The U.S. Congress hoards real estate like proud pack rats. For example, the Department of Defense has 562,000 facilities that cover 24.7 million acres—an area about the size of Virginia.
The Pentagon has surprisingly indicated that it might be wise to shed some of its real estate. Congress has stonewalled the Pentagon on this. Indeed, Congress has barred the Pentagon from even thinking about the Department of Defense’s excess asset problem.
The congressional—and often bureaucratic—asset-hoarding pathology is a result of perverse economic incentives that accompany public ownership. These incentives encourage bad behavior. The fact that capital carrying charges or rents are not paid for publicly owned assets means that no costs have to be budgeted for holding them. Once assets are under government ownership and control, they are viewed as being free; nothing must be given up for the assets’ use and retention. Furthermore, if a decision is made to dispose of some of those assets, the revenues from their disposal are usually not earmarked for use by the department or agency that initiates the sale. Hence, there are no bureaucratic or budgeted benefits that flow from the liquidation of government property.
I ran into both congressional and bureaucratic stonewalling over 30 years ago when I designed President Reagan’s privatization program. Until capital carrying charges on public assets are budgeted (read: charged), the game will remain rigged in favor of the pack rats.