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Should Government Be Run Like a Business?

NEW YORK, NY - JULY 23: A trader works during afternoon trading on the floor of the New York Stock Exchange on July 23, 2012 in New York City. The Dow dropped as much as 134 points as fear spread regarding a possible bailout for the Spanish government. (Photo by Andrew Burton/Getty Images)

A recent poll stated that Governor Romney would be a better businessman than President Obama. Many people feel that government should be run more like a business than whatever it’s being run as currently. It’s hard to pin down an accurate definition of exactly what our illustrious leaders are doing.

As a business guru you might expect that I might favor government being run like a business. Actually, I don’t think it can be run like a business, and be successful, because of the inherent differences between the two.

Business customers vs. Government Customers

Unlike business, government has no competition. I don’t have multiple choices of where I can get a drivers license or record a deed. Business has to operate under margins (budgets to government) and must be profitable in spite of the changes in the cost of doing business. Customers do not have to do business with anyone if they choose not to. Few people can go for any length of time without dealing with the government in some capacity.

In fact, government is intentionally set up so you have to deal with it. Does my car really need a license plate that must be renewed each year? Can’t they just stamp a permanent one on my car and I can add it to my state or federal income tax? Airlines are private entities, why a tax when I fly? Airlines can’t pay for air traffic controllers? Many airports are removing TSA and doing luggage checks with private companies. Cell phone companies maintain their own devices and towers why a tax on my phone?

Ironically, government preys on business when it comes to government contracts. Anyone who has ever tried to bid on a government contract knows what I’m referring to. One of government’s jobs is to save taxpayer money and government bids often shut out the small business owner because of very small profit margins. Government helps the very group they are so quick to condemn — big business.

Unfair Competition by Government

In Bozeman, there are two trash companies. One maintained by the City of Bozeman, the other, a private company. Compare the two. The City of Bozeman could operate their trash pickup at a loss indefinitely. Other more efficient government services could pick up some of the slack. The private hauler doesn’t have that option. The City can be very competitive in their pricing while the private company has to have some profit in order to keep the doors open.

There are two private companies in Bozeman that pick up recycled materials. The City of Bozeman is now competing against them.

Business Profits vs. Government Profits

Businesses have to be profitable to survive. And being big is no guarantee that you will open your doors the following day. Circuit City, Linen’s and Things, Mervyn’s, Border’s Books, Montgomery Ward were all multi-million dollar companies, and are all out of business.

Should governments make a profit? In my opinion, — absolutely. A couple of years ago Montana had a billion dollar surplus. The Clinton administration left a surplus. TARP returned about a 5% profit. The federal government buys bonds.

So yes, not only can government make a profit, they have an obligation to make a profit. The more profit the government can make the less burden there will be on the rank and file taxpayer.

Some Final Thoughts

Government is a lot like an octopus. Some arms work better than others. Due to the lack of competition, and the ability to spend what they don’t have, makes government extremely inefficient in most cases. You could try to run government like a business, but where is the incentive to be profitable? If you run your department under budget you won’t get as much next year, so your incentive is to spend every single dime before your next budget.

Business, on the other hand, must watch every penny and run mean and lean. Business invests its surpluses; government spends them. Business conserves; government waste is undeniable. Businesses rarely have overlapping policies or procedures. Government has 126 separate agencies that administer some type of poverty programs.

Business investors tend to vote out boards of directors that send the company in the wrong direction. Voters, for some strange reason, keep sending the same board of directors back to Washington every two years.

The question is probably not, “Should government be run like a business?” The question should be, “Can we STOP doing business as usual in Washington?”

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