T-Paw Needs More Than Google to Cut Deficit
I like Tim Pawlenty’s economic plan a little better than David Frum. Although they aren’t revolutionary, I’m happy to cheer for most of his ideas on the revenue front including lower corporate taxes (although it would be better to eliminate them entirely), a zero capital gains tax, and the adaptation of a nearly flat tax on personal incomes. That said, T-Paw’s ideas for true cutbacks in government are awfully vague. One that’s been singled out for a lot of criticism is his proposal for a so-called “Google test.” The test, essentially, is the idea the government shouldn’t provide any service that can be found through Google. And it was a target of leftwing blogs from the moment he proposed it. In fact, however, what Pawlenty calls the “Google test” is a good, sensible idea although hardly a panacea for government spending.
Let’s start with some history: What the former Minnesota governor calls the Google test actually began as a “Yellow Pages Test” proposed in the early 1990s by then-Indianapolis mayor Stephen Goldsmith. The idea of the test—which proved quite successful in Indianapolis—was that the government shouldn’t have to compete with the private sector for any service where multiple private sector firms were listed in the Yellow Pages.
Indianapolis’ government didn’t shed many services altogether but it did contract out everything from laying concrete to picking up litter. Government workers weren’t immediately laid off but, instead, had to compete with private sector contractors to keep their jobs. (Goldsmith called this “marketizing” services.) Because of competition, many services improved although a few, like sewage treatment, did run into trouble. Big tax cuts didn’t follow either. The city mostly used the accumulated savings for efforts to improve its infrastructure and subsidize corporations to bring more jobs into the city.
Although the results haven’t been as dramatic as they were in Indianapolis, Goldsmith has used his post-elected-office years to remake city services in the District of Columbia (where he became close to Mayor Anthony Williams) and now, as New York City’s Deputy Mayor for Operations. The federal government would do well to take another dose of the “marketization/yellow pages test/google test” medicine. There are any number of services that might, in theory, be done better by private contractors. That said, the idea is hardly revolutionary: the federal government already does a lot of contracting out, the savings likely won’t be large, and some efforts at “marketizing” that improve services tend not to save money.
To begin with, the federal government has long made very heavy use of contractors to do just about everything. Even with the enormous growth of government under Presidents George W. Bush and Barack Obama, the federal government employs fewer people than it did in the late 1960s. Although there are plenty of overweight behemoths in the federal bureaucracy, some very important entities like the Social Security Administration are actually very efficient at administering programs in part because they contract out so much. (This doesn’t of course mean, that the programs themselves are efficient.) And incredibly sophisticated tasks ranging from operating the Space Shuttle to running the Transportation Security Agency’s back office have been handed over to private contractors.
Second, large savings aren’t possible from simply marketizing federal services. The Social Security, Medicare and Medicaid programs (the later two almost entirely administered and delivered in the private sector) can all be cut but simply changing the way they are delivered likely won’t save a penny. While some more military and foreign affairs functions might be contracted out, furthermore, operating the armed forces is clearly a job that should remain in the hands of professional military and foreign service officers accountable to civilians. In the end, the only areas even appropriate for “marketization” are in the field of domestic discretionary spending and, however, one counts it, that’s less than 20 percent of the federal budget.
Not all efforts will save money either. The United Kingdom, for example, has dramatically improved the quality and frequency of rail service by handing the operation of almost all rails off to the private sector. But, at the same time, public spending on rail service has actually increased. The Department of Veterans Affairs Hospital system, likewise, consistently delivers care less expensively than the private sector. Everything that’s known indicates that privatizing it without changing the benefits it provides would dramatically expand federal spending.
In short, Tim Pawlenty’s “google test” is a pretty good idea. But it’s not likely to save lots of taxpayer money or significantly cut the size and scope of government.