Tomorrow at CPAC, I will discuss some advantages of infrastructure privatization. Perhaps the largest advantage is innovation. Unlike government bureaucracies, private firms in a competitive environment are eager to maximize the net returns of projects, so they find new ways to reduce costs and improve quality.
The U.S. Congress hoards real estate like proud pack rats. For example, the Department of Defense has 562,000 facilities that cover 24.7 million acres—an area about the size of Virginia.
President Obama’s budget would raise taxes to fund a $478 billion infrastructure spending plan for highways, transit, and other items. The budget (on page 26) cites an International Monetary Fund study that “highlights the importance of choosing high-efficiency infrastructure projects based on rigorous benefit-cost analysis.”
Congress created the Department of Homeland Security (DHS) in 2002 by combining 22 agencies that are responsible for a vast array of activities. President George W. Bush promised that the new department would “improve efficiency without growing government” and would cut out “duplicative and redundant activities that drain critical homeland security resources.”
In today’s Wall Street Journal, Stanford economics professor Edward Lazear provides an economist’s view of the California drought situation:
In discussing one of her main achievements as British prime minister, Margaret Thatcher said, “privatization is at the center of any program of reclaiming territory for freedom.” One area where Britain reclaimed a lot of freedom is aviation. Since the 1980s, that nation has privatized airlines, airports, air traffic control, and in some cases airport security screening.
With the expiration of the current federal highway bill in a few months, the infrastructure issue is heating up. Newspapers are ginning up interest with stories about deficient and falling down bridges.
Britain privatized its Royal Mail in 2013, proceeding with an initial public offering of shares that raised about $2.7 billion. The government pursued the reform because the company faced falling mail volume, and it needed to reduce costs and increase innovation. Similar issues face the U.S. Postal Service.
How many buildings does the federal government own? 10,000? 20,000? Actually, it is a staggering 306,000, according to the U.S. General Services Administration. In addition, the government leases 55,000 buildings, for a total of 361,000. These include offices, hospitals, warehouses, and other sorts of facilities. The chart shows federal buildings owned by department.