Nov 16 2010

Shrinking Government By Privatizing One Organization At A Time

Published by at 8:46 am under All General Discussions

When I came up with this idea to reduce the government through a specific privatization effort, I wanted to market it, to be a part of it, because it represents so much money. Is still do want to be a part of it, so I remind people of the terms of this website, where any intellectual property or invention that I propose is still mine. Sharing these inventions and concepts with people (i.e., marketing them) does not imply or mean I waive those rights, anymore than a televised football game is then the property of the public who viewed it. Anyway – fair warning with a hope those interested will be interested in a fair partnership.

Many elements of the government have become useless or redundant as the private sector has literally left them behind. Those parts of government that have been overtaken by the private sector are different from elements that have been useless pretty much from their inception (The Department of Education comes to mind here). For one thing, they are a both a massive cost to the taxpayer and a potential revenue maker from which to cut the deficits and debt.

The prime example of this is the US Postal Service, which has been fighting a losing battle to Fedex, UPS and DHL to name a few. Personal and business correspondence and documents are now moved electronically, mainly because now they are multimedia in nature and electronic transfer makes more sense. The Postal Service has served this nation admirably – but it is no longer needed in its current form.

The USPS lots $8.5 billion dollars last year, a tab the tax payer has to pick up. This was after massive layoffs of personnel. The USPS has been a money sink, despite having revenues of $68 billion (2009). Things will only be getting worse.

But the USPS also represents an incredible amount of resources, which its private sector competitors would probably love to purchase from the taxpayers:

The United States Postal Service employs some 596,000 workers, making it the second-largest[2] civilian employer in the United States (excluding the federal government), following only Wal-Mart.

… As of 2010, the USPS operates 36,400 post offices and locations in the U.S., and delivers 177 billion pieces of mail annually.[2]

The USPS operates the largest civilian vehicle fleet in the world, with an estimated 218,684 vehicles,

Those 36,400 post office locations not only include vehicles and people, they include computer systems, sorting machines, etc. Each of of those locations represents a potential new private business. And this is of incredible value. If these were worth $10 million dollars on average (and I would bet that is a low average number), then the selling of the USPS could bring in 364,000,000,000 – $364 billion! [sorry had to fix the math error – need to stop trying to do it in my head]

To make sure a local small business is created out of all this, I would propose the large private sector companies be required to team with local business people to bid on each USPS location and its assets. Over 50% of the new entity would have to be a local small business entity, not affiliated with one of the national parcel carriers or any large national concern. We don’t need to replace big government with big business. At least this way big business can mentor these new companies under their brand while getting a slice of the revenue.

Even better, the Post Offices provide access and services for the broader federal government. For example, you can get your passport materials there and shipped to the State Department, which mails back your passport. This service now could be paid to the DoS via these licenses and managed entities – continuing to provide revenue to the federal government for needed services (and passports are a needed service).

The USPS would then shrink down to a regulatory agency with very small powers and budget (probably could be absorbed into another oversight entity). It’s sole purpose would be to ensure privacy and security certification, the access for everyone, etc.

Anyway, the details can be worked out in discussions, but the opportunity here is clear. The government can get rid of large financial drain, the employees would shift to the private sector, new private businesses would sprout up in every nook and cranny of the nation and pay taxes instead of consume them, and we would retire some of the debt Obama, Reid and Pelosi racked up with their liberal policy failures.

And that is just one element of the bloated federal government.

17 responses so far

17 Responses to “Shrinking Government By Privatizing One Organization At A Time”

  1. Mike M. says:

    OK, AJ, I’ll raise the major objection.

    The USPS is required to provide service throughout the United States. UPS, Fedex, etc., have no such requirement.

    Now, I could see two other possible approaches.

    The first would be to contract out the entire postal delivery service for a given area. But the contract terms would have to specify service throughout the geographic region, not merely the most profitable portions of it.

    The second would be to raise prices and make USPS the Mail of Last Resort. Don’t try to compete with the private sector, just have a policy that you can mail anything anywhere…at a price. Come to think of it, this might be a good niche market for USPS to exploit.

  2. lurker9876 says:

    This adopts the approach taken by NASA and Dept of Defense by contracting out portions of their work to the private sector.

    That would work.

    I’d hate to see both NASA and the Dept of Defense top this kind of a list for privatizing one government agency at a time because 1) both are already mixture of private and public complex, 2) Both have taken major budget hits, 3) Both are necessary for national security, 4) Both are beneficial to the consumers. and so on.

    But the Dept of Education need to be reduced and responsibility shifted to the state, city (rural), and community levels.

    We don’t need the Dept of Energy either. We have been doing fine without government regulations and it’s time to repeal the light bulb bill to bring back the incandescent light bulb.

  3. AJStrata says:

    Mike M,

    Absolutely. That is why some regulatory oversight is needed. And there has to be a regional average price so those remote locations don’t pay too much of a premium.

