The efficiency of the private sector

We all know the tales of inefficiencies in the government bureaucracy due to the lack of competition. Outsource, privatize and your inefficiency problems are solved. The CIA did that with alot of its operations and, low and behold, look at how much it saved them according to an article in today's Washington Post:

In its report on the fiscal 2008 intelligence authorization bill, the Senate Select Committee on Intelligence last week noted that full-time personnel in the intelligence community had increased by 20 percent since Sept. 11. The report said that the Bush administration had not adequately funded that growth by allowing agencies to add personnel, so agencies turned to contractors to avoid personnel caps.

The committee questioned the additional costs involved in using contractors, citing an estimate that a government civilian employee costs on average $126,500 a year while the annual cost of a "fully loaded" core contractor, including overhead, is $250,000.

Aha, the really efficient private sector costs twice as much as the public sector employees, and surprise, surprise, they happen to be the same people since the private contractors hired public employees away from the CIA in order to rent them back to the CIA at twice the cost.

I'm sure this goes way beyond the CIA. My guess is that most of the privatized jobs the government now funds cost twice what they would if they were done by government employees. Privatization is simply a boondoggle for a few plugged in corporations. And, how do you suppose those corporations get plugged in? Well, crossing a few palms in Congress might help.

A note here from my economist past: If you don't surpervise the work, and if you don't seek to create competition, the private sector is very efficient at ripping you off.