Larry Kudlow
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There’s a very troubled company out there called U.S. Government, Inc. It’s teetering on the edge of bankruptcy. And it badly needs to be taken over and turned around. It probably even needs the services of a good private-equity firm, with plenty of experience and a reasonably good track record in downsizing, modernizing, shrinking staff, and making substantial changes in management. Yes, layoffs will be a necessary part of the restructuring.

A quick look at the income statement of this troubled firm tells the story. Just in the past year (FY 2011) the firm spent $3.7 trillion, but took in only $2.2 trillion in sales revenues. Hence its deficit came to $1.5 trillion.

Just in the first three months of the new year (FY 2012), the firm’s troubles continued. Outlays for all purposes came in at $874 billion, but income was only $554 billion.  So the shortfall was $320 billion. No hope of a self-imposed turnaround here. Indeed, both the senior management and the board of directors show no signs of making major changes to their business strategy.

Hope for future profits? That’s out of the question. The firms only chance of survival is a takeover. 

Worldwide employment for U.S. Government, Inc. is estimated to be over two million, a completely unmanageable number for a venture like this. Total compensation for this company is roughly twice the level of its private-sector counterparts. And its retirement and health-insurance benefits are so large in relation to contributions paid that its benefit plans are careening toward insolvency.

In fact, the total debt of this firm now equals its total income -- an unsustainable position that suggests to many observers that future financing needs will not be met.

The product line of this troubled firm has been rejected over and over by growing segments of its customer base. And its product pricing (taxes) is not even remotely competitive. Even worse, heavily unionized work rules and regulations are so onerous that the prospects for even reasonable productivity and efficiency are long gone.

Its credit rating? That’s been marked down, with more downgrades expected in the future.

The very troubled U.S. Government, Inc. had long been either number one or in the top three worldwide in terms of economic freedom. But as a result of all these deteriorating conditions, it has fallen four years in a row in this category, slipping all the way to tenth. In fact, over the past ten years, the firm has barely grown and its share price has been flat. Without the kind of radical change that comes from a takeover and turnaround, more economic slippage is baked in the cake.

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Larry Kudlow

Lawrence Kudlow is host of CNBC’s “The Kudlow Report,” which airs nightly from 7 p.m. to 8 p.m.