  4. AJStrata says:


    DoD and NASA (as well as parts of USGS, DoE, etc) will never be privatized. They follow requirements of defense or exploration, etc – not profit! Which is why they are needed services or pathfinders for commercial development (e.g., NASA).

    Anyone who thinks there is a one-size fits all formula on this is not seeing the challenge clearly. There may be classes of solutions, but each agency and department and program will have to be tailored down in their own way.

  5. […] This post was mentioned on Twitter by Free To Prosper, AJ Strata. AJ Strata said: new: Shrinking Government By Privatizing One Organization At A Time […]

  6. WWS says:

    Very innovative thinking on a difficult problem. The biggest hurdle, of course, is that currently it’s a violation of Federal Law for *any* private business to deliver regular mail. (FedEx and UPS only deliver “packages”, a euphemism which allows them to skirt this law) This law has to be changed before any of the privatization ideas can work.

    BUT – there’s a problem with changing it; once it’s no longer a criminal offense to deliver mail privately, how do you prevent UPS, FedEx, and anyone else from setting up new, independent operations to compete in this area? (I would actually argue that competition is the healthiest economic path to follow, overall) We don’t have a system that allows us to say “you private persons here are allowed to engage in this business, but you over there are not.” That is akin to the way in which the English would issue business charters in the colonial era, which banned competition with those who had gained the Crown’s favor. That is something that has always been rejected in the American system for good reason; the charter system was universally hated for it’s abuses. I suppose we could give massive subsidies to the new businesses to make up for their competitive disadvantage; but then we’re really just in the same boat as we’re in right now.

    I don’t say this to denigrate your idea; the postal system is failing and *something* has to be done about the situation; your ideas show very fresh and innovative thinking. But this is a huge legal problem that has to be solved before we even move past square 1.

    Here’s an idea that everyone will hate, because it doesn’t contain a way for anyone to profit from it and no one likes this kind of change: nevertheless, I suggest that we may have reached a point in our society where the ability to have daily delivery of paper messages is an anachronism, a useless but expensive affectation that we no longer need and can no longer afford.

    Let the government ensure universal electronic access. Let FedEx and UPS deliver essential parcels. Let everything else fade away.

  7. Mike M. says:

    I’m sticking with my own proposal.

    Radical restructuring of the major Executive Branch agencies.

    I’d start with the consolidation of the Departments of Commerce, Transportation, Agriculture, Labor, and the civilian portions of the Department of Energy into a single Department of Commerce. Too often, the response of Presidents and Congresses to a problem has been to create a new Cabinet-level agency…with all the overhead that entails.

    Then, of course, you take that Department of Commerce and tell them to get out of most regulatory activity. As Frank Herbert wrote once, “If a thing has merit, it’ll be.” No need for regulation.

    Pull the Environmental Protection Agency’s functions back into the Department of the Interior. Then inform both the Department of the Interior and the Army Corps of Engineers that “navigable waters” mean you can put a ship or large boat on it, not swamps. Five feet depth, fifty feet in width. Period. End of discussion. End of endless regulations.

    Then head over to the Pentagon. Take every acquisition “reform” imposed in the last thirty years and trash the lot. Ditch the concept of the uniformed “acquisition professional” – you want operators running the programs, with Civil Service advisors to provide the specialized acquisition expertise. And amend the acquisition and contracting laws to favor the Government. It is the responsibility of the Government to spend taxpayer money wisely – and vendors do NOT have a right to the taxpayer’s money.

    I’ll admit that I would go much further…disestablishing the Department of Defense entirely and returning to the old War and Navy Departments. DOD is top-heavy, the old structure worked far better.

    Put ALL Federal agencies on a military-style fixed budget. A lot of the welfare and non-DOD agencies never had to work on a fixed budget…it makes you a lot more careful with a dollar when you only have so many. If the current managers can’t hack it, fire them and move people over from the Pentagon.

    Above all, take the Federal Register and set a goal of a 30% reduction in regulations by 1 Jan 2012.

  8. Engmikeymike says:

    I agree with your premise. This will be the only way to get real accountability for government workers. Let me relate an experience with privatization from my state of Michigan.
    In the late 1990s the Department of Corrections privatzed the entire medical physician department. Before this action, each medical provider (MD, DO, PA, NP) had his or her own little King/Queendom. Since they were civil servants it was nearly impossible to dismiss any. The medical providers determined the services, medications, etc. which were to be carried out. There were regional doctors, but they had limited power to affect the habits and wishes of the providers. One provider saw 3 or 4 prisoners a day and spent his time reading his ‘religious book’ in his office. No one could interrupt him. Others engaged in running turf battles with the supervisors. After much politicking and a conservative state government, the feat was accomplished. One weekend we went home as civil servant doctors, and on Monday, if we chose to return we were under a personal services contract with a company which had bid and won a contract with the state. During the next ten years I witnessed managed care come to the practice of prison medicine. If a provider did not change habits and behaviour to cut costs and provide accountable, proper care he/she was terminated. Much waste has been eliminated.

