Contract out with America - privatization in 1995

Reason, June, 1995 by Brian Doherty

Congressman Scott Klug (R-Wis.), a third-termer anointed as privatization point man by Speaker of the House Newt Gingrich (R-Ga.), is bullish on privatization this year. But not because he thinks members of Congress are prepared to jettison turf protection en masse in recognition of the advantages of free, private markets.

Klug is working closely with House Budget Committee Chairman John Kasich (A-Ohio) to make sure that the fiscal 1996 budget, which is scheduled to be ready in early May, has spending caps for various agencies and departments so tight that the cost savings that come with privatization will start to make a lot of sense.

The majority Republicans' commitment to laying out a path to a balanced budget should help overwhelm members' love of individual programs on the privatization block, Klug hopes. "In the current fiscal challenges facing the U.S. government," he said in testimony before the House Budget Committee, "the budget is a powerful tool capable of encouraging, sometimes forcing...actions that will ensure sound financial health."

But this year is key. "The trick is, we need to accomplish some fairly high-profile privatizations in every area this year, which will make the rest easier down the line," Klug says.

"Privatization" to Congress can include anything from outright sale of assets to contracting out functions. Klug says this year is looking especially good for full sales or partial contracting out of functions of federal power administrations (estimated revenue from sale: $11.5 billion), the Naval Petroleum Reserves (estimated revenue from sale: $1.6 million), the National Helium Reserves (savings by 2000: $16 million), the Government Printing Office (savings by contracting out many functions: $80 million a year), and the National Weather Service (savings by contracting out many functions: $12 million a year).

The White House has embraced many of these ideas. It supports selling the Naval Petroleum Reserve and all the power administrations except Bonneville, and even privatizing air traffic control.

The fight, Klug says, "isn't Republican vs. Democrat. It's regional. Everyone loves what's in their corner of the world. The Pacific Northwest congressmen are tough on keeping Bonneville. For some reason, [Vice President] Gore happened to leave the Tennessee Valley Authority off of his list."

Many freshmen in Congress talk about eliminating agencies. But without privatizing their functions, that would just mean "changing the names on the stationery," Klug says. "When I began work on privatization in January, there was no momentum and not a lot of press attention," Klug says. Now he thinks that has changed. Realizing that privatization is key to a balanced budget might make 1996 the year of privatization.