Save for those instances in which market failures exist or could with a strong probability exist, the federal government should always leave the production of goods and services to the private firms in the market.
Put simply, due to civil service reform laws (see the
Pendleton Civil Service Reform Act of 1883 and the
Hatch Act of 1939), federal employees have little to no incentive to do their jobs in an efficient manner; so much more could be provided with the federal budget approved on Capitol Hill each year. In contrast, workers in the private sector face the compelling incentive of future employment; if they don't perform according to certain standards, then their employment will be terminated. If we make the (very safe and easily verifiable) assumption that, in comparison to their federal counterparts, private-sector employees are held to higher standards that are actually enforced, then it follows that the latter group of people will seek to do their jobs much more efficiently than the former group of people.
Of course, there are some instances in which the federal government should provide certain good and services. If a good is common (i.e., rivalrous but non-excludable) or purely public (i.e., non-rivalrous and non-excludable), then there will exist little impetus for the creation of markets for these goods; thus, government intervention is acceptable. Another instance involves goods and services whose production produces externalities; if a privately-provided good or service produces positive externalities, then the federal government should offer incentives for an increase in its production (on the other hand, if a privately-provided good or service produces negative externalities, then the federal government should look to ways to decrease its production). Finally, if a private firm (or group of firms) gains too much power, then the government should intervene for the sake of continued economic efficiency. In cases where these conditions do not hold, however, private firms in the market, rather than the federal government, should produce goods and services.
