Inevitable Failures: How the Privatization Machine Manufactures Budget Crises

Public banks, public power, public broadband. Each one already makes money in the states and cities that run it, and the companies that profit from privatization spend millions to keep that list short

A couple of years ago, I went to a meet and greet with one of my city council members. I like this person. They’re a good representative, sharp on zoning law, responsive to constituents, genuinely trying to do right by the community. They also have a graduate degree in public policy from an Ivy League university. This is someone who went to one of the most prestigious schools in the country specifically to learn how to run a government.

The city was staring down a budget deficit. The conversation was about layoffs, and you could tell it was weighing on them. They were talking about real people they’d have to let go, people they knew were good at their jobs, people the city needed. They understood what losing those employees would mean for the government’s ability to function, as well as the brutal process of deciding who would be let go. They told me, plainly, that there was no way to fund these jobs without raising taxes and raising taxes would mean upsetting a lot of folks. You could see it bothered the City Councilmember. But in their mind, the math was the math and there was nothing else to do. So I said something that I thought was pretty unremarkable. I said, “you know, there are ways to generate revenue that don’t involve raising taxes.”

They had heard of money beyond taxes, of course. The city runs parking meters, charges for permits, etc. Still, there was confusion.

The problem I’ve encountered in that conversation and in others is that an entire generation of public officials has been educated inside a framework that cannot see the most obvious solution to the problems they face every day.

An Ivy League public policy program produced someone who is excellent at managing scarcity and completely blind to the possibility of generating abundance.

The framework is simple and almost everyone in American politics accepts it without question: government collects taxes, then decides how to spend them. The conservative version says collect less and spend less. The liberal version says collect more and spend more. But both versions agree on the underlying premise that government is a cost center. A thing that consumes money. The only debate allowed is how much.

Almost no one in mainstream politics is asking the obvious follow-up question: what if the government generated its own revenue? We already do this in dozens of ways across the country, from state-owned banks to public utilities to municipal broadband, and it works. But the politicians making budget decisions act like these examples aren’t worth paying attention to, expanding, or replicating.

All of our budget problems can be solved by doing the thing that already happens all the time. Deliver a product or service and do it well enough to make more money than you spend.

Public enterprise stays off the table for a reason, and it has nothing to do with effectiveness. Nationwide and for decades, major policy schools, think tanks, and donor networks have been training officials to think of government as just a cost center that should hand tax dollars to private enterprise whenever possible.

They look at a housing crisis and propose a tax credit that flows through private developers instead of just building public housing. They respond to the healthcare crisis with a law that requires you to buy insurance from the same companies causing the crisis. They are often well intended. The result is still that our tax dollars flow into for profit pockets, often for subpar results. Every dollar of non-tax revenue the government generates is a dollar that doesn’t flow through the privatization pipeline, and every public service that operates at a surplus is proof that government can function effectively.

Consider what we’ve normalized. Your city collects taxes from you, then pays a private company to pick up your trash. As of 2024, municipalities handle only about 12% of waste collection revenue in the United States. The rest goes to private companies, and the biggest player in that space is Waste Management, Inc (WM). In 2024, WM’s CEO Jim Fish took home $17.1 million in total compensation. The company spent $840,000 on federal lobbying that same year and has received over $32 million in corporate subsidies from state and local governments. WM’s workers, meanwhile, are paid significantly less than their public sector counterparts. Your tax dollars are subsidizing a company that pays its CEO $17 million, lobbies to keep public options off the table, and delivers worse outcomes for workers and communities. That’s the model. And waste collection is just one example.

Multiply it across every sector the corporate donor class has managed to privatize: private prisons, private military contractors, private health insurance, privatized utilities, charter school management companies, outsourced IT for government agencies, and the entire consulting-industrial complex that charges the Pentagon $436 for a hammer and then lectures the public about fiscal responsibility. I watched this happen in real time in the Air Force when they privatized our dining facility. The food got worse, the rules got more strict, and the government ultimately ended up paying more for a worse product, which is the entire privatization model in action.

The money always flows in one direction: out of your pocket, through the government, and into private balance sheets. And sometimes the government doesn’t even bother with the middleman step. In huge parts of the country, your local government granted a private utility company an exclusive franchise over your area. And to be clear, the monopoly itself isn’t the problem. Electricity is a natural monopoly and it makes sense for one entity to run the grid. The problem is that the government handed that monopoly to a private company instead of operating it publicly.

The result is a legally mandated private monopoly over a basic necessity with a regulatory commission where roughly a quarter of commissioners have utility or fossil fuel industry backgrounds in charge of making sure it stays “fair.” A publicly owned utility would also be a monopoly, but it would be one that’s publicly accountable, doesn’t hand its CEO a $20 million bonus, and doesn’t siphon revenue to shareholders. The difference between a public monopoly and a private one is where the money goes when you pay your bill.