    It has been a struggle but in my opinion the results are well worth the efforts. Without getting in to the oddities of the practice of correctional medicine compared to the practice in the ‘outside’ world, there has been remarkable improvement. The introduction of managed care based upon true, evidence based medicine has cut down on waste and actually helped the providers to do what is needed, and resist the pressures inherent in the job, to do all sorts of expensive, unnecessary procedures and treatments.

    To do this on a large scale is daunting. One thought would be to selectively target sections of each large government organization which will lend themseleves more readily to privitization. The resistance has been mainly from other civil sevants who feel their benefits and territories would be incringed upon. Ultimately, the complete privitization of most large government sections is needed.

    We need a ground swelling of support to pressure the congress to have the courage to act. We are seeing signs of this recently, think New Jersey. I hope the time has come for this.
    I hope these limited thoughts are helpful.

  9. Mike M. says:

    One point to bear in mind, though…part of the issue is not efficiency, but over-reach. It does not matter how efficiently the Federal Government dictates what kind of light bulb I use – that is MY business, not theirs.

    Now, I happen to prefer industrial-grade CFLs, but that’s because they last longer and I don’t have kids around.

  10. Redteam says:

    I certainly agree with the privatization of almost all government functions, except for law enforcement, defense(the actual military services) and government oversight. Yes, we have gotten government so involved in attempting to do everything that it will take time and effort to get all them off the public dole. (isn’t it amazing how quickly they voted themselves job security, early retirement, great pensions and benefits and higher pay?)
    Why should a guy sweeping the streets in my city be a city employee? why not a private company?
    remember in the old days when a cable company might have exclusive franchise rights in an area? They still might, but now that same service is available in several delivery methods so franchised areas are kinda meaningless, but still necessary for very small and/or remote areas.
    I read where Abraham Lincoln had exactly 2 staff members when he was President. I wonder how many thousands are on the president’s staff now? It’s a different world.

    Let’s get started!!!!

  11. Frogg1 says:

    The idea of privatizing the Post Office has been bounced around in the arena of ideas for a couple years now; and, has become a reality in some other countries. So, yes, let’s do it! We should privatize as much as logically possible. I think some of our new Governor’s may lead the way by example.

  12. Ken says:

    Al this time you failed to do your homework in regards to the USPS. The taxpayers are not on the hook for the losses of the Postal Service. In fact the 8.5 billion dollar loss is directly due to the Federal Government requiring the Postal Service to prefund retiree and health costs. Almost any private company would be in the same boat as the USPS if they had to make totally unreasonable payments to the Federal Government. The OIG and the PRC both have found that the USPS has overpaid to the tune of between 55 – 75 billion dollars to the government based on faulty or should I say phoney calculations. The Postal Service is able to compete with both Fed EX and UPS what they can’t compete with is a Federal Government that refuses to level the playing field. There is plenty of room for modernizing and streamlining the Postal service and actually reducing costs but I doubt if that will happen. If the Postal Service is privatized the Postal Unions will be a major sticking point. Fed Ex is non unionized for the most part and UPS is unionized so if eithor or both of them want part of the USPS they will have to take the mandate for universal service and that will be the sticking point for either of those companies. Downsize and privatize sound good but the devil is in the details.

  13. crosspatch says:

    As long as we are offering advice to the new Congress, I believe this article should be required reading by every new member (and by all high school students in the country):

    We can double our current electricity production right now without creating one molecule of CO2 and recycle the waste and eliminate dangerous shipment of highly radioactive nuclear fuel around. No more enrichment … you can take natural U238 and convert it directly to fuel and reprocess spent fuel.

    Current nuclear plants use about 5% of the available energy in their fuel rods leaving a lot of radioactive waste to be disposed of. Reprocessing of that spent fuel would allow us to get more energy out of it and greatly reduce the hazards of nuclear energy. You put the reprocessing plant on the same site as a pair of conventional reactors and you have a fuel factory and a fuel burner at the same location with no need to ship enriched U235 fuel on the highways and railways.

  14. andie says:


    I fear that our increasing reliance on the internet is going to be the downfall of this country. A successful attack on that infrastructure could reduce us to a third world basket case, almost overnight. Water, food distribution and storage, banking, electricity, etc, etc, etc…POOF!! All gone.

  15. andie says:

    My comment was referencing this paragraph in the thread (my paste didn’t carry)…

    The prime example of this is the US Postal Service, which has been fighting a losing battle to Fedex, UPS and DHL to name a few. Personal and business correspondence and documents are now moved electronically, mainly because now they are multimedia in nature and electronic transfer makes more sense.

  16. andie says:

    test test test

  17. […] And, we can could remove a good chunk of our debt by auctioning off the USPS. […]