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Waste Is A Terrible Thing To Mind: Regaining Public Trust By Rethinking Government Spending

This item, a response to the Demos-TDS forum on Restoring Trust in Government, is by Eric Schnurer, president of Public Works LLC, a policy consulting firm specializing in state and local governments.

As Bill Galston notes in this forum's lead-off essay, "The public's evaluation of both competence and integrity are shaped to some degree by its perception of government as steward of public institutions and public funds." Patrick Bresette presents this problem as almost a Catch-22, in that progressive attempts to root out waste only reinforce public perceptions of government as wasteful. Writing of the Clinton-Gore National Performance Review (NPR), he bemoans that "[t]he media's attention to the efforts of the initiative - and thus the public's attention - focused on all the most egregious examples of wasteful spending that were being uncovered - from outrageously overpriced ashtrays, toilet seats and hammers to overlapping and duplicative governmental agencies and processes."

Nevertheless, as Bresette observes, the NPR was part of an overall revival in Clinton Administration fortunes - and public trust in government - during the final six years of the Clinton presidency. I have seen similar results at the state and local levels, where I have overseen comprehensive performance reviews of government spending modeled on the NPR in seven states and helped governors in a half-dozen others to develop budget plans based on the principles discussed in this article.

This is not as dichotomous as it might seem: Revealing waste in government might increase public cynicism, but doing so also increases public confidence in the politician doing so, especially if that politician is a Democrat. The opinion research by John Halpin and Ruy Teixiera supports this argument, finding extremely high public responsiveness to an agenda of "[e]liminating inefficient programs and redirecting support to the most cost-effective programs" and like initiatives as a prelude to further progressive policies.

As both Galston and Bresette observe, Clinton and Obama rose in public esteem when they were able to convey the message that they were centrists or a "different kind of Democrat" and sank when they appeared otherwise. Clinton, according to Galston, floundered when he became embroiled in the flap over gays in the military - and, I would argue, when he decided to pursue health care reform before welfare reform - and Obama lost ground when he shifted his focus from economic recovery to the health care issue. This makes clear that the effect of fiscal responsibility on faith in government - and in those governing - also is closely related to Galston's "third key determinant of trust in government": responsiveness. "If people feel that the government is listening to them and working on the problems they think are most important, trust tends to rise. In recent decades, the public has come to view the federal government as much less responsive to their needs and preferences than it should be." Conservatives have exploited the perception that Obama hasn't been working on the right problems, focusing, instead, on bailing out banks and pursuing a health care reform that liberals cooperated in presenting as primarily transferring huge subsidies to the poor rather than lowering costs for all. As Thomas Edsall argues, this critique has fed on voter fears that limited resources were being taken from them and given unfairly to others.

Whether that constitutes a politics of selfishness, defined largely by racial and generational warfare, as Edsall warns, is debatable, however. In polling and focus group research throughout the 1990s in which I was able to participate as an advisor to various gubernatorial and Senate candidates, I found Americans amazingly receptive to paying for government programs to help needy Americans - such as education, job training, family counseling, child support, and transportation - if and when convinced of their effectiveness and efficiency.

A related concern is decline in the ideal of a shared social fate, as cited, for instance, by Bresette. It is often argued that shared commitment died when Ronald Reagan encouraged Americans to ask not what they could do for their country, but rather, "Am I better off today than I was four years ago?" It is again debatable whether Americans have been this incorrigibly self-centered for the last 30 years; in 2008, Barack Obama seemed to tap successfully into a majority yearning for some sense of community. While public attitudes on this issue may shift in a complex relationship with the competence and integrity of political leadership, as Galston discusses, or the economic vicissitudes that preoccupy Edsall, one thing has remained constant since Reagan: The willingness of political leaders, both left and right, to indulge the notion that we can have it all and not pay for it.

It is tempting to see in this our political "leaders" simply catering to the public's own immature desire to have things both ways. But it's also just possible that the public is making a much more sophisticated demand - to have things a different way. Might it possibly be that the public expects its leaders to figure out how the public sector can actually deliver more in services, with more customer choice, and do it for less? Preposterous, except that the technological advances of the last few decades have allowed consumers to demand that the private sector do exactly that. Politicians' failure to respond to the same imperatives with anything more than demagoguery or transparently vapid "reforms" might actually be a cause of public dissatisfaction, rather than simply the most advantageous political response to it. Perhaps a more honest and sophisticated approach to these issues might engender public support.

Waste, Fraud and Abuse

Elements of both parties chronically rely on the snake oil prescription that waste, fraud and abuse make up such a huge portion of government spending that simply eliminating it will cure all ills. But "waste" must mean, less conveniently, only spending that is unnecessary to achieving its intended purpose - not just a program, whether subsidies for oil companies or income supports for the poor, that some might consider ill-conceived. In that sense, governments are not notably less efficient than private entities. (As for fraud and abuse, anyone hear about that financial crisis?)

