I should have seen it.
The Washington Post recently reported on what should have been obvious to those of us who have studied the Right’s constant efforts to privatize governmental functions: Elon Musk’s mass government cuts will make private companies millions. While Trump and Musk are framing the immense and indiscriminate cuts to federal governance as removal of “waste,” they are really likely to provide what the article calls “a boon to private companies – including Musk’s own businesses – that the government increasingly relies on for many of its key initiatives.”
Much of my academic life was devoted research on contracting-out, a/k/a privatization–the decision to provide government services through private contractors rather than government employees.
My skepticism began with obvious misuse of the term. Actual privatization would mean selling off government operations and allowing them to sink or swim in the marketplace (a la Margaret Thatcher). Americans, however, use the term to mean something else entirely: government “contracting out” with private companies to supply goods and services being financed with tax dollars.
There are certainly times where contracting makes sense, but government hasn’t been a very good judge of when those are. Contracts with units of government are qualitatively different from contracts between private actors, and those differences make it far more likely that the contracts ultimately negotiated will be unfavorable to the taxpayers who are funding them–and that’s even without the predictable “crony capitalism” that rewards campaign donors and favored billionaire sycophants with lucrative contracts at taxpayer expense.
As Musk has proceeded to lay waste to the federal bureaucracy, many objectors have noted that despite population growth, the federal workforce has been flat for decades. There’s a reason: a few years ago, I came across data showing that the federal government was actually paying the salaries of some 17 million full-time contract workers who weren’t technically government employees.
Criticisms of government operations ignore the reality that programs are often stymied by a lack of skilled in-house personnel. That includes–among other things– the government’s inept handling of refugees and the (mis)management of Medicare and Medicaid ($103.6 billion in improper payments in 2019 alone).
Too few critics recognize that passing a law to do X or Y is only a start; the unit of government charged with administering the law or program needs sufficient resources to do so. Those resources include adequate numbers of well-trained employees and skilled supervision– virtually impossible when contractors are providing the bulk of the services.
Back in 2021, I posted about an example from 2004, when George W. Bush turned the job of collecting the hundreds of billions of dollars that tax scofflaws owed Uncle Sam over to private collectors–parroting the GOP insistence that private business would do a better job than federal workers. Most of what the private firms brought in was from easy-to-collect cases that began running out after just a few months. When the IRS brought the work back in-house, agents collected some two-thirds more money in that same few months, and it came from the harder cases the private companies had avoided. Relying on private tax collectors actually ended up costing the federal government money.
I should note that Republicans’ subsequent actions suggested that “efficiency” hadn’t really been the goal. They slashed 20 percent of the IRS’s budget and 22 percent of its staff. For people making more than $1 million, the number of tax audits dropped by 72 percent—and the money the IRS collected from audits fell by 40 percent.
The Guardian report noted that private firms are salivating as Musk decimates the federal bureaucracy.
Musk’s plans have already excited Silicon Valley mainstays such as Palantir, whose executives praised Doge on an earnings call last week and talked about how the disruption by the billionaire’s strike squad was good for the company. Palantir already has won hundreds of millions of dollars in US military contracts in recent years for AI-related projects.
Musk himself has extensive contracts worth billions of dollars through companies like SpaceX that are set to expand under the new administration.
There are certainly situations in which contracting out makes sense–but we are already relying on private contractors beyond the point of reason. We have contractors who do more or less the same work as civil servants, sitting in the same offices, for years on end, and typically at far higher cost. We have contractors who oversee contractors, contractors who write policy for government officials, and Trump is firing federal contract managers who are already too few in number and too outgunned in skills to manage it all.
The GOP’s persistent attacks on civil servants costs taxpayers and enriches privateers. The Trump/Musk goal is more of the grift.
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