Privatization Issues

The Promise of Privatization

While governments throughout the world -- and even states and local governments within the U.S. -- are moving to privatize assets and certain functions, the federal government has lagged behind. Many economists say that privatization is another way to balance the budget while cutting taxes.

Privatization can be accomplished in two ways.

  • First, the government sells assets it owns to private buyers.

  • Second, the government stops providing a service directly and relies on the private sector to deliver the service.

Experts say the sale of federal assets could raise large sums.

  • The sale of federal energy projects -- including the Tennessee Valley Authority -- could bring $30 billion.

  • Congress has already approved the sale of the federal government's oil and gas reserves at Elk Hills, California -- which could bring $1.6 billion.

  • Sale of the nation's Strategic Petroleum Reserve -- created in response to the oil embargoes of the 1960s and 1970s -- could generate $13 billion.

  • Auctioning off drilling rights to federal lands and offshore fields controlled by the government might bring in as much as $420 billion.

Hydroelectric and petroleum properties are not the only assets belonging to the federal government. It owns one-third of he land area of the U.S.

  • Sale of timber lands owned by the Forest Service and grazing lands under the auspices of the Bureau of Land Management -- a total of 351 million commercial acres -- could fetch $160 billion, according to Reason Foundation estimates.

  • Many urban buildings and properties owned by the federal government across the country are not needed and could be sold.

  • The U.S. also owns $12 billion in foreign real estate -- some of which could be sold off.

  • Privatization of all non-military broadcast spectrum could ring as much as $100 billion to $300 billion.

Then there are all those loans to college students, homeowners and small businesses -- worth some $80 billion to $120 billion, according to Heritage Foundation estimates.

Privatizing the U.S. air-traffic control system might reap $3.5 billion, by Reason Foundation estimates.

Contracting out services -- such as data processing, fleet maintenance, security and parks management -- would save money. The Defense Department alone estimates that it has 600,000 positions, civilian and military, which could be contracted out. Local experience has shown contracting out brings savings of 25 percent to 30 percent.

Experts say that enormous sums could be freed up if Americans only rethought the nature of government and the needlessness of its being involved in so many things.

Source: Charles Oliver, "A Way to Really Shrink Government," Investor's Business Daily, October 11, 1996.

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