U.S. Cities at Long Last Begin Grasping the Benefits of Privatization

Facing a budgetary shortfall of between $56 billion to $86 billion over the next two years, a recent article in the Wall Street Journal by Tamara Audi (“Cities Rent Police, Janitors to Save Cash”) documents efforts by municipalities across the nation to stanch red ink by outsourcing the “public” services they no longer can afford to supply.

It’s about time.

Until very recently, city, county and state governments nationwide have taken advantage of every growth in tax revenues, even if temporary, permanently to expand the size and scope of the activities taxpayers are called upon to finance: convention centers; sports venues, including football stadiums, basketball arenas and golf courses; trash collection; janitorial services; grounds-keeping; parks and recreational facilities; fairgrounds; and vehicle maintenance, along with many other goods and services that the private sector could provide much more cost-effectively.

During the mid 1990s, I was appointed by Governor Kirk Fordice to a taskforce commissioned by the then-State Auditor of Mississippi, since sentenced to Club Fed as a result of his later involvement in king-of-torts Richard “Dickie” Scruggs’s ill-conceived attempt to bribe a state judge for the purpose of buying a favorable ruling on a fee-splitting dispute with his co-counsel. (I have no involvement in that criminal activity.)

The task force produced a well-reasoned report summarizing numerous budget-saving privatization initiatives open to the State of Mississippi. Among other such opportunities, we identified a publicly owned and operated gasoline station (which the operators of state-owned vehicles rarely took advantage of) located in the capital city; a state-run school for hearing- and sight-impaired children; grounds-keeping and janitorial services at public institutions of higher learning; food service operations at state prisons and county jails; and Mississippi’s Veterans Memorial Coliseum, used mainly as the site of Jackson State University’s home football games, but otherwise idle and, thus, unable to cover its operating expenses let alone its capital costs. Few of those recommendations subsequently were adopted.

Nowadays, however, constrained in their borrowing capacities and lacking the power to print money, sub-national governments nationwide finally have hit the wall.

Afghanistan may or may not be President Obama’s war, but the ongoing recession certainly is. Faced with the expiration of the Bush tax cuts, the enactment of the current administration’s healthcare and financial market reform initiatives, along with its FDR-like anti-business rhetoric, the U.S. economy is in a protracted slump to which no end is in sight.

It is no wonder that privately owned businesses are reluctant to invest in new plant and equipment or to hire some of the 9.5% of the civilian workforce that currently is unemployed. The private sector has shed inessential personnel and is in the process focusing on their core competencies. So should the public sector.

In that regard, the so-called Great Recession may in the end turn out to be a boon for hard-pressed taxpayers rather than a bust.

William F. Shughart II is Research Fellow and Senior Fellow at the Independent Institute, the J. Fish Smith Professor in Public Choice at Utah State University, past President of the Southern Economic Association, and editor of the Independent book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.
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