Three decades ago, Prime Minister Margaret Thatcher implemented a policy called “privatization” to rejuvenate the moribund economy of the United Kingdom.
Like the United States today, the cost of a too-large government was sapping the vitality of the U.K.’s economy. The private sector was staggering under the heavy tax burden needed to fund the public sector. In fact, despite very high tax rates, taxation could not keep up with government spending, so the Bank of England (the U.K.’s central bank) created more money (what we euphemistically call “quantitative easing” today) to make up the difference.
Prime Minister Thatcher’s solution to this untenable situation was brilliant and elegantly simple: She decided to divest the government of its nationalized businesses by selling them to private investors—i.e., privatization. This shrank the budget deficit dramatically, first, by shrinking expenditures, since the government would no longer have to fund those businesses, and second, by increasing revenue. Revenue was increased both immediately, via the price paid by private investors for government assets, and on an ongoing basis, as private firms and their employees became net taxpayers.
A whiff of privatization is in the air here in the United States, and at the federal level. (Privatization has been widely practiced by American states and local governments during the past two decades.) A bill called the Civilian Property Realignment Act (H.R. 1734) is “in play” in the House of Representatives. Its objective, according to Congressman Mike Kelly’s press release, is to “save billions of taxpayer dollars by selling or redeveloping high value federal properties, consolidating federal space, maximizing the utilization rates of space, and streamlining the disposal of unneeded assets … If passed into law, the Office of Management and Budget (OMB) estimates that H.R. 1734 could generate $15 billion in revenue from property sales, in addition to the billions more generated from future cost avoidance from simply owning less property.”
Given the federal government’s gargantuan debt and deficits, H.R. 1734 should be a no-brainer, a slam-dunk. One would expect any member of Congress who professes any concern for fiscal responsibility to vote for this bill. Nevertheless, the bill is flawed.