost. “Replacement companies” in other states will be less efficient, raising costs for the city’s taxpayers. In the end, LA will pay more for the same services from companies located in other states, all in the name of political correctness.

I wonder how much more could be saved if non-essential government services were eliminated and the essentials were performed by independent firms. Studies conducted by the Cato Institute and others—not to mention examples like San Jose—suggest that such a figure could be staggering. Organizations that outsource are not required to invest heavily in technology that might not be as efficient in the future. They also retain the flexibility to expand or contract programs more easily as needed.

Why don’t we see more outsourcing of government services? A major reason is union influence. Outsourcing translates into more activity at the small business level where unions wield much less power.

Now more than ever, governments are struggling with financial reality. The current level of spending is far from sustainable, and more taxes and deficits will stifle the economy and pass the problem down to future generations. The battle to eliminate non-essential government spending is important. Equally critical, however, if the need to get the most bang for the buck when governments spend for essentials. Less is usually more when it comes to government.