This Week's column 

 

Put ‘Government, Inc.’ Out of Business

June 25, 2009

Sales are down. Expenses are up. And banks are balking at your requests for capital.

But worst of all, your most formidable competitor is the government.

That’s a reality faced by far too many entrepreneurs. When government “businesses” muscle their way into a market, they do so with tremendous edges on traditional companies. Exemptions from taxes and regulations, access to public treasuries for bailouts, and no-fee services from fellow government entities put for-profit firms at a disadvantage. Often, the disparity is too much for all but the most capable capitalists to bear.

In Washington, five senators are trying to help. With four co-sponsors, South Dakota’s John Thune has drafted the “Freedom from Government Competition Act.” His bill, S. 1167, finds that “unfair Government competition with the private sector of the economy is at an unacceptably high level, both in scope and in dollar volume,” and codifies a Eisenhower-era policy that the federal government “should not compete with its citizens.” Inherently governmental duties will continue to be performed by departments’ employees, of course, but the legislation requires D.C. to divest itself of commercial assets, award contracts through competitive sourcing, and publish annual reviews of the act’s implementation.

The Business Coalition for Fair Competition (BCFC) is leading the charge to pass Thune’s bill. Executive director John Palatiello explains why his organization, operational in the ‘80s and ‘90s, is back at work: “BCFC is being revitalized inasmuch as there is a heightened and renewed threat to private enterprise and small business by government, including taxpayer bailout/investment in equity in private financial firms (banks, insurance) and auto companies, proposed creation of government (or nonprofit coop) health insurance companies, and the Obama Administration’s move toward ‘insourcing’ (converting activities currently performed by private contractors into performance in-house by government employees), as well as actions by Congress to limit the ability to convert (or even study the conversion thereof) commercial activities of the government to performance by the private sector.”

Palatiello notes that federal bureaucrats are hardly alone in their desire to do business, and that the BCFC plans to “extend our activities to the state and local levels.”

Its efforts can’t some quickly enough for Connecticut. The state’s “quasi-public agencies” engage in all manner of commercial meddling, including venture-capital investing (Connecticut Development Authority, Connecticut Innovations), waste disposal (Connecticut Resources Recovery Authority), and convention-hosting (Capital City Economic Development Authority). It’s bad enough that these “corporations” and “authorities” provide cushy gigs for retired pols and their cronies. They also compete, unfairly, in a state with one of the highest costs of doing business.

At the municipal level, government competition is rampant. Cites and towns are crying poverty, and using every tactic to maintain state subsidies and boost mill rates on property owners. But evidently, selling their ice rinks, airports, tennis courts, parking lots/garages, nursing homes, and pools -- all of which are best owned and managed by the private sector -- isn’t an option under consideration.

The most egregious example is municipal electricity. Groton, Norwich, Jewett City, Norwalk, Wallingford, and Bozrah have “public” utilities that enjoy perks non-government providers in the increasingly competitive power business do not, including tax abatements and access to low-interest loans.

Running a close second is government golf. “Privately owned public golf courses currently have double taxation on the same property,” writes William E. Anderson, a country-club owner and member of the Connecticut Association of Privately Owned Public Golf Courses. “They pay a per-acre property tax and a per-hole assessment. Town-owned courses, which compete with privately owned courses, pay no taxes and are subsidized with state grants.”

Michael LaFaive, a fiscal-policy analyst with the Mackinac Center for Public Policy, observes that government golf courses “represent untapped assets that could be sold, generating revenue from the sale and adding property to a municipality’s tax rolls. Government-run golf is the most nonessential of nonessential services. Can anyone seriously claim golf as a legitimate government function?”

No, but party-planning hardly qualifies as core public-sector work, either, and it’s a service many municipal governments now offer. In 2007, the executive director of the Connecticut Recreation and Parks Association gleefully reported that running parties was “a growing trend within our profession.” After all, it’s a “wonderful service [park departments] can offer their town.”

With the state and the nation facing economic anguish and runaway debt, the flimsy arguments used to justify unfair government competition fizzle into nothing. It’s time to auction off the investment funds, convention centers, power plants, golf courses, and airports. It’s time to put Government, Inc. out of business.

D. Dowd Muska is a writer, commentator and lecturer. His website is www.dowdmuska.com.

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