New at Reason: Public Options Are Ill-Conceived

Colleague John Palatiello and I had an article in Bacon’s Rebellion today responding to a recent editorial in a weekly Northern Virginia newspaper (Cascades Connection) that attempted to justify governments being in the business of business and competing against private sector companies to provide golf courses, pools, water parks and other utterly non-essential government functions. As Connection editor Mary Kimm wrote:

Do these public options hold down the prices at private camps, private colleges, private country clubs? That�s unknown, but what we do know is that the public options make many things affordable and accessible to people who would not be able to afford them otherwise.

Meanwhile people continue to pay a premium for the amenities, services and added value and availability of the private options, keeping those businesses in business.

Why not just get governments into the grocery store business too? They could even start their own telecom enterprises to sell cell phones or set up clothing stores too, right? Applying Kimm’s thinking, government’s presence in any given marketplace would pass muster if it gives people (subsidized) amenities they’d otherwise pay a little bit more for in the private market.

Presumably, that could also include producing newspapers as well. In our article, John and I suggest that Kimm might not look so favorably upon the “public option” if her company was suddenly placed in the position of having to compete with a low-cost, high-subsidy government-run newspaper.

We then go on to discuss the absurdity of government-run golf coursesââ?¬â?what Governing magazine once called “perhaps the most non-essential of the non-essential public services”:

[W]hat’s even more disturbing than the notion that there’s an inherent public interest in low green fees is the fact that governments aren’t very good at running golf courses. Many municipal golf courses are running huge deficits, are in poor condition, and face competition from better-maintained privately owned public courses. For example, the Freedom Foundation of Minnesota published a report earlier this year estimating that municipal golf enterprise funds throughout Minnesota combined for approximately $2 million in operating losses in 2007, and earlier this year South Carolina state legislature rejected a budget proposal to privatize two state-run golf courses currently operating at an estimated $500,000 annual deficit.

In fact, government-run courses rarely turn a profit, thus requiring a subsidy from taxpayers at large. In other words, non-golfers subsidize those who play the public links. Advocates like Kim see no problem with such inequity, arguing that government golf will “hold down prices” and offer links “at a cost well below private options.”

But this is a false illusion and ignores the myriad of hidden costs. When a fully allocated cost is applied to public golf coursesââ?¬â?including land acquisition, interest on bonds, operation and maintenance, labor costs, liability, retiree benefits and tax revenue foregoneââ?¬â?it becomes clear that the “public option” is a bad deal for taxpayers.

Luckily some policymakers are paying attention, and over 25 percent of all municipal golf courses have been privatized over the last several decades. Governments from New York City to El Paso to Los Angeles County have either sold or contracted out the management of their golf courses to private operators, who have a natural incentive to focus on reinvesting in the quality of the golf course to attract more players, host more tournaments, sell more merchandise, and generally increase golf revenues. By getting out of the way, these governments turned these liabilities into revenue generating assets.

I have yet to hear a compelling rationale for a government role in providing golf. And I’d really be curious to hear someone attempt to explain away the obvious immorality of forcing non-golfers to subsidize those who play the public links.

Let’s focus on priorities, folks. The “public option” is the fastest track to get a lower-quality service for more taxpayer money. Aren’t policymakers supposed to be trying to do more with less, rather than the other way around?

Ã?” Reason Foundation’s Annual Privatization Report 2009
Ã?” Reason Foundation’s Privatization Research and Commentary