Whom Do the Public and Private Sectors Serve?

Yesterday, I noted a couple of differences between the public and private sectors when it comes to the calculation of hiring new employees, prompting commenter Michael (himself a public employee) to write:

The big difference between the public sector and the private sector is the most important. The public sector exists for service and the private sector exists for profit. Government exists to service the people, hence the public sector.

It wouldn’t be a semantic game to reply that Michael’s distinction is awfully fine. The restaurant across the street exists serves the public, as do the convenience store and the mechanic’s garage, the funeral home and the wedding planner, the insurance agent and the bank. Moreover, as the healthy economy around Washington, D.C., throughout the entire recession illustrates, the people who work within and operate government clearly profit by the activity. Indeed, much of the revelation about the public sector, over the past decade or so, has been that there isn’t much (arguably any) financial sacrifice involved in the vocation of government service.
Until very recently, I might have ceded the point that the government is at least like a non-profit organization in that it doesn’t need to show a profit beyond salaries for the sake of an owner, partners, or stock holders. But even that is beginning to seem like an assumed — that is, not accurate or real — difference. Consider:

… at least one credit rating agency has already made it clear that unless that agreement includes at least $4 trillion in budget cuts over the next decade, the country’s AAA rating could be lost. Right now, the proposals under discussion cut around $2 trillion or less. …
JPMorgan’s Belton said clients have started asking how markets will respond if the U.S. loses its AAA rating. A drop to AA will mean permanently higher borrowing costs for the U.S. government, he said. And because government lending rates act as a floor for other lending rates, mortgages, student loans, corporate debt and other types of loans will become more expensive.

Add this to the general consensus that the government must allow itself to continue borrowing money so as not to default on interest payments to people who’ve invested in the government by buying bonds, and it begins to appear that the feds are really in the business of offering a low-risk investment opportunity. Corporate stockholders invest their money in the expectation that the company will be successful enough in serving the public that people will continue to pay profitable rates for its services. Government bondholders invest their money in the expectation that the government will continue to be successful enough in offering its own services that the public will continue to tolerate its tax bills.
Of course, with forty cents of every dollar that the government spends being borrowed, the federal government really isn’t that far off from the Madoff scheme of paying prior investors with money from new investors. Also of course, the government doesn’t have to be but so efficient in its service offerings, because those who receive them are for the most part not those who pay for them.
This lesson of the debt-ceiling debate comes close on the heals of the lessons of the stimulus program, which amounted to hugely expensive insulation of government entities and their employees from the effects of the recession. What we’re learning is that the United States government and its subsidiaries exist primarily to ensure well paying and astonishingly secure employment to those on the public-sector payroll and a secure profit to those investing in the ability of American governments to impose taxes on the people whom they ostensibly represent.

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Patrick
Patrick
11 years ago

“at least one credit rating agency has already made it clear that unless that agreement includes at least $4 trillion in budget cuts over the next decade, the country’s AAA rating could be lost. Right now, the proposals under discussion cut around $2 trillion or less”
One problem with these numbers is the scale. They’re so big, we don’t really understand them all, so let’s cut them to a scale we understand:
The federal budget is a little more than $7 trillion a year. The ratings agencies want $4 trillion cut over 10 years, or about $400 billion a year. Let’s just strip off some zeros.
Let’s say you earn, tax-free, $70,000 a year. That’s $5833 a month. The cut from there needs to be $4,000 a year, or about $333 a month. Will cutting $333 from a $5,833 budget be that big a whack? One wouldn’t think so.
Instead, what Obama and the Senate is offering is to cut that $5833 a month by about $167 a month AND to raise taxes.
Which proposal makes more sense now?

Patrick
Patrick
11 years ago

“Of course, with forty cents of every dollar that the government spends being borrowed, the federal government really isn’t that far off from the Madoff scheme of paying prior investors with money from new investors.”
Whoa, whoa, whoa! Be careful there or Politifact is going to call you a liar!

Dan
Dan
11 years ago

The “government is for service, private sector is for profit” argument is not just crude and self-serving, it’s plainly inaccurate. Plenty of people enter government hoping to climb the power ladder, make a big salary, or the most common reason of all – to enjoy ironclad job security for life. The motivations behind business owners, nonprofit organizations, and private employees are as varied as the people themselves – not all of them are simply chasing the almighty dollar.
The more accurate distinction is that government uses force to achieve its ends and private entities rely upon voluntary transactions. The extent to which the use of force is justified is a matter of legitimate debate.

Tom Kenney
11 years ago

“government is for service, private sector is for profit”
The first part of this statement is absolutely true.
The second part is primarily true.
Yes, there are some exceptions, but for the most part no one goes into business to lose money or break even.

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