SUMMARY: Privatization of government services has been promoted by Republicans and some Democrats for over 40 years. Their promises of greater efficiency rarely turn out to be true. Over 40% of the federal government’s workforce are now private contractors. The Department of Defense uses contractors extensively, including for sensitive, mission-critical functions. Its contracts with Elon Musk’s SpaceX company present serious national security risks.
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Privatization of government services or “outsourcing” has been promoted by Republicans and some Democrats for over 40 years. Proponents claim it will save taxpayers money, improve public services, and increase public sector accountability. This rarely turns out to be true. Once the profit incentive is introduced, prices are likely to go up and quality is likely to go down. Privatization only tends to be successful if there is strong oversight and regulation, as well as real competition. (See this previous post for more details.)
Poor experiences with privatization at the municipal level led to a wave of de-privatization between 1997 and 2002. Nonetheless, privatization continued to march ahead at the federal level. (I’ve been criticizing privatization since way back in 2012. See previous posts here and here for more information.)
Numerous examples exist of privatization’s failure to deliver its promised benefits. The U.S. health care system is a classic one. The privatized, for-profit system in the U.S. is the costliest system among any of our peer countries and its outcomes are among the worst. All elements of the system are putting profits before patients. (See previous posts here and here for more information on the failures of for-profit health care.)
Other examples of failed privatization include:
- Rail transportation is more efficient, dependable, and convenient in the rest of the world than with the privatized system in the U.S.
- Bridges, roads, and parking meters that have been privatized by state and municipal governments often did not produce the desired results.
- Water, sewer, and solid waste disposal systems’ privatization has been found in most studies to provide no cost or efficiency benefits.
- Internet service is cheaper and faster where there are municipally run systems and in Europe.
Privatization is also evident in the increasing portion of the federal workforce that is contractors. The total federal government workforce of roughly 9.1 million people can be categorized as follows: [1]
- 3.7 million contractors (40.7%),
- 2.0 million civilian employees (22.0%),
- 1.6 million people paid through various grant programs (17.6%),
- 1.3 million active-duty military personnel (14.3%), and
- 0.5 million Postal Service employees (5.5%). [2]
The use of contractors by the Department of Defense (DOD) on the ground in war zones has gone largely unnoticed. However, more contractors have died (8,000) than US service members (7,000) in post 9/11 military activities. Contractors have become a permanent element of the military infrastructure. In the Middle East region, operational and battlefield contractors greatly outnumbered military personnel (43,800 contractors to 15,000 military) in October 2020. There were three contractors for each member of the military in Afghanistan at the end of U.S. involvement in August 2021. [3]
But the DOD’s privatization goes further and, as has become apparent recently, is jeopardizing national security and U.S. foreign policy. The U.S. DOD has billions of dollars of contracts with Elon Musk’s SpaceX company to provide critical military and national security capabilities. For example, Space X has a multi-billion-dollar contract to build a classified spy satellite network for the DOD. It also has contracts for communication services through Space X’s subsidiary, Starlink. [4]
Recently, Trump and Musk were limiting Ukraine’s use of Starlink and its military version, Starshield. Musk claims that Starshield is operated by the US government. The limitations that were imposed on these communications services prevented or slowed warnings of incoming Russian missiles and drones, and also degraded Ukraine’s offensive military capabilities. [5]
It seems likely that the U.S. DOD is similarly dependent on SpaceX communications capabilities. It doesn’t seem wise or safe to have privatized these DOD mission critical capabilities.
Furthermore, Musk is considered a significant national security risk by DOD and intelligence officials, as well as by other intelligence experts. [6] When Trump took office in 2025, there were three DOD investigations of Musk’s and Space X’s repeated failures to file mandatory national security reports of contacts and involvement with foreign entities. [7] Their significant contacts and engagement with Chinese leaders and investors make this a matter of serious concern. Space X has sizeable investments from Chinese investors, but because of its contracts with the DOD, Space X does not want its investments from Chinese investors to be public knowledge. Therefore, it actively works to make sure those investments are laundered through intermediate entities in the Cayman Islands and elsewhere, which keeps investors anonymous. [8]
Roughly half of Musk’s Tesla vehicles are built in China and China is Tesla’s largest market. Tesla’s largest factory is in Shanghai and its construction received a $2.8 billion investment, major tax breaks, and special permissions from the Chinese government. Musk regularly meets with Chinese government and Communist Party officials due to his multiple business interests, current and future, in China.
It seems quite clear that sensitive DOD capabilities should not be privatized to Musk’s company – or anyone else’s for that matter.
My next post will focus on the need to slow, stop, and eventually reverse the privatization of essential government functions.
[1] Gordon, N., 10/5/17, “Contractors and the true size of government,” Project On Government Oversight (https://www.pogo.org/analyses/contractors-and-true-size-of-government)
[2] Note: These data are from 2017, but overall these numbers have been relatively stable over time. If anything, the percentage of contractors has increased.
[3] Cancian, M., 8/30/21, “In Afghanistan, contractors were unsung heroes of US efforts,” Breaking Defense (https://breakingdefense.com/2021/08/in-afghanistan-contractors-were-unsung-heroes-of-us-efforts/)
[4] Elordi, M., 10/21/24, “Elon Musk’s companies have faced at least 20 federal probes,” Daily Wire (https://www.dailywire.com/news/elon-musks-companies-have-faced-at-least-20-federal-probes-report)
[5] Roth, A. 10/14/26, “Ukrainian military’s access to Starlink satellite internet suddenly restricted,” The Guardian (https://www.theguardian.com/world/2026/oct/14/ukraine-soldiers-combat-access-starlink-satellite-internet-restricted)
[6] Reich, R., 3/21/25, “Is the Muskrat working for China?” Robert Reich blog (https://robertreich.substack.com/p/is-the-muskrat-working-for-china )
[7] House Committee on the Judiciary, 2/13/25, “Fact Sheet: Trump administration, DOGE punish agencies investigating Elon Musk’s companies,” (https://democrats-judiciary.house.gov/uploadedfiles/2025.02.13_fact_sheet_re_musk_investigations.pdf
[8] Kaplan, J., & Elliott, J., 3/26/25, “How Elon Musk’s Space X secretly allows investments from China,” ProPublica (https://www.propublica.org/article/elon-musk-spacex-allows-china-investment-cayman-islands-secrecy)