While invariably over-stated to avoid real choices, there is "waste, fraud and abuse" to be addressed. Over the past decade, the state government performance reviews my colleagues and I have conducted examining all areas of spending have identified potential savings ranging from reducing outright fraud - the single biggest-ticket item tends to be Medicaid fraud, which the federal government estimates to range between 10% and 40% of program spending in most states - to eliminating such obviously wasteful activities as the $3 million West Virginia spent each year by depositing more road salt than needed whenever it snowed, or the $15,000 in weed-cutting costs Colorado started saving each year by using excess asphalt from road work to pave under highway guardrails. These are all expenditures that no one, regardless of ideological perspective, would object to cutting. Identifying hundreds of such examples of "waste, fraud and abuse" has enabled us to reduce annual government spending in these states by billions of dollars - but, all told, these efforts, and those by others elsewhere, consistently produce, when well done, savings of perhaps 5-6%.

Under the leadership of a chief executive willing to make cutting waste his or her full-time focus and expend all political capital necessary to achieve any and every possible saving, governments actually could squeeze perhaps about twice as much - up to 10% - out of their annual budgets. The situation is more complex at the federal level, where an inordinate amount of spending - notably Social Security and debt service - consists simply of cashing IOUs. But does anyone believe we can't find efficiencies in health care expenditures under Medicare and Medicaid (22% of federal spending), or in the Pentagon (19%)? In short, the 5% overall operating savings we've found elsewhere - and certainly more than the 0.01% that President Obama has identified - are achievable in the federal government. In short, significant cuts in government spending are achievable just by squeezing out waste, fraud and abuse. They just aren't significant enough to close the kind of budget gaps that exist today.

Reinventing Human Services

Most progressives, as the generally pessimistic tone of this forum reflects, think we're in for grim times, between the budget shortfalls, economic constraints, and the plethora of Tea Party-inspired or -indebted conservatives elected to Congress and statehouses across America. I know I'm in the minority on this, but I believe that the current conservative fiscal situation will eventually yield progressive public policies.

The vast bulk of federal spending goes not for the "discretionary" items now the focus of the farcical battle on Capitol Hill over cutting $20 billion or $70 billion out of $7 trillion, but for retirement and health care benefits for middle=class Americans, and military spending. At the state level, the top three spending categories, accounting for the overwhelming majority of expenditures, are corrections, education, and Medicaid; the latter, which consumes a growing share of budgets at both the state and federal levels, now expends most of its dollars on long-term care for the elderly, most of them comfortably middle-class. Most of the rest of government spending goes for the highway patrol and motor vehicles office, programs to help businesses expand, workforce training efforts, drug enforcement, the vital records office.... Which of these will a majority of voters really support cutting?

Once the truly wasteful is eliminated, programs that lack powerful constituencies are gutted, and the one-time gimmicks deployed to paper over the remaining shortfalls are exhausted, what are conservative crusaders, both in Congress and particularly in Governors' mansions, going to do next year? There are only two choices: Show the courage of their convictions and eliminate government spending that most voters actually want - or find ways to preserve most current government programs, especially the human services consuming the biggest chunk of the budget, by making them less costly.

It so happens that we already know how to do the latter. In virtually every area in which government "processes" people - corrections, health care, mental health, children's services, long-term care - we utilize 19th century institutions that produce results generally the opposite of what we presumably want, and do so at greater cost than better alternatives. The most notable of these is corrections, which is absurdly expensive (in Pennsylvania, the saying goes that it costs more for a year in the State Pen than for a year at Penn Stat) and does little by way of "correcting." Analysts have understood for several decades that we could reduce crime more, for considerably less, by being more selective about whom we incarcerate, diverting less serious offenders to alternative forms of punishment, and - most importantly - getting offenders off drugs, which drive about two-thirds of recidivism. But actually saying this made one a "liberal," so it has been a political non-starter. Now, we are starting to see these issues addressed - by conservatives. You probably won't see progressive corrections reform coming any time soon in cash-strapped California, where Governor Jerry Brown depended for his election upon the strong backing of the correctional workers union, but we're already seeing calls for these types of corrections reforms from the most conservative legislators in Texas and Florida, and from ultra-conservative Ohio Governor John Kasich. In a Nixon-Goes-To-China sort of moment, we will see long-overdue, sensible reforms under conservative politicians in conservative fiscal times, simply because they're the only viable answer.

