There is a great debate going on in our country about who is best placed to run a business, the government or a private company. The country is about evenly divided on the issue. So how does the government manage businesses?
The US Postal Service is government run and loses billions of dollars year after year. As an investor, wouldn’t you like to sell this one as soon as possible?
All public schools are organized and run by the government and funded by taxes, with the goal of producing a high school graduate in 13 years. The United States spends about $10,000 to $15,000 per student per year, which is more money per student than any other industrial country.
The result? Our students collectively rank lower than our competing nations in the basics of language, math and science, and on top of that, the high school dropout rate exceeds 30%. Now, would you invest in a business where the cost of the product is $100,000 to $150,000, but the product fails to meet specifications 30% of the time?
Worse still, the management of the company has no idea how to solve the problem. How long would you tolerate such incompetent management?
The roads and bridges are in very poor condition, but they are owned and maintained by the government, and the revenue needed to pay for the work comes from government taxes and tolls. So why is there a problem? Has anyone run away with money set aside for the maintenance of roads and bridges? Would you invest in such an incompetent, or worse, corrupt company?
Social Security is based on the premise that more people contribute at the bottom than withdraw at the top. It was a good plan when the number at the bottom (payout) equaled or exceeded those at the top (withdrawal). But that was when the average age of death was 65.
In today’s world, the pyramid is upside down. We don’t die at 65. Today, the average age of death is 79, and if you check obituaries, you will find that most lives will end in the 80s and 90s. The extra years can be attributed to our modern medical technology.
By the way, someone took the funds from the Social Security “locked box”, so she is already bankrupt. Would you like to invest in this business?
Obamacare (the Affordable Care Act) puts government in the business of health insurance. Insurance is a business that relies on the actuarial bet that you are not sick or, in the case of your home, that you are not an arsonist. But under the ACA, the government is prepared to insure you even if you are fatally ill and need millions of dollars in medical care to allow you to live another year. In private insurance companies, if you meet these prerequisites, the premiums will be adjusted upwards accordingly. This is not the case with the ACA.
Therefore, it will only be a matter of time until ACA insurance goes bankrupt, and the government will have to bail out or take over the insurance industry. Indeed, the provision to bail out insurance companies is already in the ACA bill. Does anyone really believe the government can manage the healthcare industry, which accounts for one-sixth of the US economy?
Now there is a company that the government is not it want to run. It is energy. Because we have an abundance of natural gas, we could convert our car fleet to compressed natural gas, and we could export energy to Europe to antagonize Russian Vladimir Putin. We could also build the Keystone XL pipeline and make our hemisphere independent of OPEC. All of this would create millions of jobs for under-qualified people.
But the government is blocking energy development to avoid climate change that could harm us hundreds of years from now. Meanwhile, we still have 15% of our population living in poverty, and the nation is bankrupt.
Which is more important, the harm of future climate change or the immediate harm as people living in poverty are increasingly left behind by digital technology, which is growing exponentially?
Businesses owned and operated by our government are bankrupt – or are on the verge of bankruptcy in a financial order never seen or even imagined. When we ask ourselves if government can run businesses, we can use President Obama’s way to punctuate the thought.
He can’t… PERIOD!
(Mr. Pearson lives in Smethport, Pennsylvania.)