Is Private Better?

Cities across the U.S are finding that private suppliers could revitalize faltering government programs. Here’s how privatization works: private vendors compete for contracts that at one time automatically went to city workers. The government then hires a business to provide a particular service by contracting it out. The result is a more cost-efficient program, made better through competition. Privatization can also include selling public assets to private purchasers and leasing facilities to government agencies.

But the deal has to meet with scrutiny from unions who often charge that employees who work for these businesses lose out. The problem is that businesses that offer the best bids to get contracts may end up cutting their expenses elsewhere–namely, on the payroll.

Although state and local programs have been at the forefront of privatization in recent years, substantive federal programs, like Social Security and the U.S. Postal Service, are now under consideration. In total, federal services could yield more than $75 billion if sold to private businesses.

Turning It Over to the Private Sector
The sale of federal enterprises to private businesses would yield billions of dollars

Federal enterprise

Estimated revenue
if sold
($ billions)

Estimated
annual savings
($ billions)

U.S. Postal Service

8.1

National Weather Service

2.5

0.4

U.S. Geological Service

0.5

0.6

Four NASA Aeronautics Labs

1.5

0.3

Amtrak

1

Corp. For Public Broadcasting

0.3

0.3

Source: CQ Researcher, August 9, 1996
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