Many of The Existentialist Republic’s readers will be familiar with the Bank of North Dakota, which has been publicly owned since 1919. BND partners with local community banks rather than competing with them, funds public infrastructure, and weathered the 2008 financial crisis without a bailout while Wall Street was on fire. Its profits go directly to the state’s general fund. In 2024, it reported net income of $200.4 million, with $10.8 billion in total assets and an A+ credit rating from Standard & Poor’s. Since its founding, the bank has transferred more than $1 billion in profits to North Dakota’s general fund and state programs.

That is over a billion dollars in state revenue that North Dakota didn’t have to tax a single resident to bring in. They generated it by competing in the market as a public option in banking. No shareholders, no executive bonus packages, no lobbying budget. Just a bank doing bank things and sending the money home. And when the state faced a $43 million budget deficit in the early 2000s, BND kicked in $25 million to close the gap, reducing the need for both spending cuts and tax increases.

There is no reason any city in America can’t do some version of this. They could also build public housing and set a floor for housing costs instead of letting the private market set a ceiling. They could operate a public bank that funds infrastructure and returns the profits to residents. Any city or state could start an insurance company public option that stays solvent while providing free healthcare to low income residents. Your city and state could do these things and I think that is an incredible opportunity.

The tools exist, the models exist, and the results are public record. So the question for every local official in the country, including the ones I like and respect, is simple: get on board or get out of the way, otherwise we need to find a replacement for you.

The Alaska Permanent Fund takes oil royalties and invests them so effectively that every eligible Alaska resident gets an annual dividend check. The state literally pays its citizens instead of taxing them, and it does this through public ownership of natural resources and competent fund management. Alaska’s publicly managed oil fund has been cutting checks since 1982.

Municipal broadband networks consistently offer lower prices than private ISPs.

Public utilities that haven’t been privatized deliver cheaper residential electricity than their for-profit counterparts.

State-owned liquor stores generate billions in revenue across more than a dozen states, funding schools and infrastructure without tax increases.

About 60% of Vienna’s residents live in publicly built or subsidized housing, with the city directly owning roughly a quarter of all housing units. Residents pay for it. The system generates revenue. And because the public option is actually good, private landlords can’t gouge anyone, because they’d lose tenants to the city. The government doesn’t need to subsidize housing. It competes in the housing market and wins, and it uses the profits to create a robust social safety net.

The United States did something similar with public housing in the 1930s and 40s, projects that were well built, financially solvent, and popular with residents, until the real estate lobby spent decades deliberately defunding and stigmatizing them because they couldn’t compete with a government product that worked.

The evidence is everywhere. Public enterprise has working use cases. It is functioning right now, in this country, generating revenue that reduces the tax burden on the working class. And yet the people making budget decisions at the local level are still generally presenting tax hikes and layoffs as the only two options.

Here is what success looks like. A city launches a municipal broadband utility. Within three years it generates $4 million in annual revenue while delivering faster, cheaper internet than Comcast. That revenue funds a public pre-K program. The pre-K program charges sliding-scale fees, operates at a surplus in wealthier neighborhoods, cross-subsidizes services in lower-income ones, and still nets revenue for the general fund. The budget deficit disappears. Nobody gets fired. Housing becomes more affordable because the city is competing in that market too. This is already happening in other countries and even in the U.S. as a patchwork of decisions here and there. We need to move policy in this direction as a whole.

Some elected officials are already moving. Seattle’s new mayor Katie Wilson is backing a billion-dollar social housing bond and a publicly owned housing developer that voters approved twice by landslide margins. New York’s new mayor Zohran Mamdani is proposing 200,000 publicly built housing units and city-run grocery stores to drive down prices. Portland’s City Council unanimously voted to develop a social housing implementation plan and sent housing experts to Vienna to study their model.

So the next time your city council says they can’t afford something, or a state legislator says there’s just no money, or any elected official presents you with the false binary of raising taxes or cutting services, ask them one question: what non-tax revenue streams has this government explored?

Watch their faces. If you see confusion, that’s your opening. That’s the moment where you get to influence your community in a beneficial direction.

And if you want to put this in front of someone who can build it, look up your state representative at openstates.org/find_your_legislator and send a short message asking them to consider a state public bank, modeled on the Bank of North Dakota, as a non-tax revenue stream. Something along these lines:

Hi [Representative], my name is [name] and I live in [location]. I’m writing because [why a healthy budget and a strong safety net both matter to you], and I don’t believe we have to choose between them. I’d like you to look into a state public bank, modeled on the Bank of North Dakota. In 2024, it earned net income of $200.4 million on $10.8 billion in assets, with an A+ credit rating from Standard & Poor's. Because the state owns the bank, that profit belongs to the public instead of to shareholders, and the legislature moves it into the general fund and state programs. That is money North Dakota raised without taxing a single resident. It’s a non-tax revenue stream that could fund social services and public works here at home. Thank you for your time.

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