NCPA - National Center for Policy Analysis

Running Government 'Like A Business?'

January 17, 1996

One of the clichés of modern politics is the promise that government can be successful if it is "run more like a business." But there are fundamental differences between the two institutions, not the least of which is that businesses exist to make money -- government to tax it, print it and spend it.

  • No business would survive if it ran out of money and had to shut its doors for more than two weeks while its directors tried to hammer out a difficult restructuring plan.
  • While businesses which make shoddy economic forecasts suffer in the marketplace, four plans over the last 13 years to balance the federal budget have flopped.
  • Whereas businesses have a built-in profit incentive to abandon wasteful practices so as to control costs, the nation is still waiting for reform of welfare, Medicare and Medicaid.

Evidence of bad business management can be found throughout the federal government. For example,

  • When Amtrak was created in 1970, the goal was to eliminate federal support in only a few years -- but 25 years later "temporary" subsidies cost taxpayers some $390 million a year.
  • The Federal Aviation Administration, trying for over a decade to upgrade its airport systems, is woefully behind schedule and over budget.
  • The National Forest Service loses some $60 million a year on timber sales.
  • Default rates on federally backed loans to students, farmers and small businesses are far higher than those in the private sector.
  • And few would call Social Security anything other than "unsound" and a bad investment, compared to private pensions and insurance.

Everyone believes the federal government should be run more efficiently. But it is not a business, and when it takes on too many tasks it is bound to fail.

Source: John Merline, "Can Government Run Like a Business?" Investor's Business Daily, January 17, 1996.


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