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113 IRET Congressional Advisory 1 (2001)

handle is hein.taxfoundation/iretcgadv0110 and id is 1 raw text is: April 5, 2001 No. 113 GOVERNMENT-SPONSORED ENTERPRISES ARE A GLOBAL PROBLEM Several IRET studies have examined the perils posed to taxpayers, consumers, and private sector businesses by government owned and sponsored enterprises such as the U.S. Postal Service, the TVA, and Amtrak.' Government- sponsored enterprises are less sensitive to [Pioblems ai the needs of their customers sponsored ei and less apt to contain costs revenue gener and provide efficient service proided mo than private businesses, and subsidies to e may demand taxpayer core busine assistance at some point, activities ser businesses... Additional problems arise sutch gov~er-nm if government-sponsored not confined enterprises use the revenue generated by government- provided monopoly power or subsidies to expand beyond their core businesses into other activities serviced by private businesses. Even with a less efficient operation and poorer service, the government enterprises can take market share and damage competing private businesses so long as the enterprises' efforts are bolstered by the deep pockets of their subsidized or protected monopoly divisions. Concerns posed by such government enterprises are not confined to the United States. Government-owned, sponsored, subsidized, or protected entities are common all around the world. For example, foreign postal services and national telephone companies often are monopoly operations in their core businesses. Efforts by such companies to encroach on other product markets by entering other sectors of the economy or by expanding their traditional services beyond their borders are generally discouraged, for good reason. In many countries, however, previously monopolized telecom-munications sectors are being opened to foreign and domestic competition. Government shares in these companies are being sold to private ise if govler-nment- terpises ise the cited by gover-nment- nopoly power- or- x~pand beyond their- sses into other, viced by pivate roncerns posed by rent enterprises are o the United States. unlike the case t( investors, and competition from domestic and foreign . companies is being introduced. Even some national postal services are being privatized and exposed to competition. Such efforts can be a major boon to consumers and to the economy, particularly where the liberalization of the markets are genuine and complete (with no residual favoritism shown by regulatory officials to the former national enterprises, o some degree with the opening of the Mexican phone sector). As such enterprises are privatized and exposed to competition, they have generally been allowed to expand into other activities, or to extend their geographic reach. Many have expanded across Institute for Research on the Economics of Taxation IRET is a non-profit, tax exempt 501(c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote economic growth and efficient operation of the free market economy. 1730 K Street, N.W.. Suite 910, Washington, D.C. 20006 Voice 202-463-1400 * Fax 202-463-6199 o Internet www.iret.org

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