Your second thought sounds like a good idea. Let's have another competitor (government) funded by private entities via debt equity (bonds) which is paid back by customer receipts (profits) where failure equals unemployment. Actually, this is starting to sound like a business, but with more steps and the power to pass laws affecting its own operating environment. What's the advantage to having the government be the competitor?

Voters choose management instead of shareholders. Maybe they'd make different choices. Diversity is good.

Yes in many place that would drive out current businesses.

If we are worried about inefficiency, maybe we make government compete with itself. Have it's initiatives be charters, and issue new overlapping charters over time. Governmemt is not required to have a stasist implememtation; dynamic behavior can be part of the system.

They're two independent things. If a different management style would produce a public benefit then do it without access to the taxing power. If using tax money to subsidize some service is in the public interest (spoiler alert: it rarely is) then the subsidy should go to anyone providing that service.

> Yes in many place that would drive out current businesses.

Which is the problem -- because then they're no longer competing, and it's the competition on equal terms that keeps them honest. If they're actually helping people then people should have no trouble voluntarily choosing their unsubsidized offering. Without that they're just an unregulated monopoly susceptible to inefficiency and corruption.

> If we are worried about inefficiency, maybe we make government compete with itself. Have it's initiatives be charters, and issue new overlapping charters over time. Governmemt is not required to have a stasist implememtation; dynamic behavior can be part of the system.

Charters where funding only goes to the politically connected are effectively corruption, and whoever is getting fat off the cash will exert their influence to make sure no one capable of doing it more efficiently can get access to the funding. Charters where funding goes to anyone who signs up to provide the service are effectively tax credits.