Economics Lesson in the Senate Dining Room

Democrats in Congress are privatizing something? Hard to believe? Well, check out the following from the latest SBE Council Fact of the Week below. Could it be the start of some clear economic thinking?

Why does anyone think that government can run our health care system, for example, when it can't manage to run a few restaurants in the U.S. Senate?

As the Washington Post reported on June 9, the Democrat-led U.S. Senate voted last week to privatize its network of restaurants, including "the world's most exclusive dining hall," a large cafeteria and various coffee shops.

The Senate Restaurants food service has excelled at losing money and providing lousy service.
For example, the Post noted:

• The restaurants have lost more than $18 million since 1993, and "an estimated $2 million this year alone."

• The Senate needs a $250,000 taxpayer bailout to make next month's payroll.

• "All told, they bring in more than $10 million a year in food sales but have turned a profit in just seven of their 44 years in business, according to the GAO. In a masterful bit of understatement, Feinstein blamed ‘noticeably subpar' food and service."

What a surprise - lousy service and losing money in a government operation.

Meanwhile, across the Capitol, Democrats who led the House of Representatives in the 1980s turned that chamber's food service over to private contractors. The result? The Post reported better food, more choices, and profitability - "paying $1.2 million in commissions to the House since 2003." And Senate staffers choose to eat at the House's facilities.

So, what's at the root of the problem in the Senate? The Post noted that Senator Dianne Feinstein (D-CA), chairwoman of the Rules and Administrations Committee, laid out the woes this way: "‘It's cratering,' she said of the restaurant system. ‘Candidly, I don't think the taxpayers should be subsidizing something that doesn't need to be. There are parts of government that can be run like a business and should be run like businesses.' In a letter to colleagues, Feinstein said that the Government Accountability Office found that ‘financially breaking even has not been the objective of the current management due to an expectation that the restaurants will operate at a deficit annually.'"

All members of the Congress should take note. This is not a unique failure of government. This is the norm for government. What incentives exist to do things well and efficiently when there are no owners and the taxpayers are always there for a bailout?

That's the case with the Senate restaurant. And it is the case with every government program. And it will be the case if government spreads further, such as in health care.

Rather than thinking up new ways to expand government, the focus should be on additional opportunities for privatization.