Annual Privatization Report 2013

BCFC Outlines $795 Billion in Federal Budget Savings

Subsection of Annual Privatization Report 2013: Federal Government Privatization

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BCFC Outlines $795 Billion in Federal Budget Savings 

By Adam Summers

As Congress was wrangling with the “fiscal cliff” and “sequestration” budgetary debates at the end of 2012, the Business Coalition for Fair Competition (BCFC), a national coalition of businesses, taxpayer groups, and think tanks that seeks to reduce unfair government competition with the private sector to provide goods and services, issued a proposal in December 2012 containing a list of federal budget cost savings measures totaling $795 billion.

According to an open letter listing the potential savings from the BCFC to the president and congressional leaders,  “The federal government can achieve $795 billion in savings simply by getting out of activities that duplicate or compete with the private sector, which subsidize unfair competition with private, for-profit companies, or by privatizing activities for which there are current or potential providers.1

Among the 33 recommendations contained in the BCFC letter are the following:

  • Sell federal lands and other assets, expedite oil and gas production on federal lands and in federal offshore areas, increase timber sales in the National Forest System, and increase coal leasing on federal lands ($300 billion);
  • Privatize the federal student loan program ($116 billion);
  • Privatize federal electrical power operations ($62 billion);
  • Adjust federal employee’s wages to those comparable in the private sector ($47 billion);
  • Return unspent TARP money ($44 billion);
  • Privatize Fannie Mae and Freddie Mac ($30 billion);
  • Apply the “Yellow Pages test” (a means of identifying inherently commercial activities performed by government by seeing if that good or service is offered by the private sector) to 850,000 commercial positions in the federal workforce ($27 billion);
  • Eliminate energy subsidies ($20 billion);
  • Eliminate agriculture subsidies ($15 billion);
  • Sell the remaining 500,000 shares of General Motors owned by the federal government ($12.5 billion);
    • Note: This figure was calculated using a market value of $25 a share.  As of this writing, GM stock was trading at slightly over $30 a share, which would make the current savings figure over $15 billion.
  • Eliminate federal transit subsidies ($10 billion);
  • Eliminate federal subsidies for Amtrak and high-speed rail ($9.6 billion);
  • Eliminate taxpayer subsidies for military grocery stores/commissaries ($9.1 billion);
  • Privatize the Postal Service ($7 billion);
    • Note: While the USPS is essentially a self-sustaining government-owned enterprise, its current government debts and financial problems notwithstanding, it does receive a small government subsidy of about $100 million a year to provide free mail services for the blind and absentee-ballot mailing for overseas military personnel.
  • Privatize the Tennessee Valley Authority ($1 billion);
  • Eliminate the Economic Development Administration ($523 million); and
  • Eliminate federal funding for the Corporation for Public Broadcasting ($430 million).

The BCFC also suggests implementing the many recommendations of the Reagan administration’s 1988 President’s Commission on Privatization. That report also recommended privatizing the Postal Service, Amtrak, and military commissaries. In addition, the Commission recommended:

  • Privatizing the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac);
  • Privatizing air traffic control towers and the Federal Aviation Administration’s system of flight service stations and system maintenance service;
  • Contracting out the administration of jails and prisons;
  • Divesting the Naval Petroleum Reserves in Elk Hills, California, and Teapot Dome, Wyoming (the Elk Hills reserve was later sold to Occidental Petroleum Corporation for $3.65 billion in 1998, making it the largest United States government privatization in history at the time, and the Teapot Dome reserve is reportedly just now being prepared for sale or lease2);
  • Encouraging public-private partnerships and competition among public- and private-sector mass transit providers through the government’s urban mass transit grant programs; and
  • Using vouchers to increase competition and reduce the federal government’s role in Medicare, low-income housing and elementary and secondary education.3

The organization argues that its recommendations will help to reduce the federal budget deficit and place a stronger focus on the government’s core duties and functions without increasing taxes or decreasing services.

While Congress ultimately decided to increase some taxes (the payroll tax “holiday” was allowed to expire as scheduled, and individuals earning over $400,000 a year will see increased income, capital gains and estate taxes) while preserving others at their previous rates, the issue of government spending was postponed for at least a couple of months until the government comes up against the current debt ceiling. Thus, spending reduction and cost savings proposals such as the BCFC’s are likely to yet again be the subject of hot debates in the near future.

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Endnotes

1 John M. Palatiello, “Business Coalition Letter to Congressional Leadership Identifying $795 Billion in Budget Savings for Fiscal Cliff Negotiations,” Business Coalition for Fair Competition, December 10, 2012, http://governmentcompetition.org/uploads/BCFC_Letter-Budget_Savings_List_for_Fiscal_Cliff-12-10-2012.pdf (retrieved January 24, 2013).

2 Adam Voge, “Once center of scandal, ‘Teapot Dome’ oil field prepped for sale,” Casper (Wyo.) Star-Tribune, March 4, 2013, http://trib.com/business/energy/once-center-of-scandal-teapot-dome-oil-field-prepped-for/article_5d3f7c75-bbc1-5de5-8762-6971630b0213.html (retrieved March 6, 2013).

3 David F. Linowes, ed., Privatization: Toward More Effective Government, Report of the President’s Commission on Privatization (Washington, D.C.: U.S. Government Printing Office, 1988), http://pdf.usaid.gov/pdf_docs/PNABB472.pdf (retrieved March 6, 2013).

Adam Summers is Senior Policy Analyst





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