Similarly progressive policies will emerge of necessity in other human service areas. Just about everyone recognizes the need to shift health care into smaller, cheaper, and more pro-active settings and away from large and costly institutional care. Home- and community-based care costs about half as much as nursing home care while delivering what most long-term care recipients want. The same can be said of the foster care system, in which too many children still remain in group homes. While Newt Gingrich has waxed poetic about creating more "orphanages," for most people the term suggests less "Boys Town" than "Oliver Twist." In fact, Oliver Twist would easily recognize most of our government programs for the handling of human beings; moving these systems into the 21st Century would not only be more humane and productive, but cheaper. And that's why we can expect to see a lot more of it in the next decade, regardless of who is in charge.

Paring Down to the Backbone

One reason for government inefficiency is all too often overlooked: The essence of government is monopoly. The classic definition of "the state" is sociologist Max Weber's dictum that it represents the "monopoly of legitimate force." The best case for government remains the provision of "public goods," which must be unified and centralized in order to avoid the problems of "free riders" and externalities. Conservatives have taken in recent years to deriding government services as "monopolies" - and they are right. In fact, it's hard to justify why something should be run by the government unless it properly is a monopoly. Yes, governments are inefficient; That's the nature of all monopolies.
But changing technology has rendered most seemingly "natural" monopolies - such as telecommunications or electricity generation - no longer defensible as monopolies. Government regulation designed to uphold and preserve private monopolies has gradually fallen, and government's provision of its own monopoly services is increasingly under challenge. The fastest growing private-sector industry in the United States today is education - formerly the near-exclusive province of the state. Public safety is increasingly being taken over by the private sector. Public functions like rule-setting and adjudication - in areas ranging from securities industry dispute resolution to the assignment of Internet addresses - is increasingly jobbed out by government or simply taken over by the private sector. Private businesses now provide not just ancillary services to governments like bad cafeterias and bill collection but actual governmental functions like waging war, supplying national intelligence, and, as is now well-known, interrogating and torturing prisoners.

Republicans frequently, and not particularly inaccurately, cast Democrats as pushing large-scale, one-size-fits-all, centrally-directed schemes for solving society's problems - rather like the mainframe computers that promised a brave new world around the time today's "liberalism" was taking shape in the Truman, Kennedy and Johnson eras. The Republican alternative is that great breakthrough for freedom, the stand-alone PC of the Reagan era: smaller, less expensive, freed not just from the tyranny of central control but from all connections whatsoever. Conservatives might see this as the modern analog to that early American ideal, the yeoman farmer, clearing the wilderness and feeding his family by himself in splendid isolation. Today, however, both visions - the mainframe and the stand-alone PC - are terribly dated. Individual entrepreneurs design and launch all sorts of fabulous "apps" that people want nowadays, but they are able to do so only because there is a public infrastructure: the "backbone," provided by a single, central entity like Facebook or the government (the original Internet). With their large economies-of-scale and a pre-existing structure for reaching all citizens - in other words, the backbone - governments can, and increasingly do, reduce what economists call "transaction costs" in aggregating citizens to drive better bargains or create new opportunities.

In "the cloud" - the new computing and business model - both the centralized "mainframe" (or, at least, its modern equivalent, the server farm) and the individual PC play complementary roles. Both the backbone and the individual apps are necessary for this economic and social world to exist. Recognizing this as the role for government - and that, where a better, more competitive alternative exists, a government monopoly isn't the solution - would lead to shrinking of the public sector in some areas and expansion in others. But in all cases the result would be a more efficient public sector.

Political Endgames

Both parties have a desired endgame for the current battle over the size, shape and cost of government. For Republicans, it is to eliminate virtually all vestiges of government built during the 20th and 21st Centuries, leaving only the proverbial Night Watchman State. For liberal Democrats, it is to force the recognition that taxes must be raised to pay for needed government services - in general, raised not in new ways but simply by reversing the tax cuts of the past twenty years that have benefited largely or exclusively the wealthy and large corporations. Progressive interest in looking for government efficiencies is often no more than a tactical feint.

Serious searches for waste, restructuring of most government programs to achieve
meaningful efficiency gains, and a deep rethinking of the purposes of government in ways quite different from those of the regulatory and welfare state of the mid-20th Century, however, are not only consistent with liberal principles but are necessary today. They are also the strategic precedent to any meaningful discussion of taxes. The most successful model for any such discussion was Senator Mark Warner's tenure as Governor of Virginia. Warner convinced a conservative electorate - and a Republican legislature - to raise taxes, but only after convincingly cutting any wasteful or unneeded expenditure that he could find in state government and then making a case to the public for his new priorities.

Rationalizing public revenues and expenditures at some point will require us as a nation to come to terms with the realities that we can only buy what we're willing to pay for, and that, in doing so, we must choose not only between private and public spending, as conservatives frame the decision, but also between continued consumption today and investment in tomorrow. An adult conversation on the foregoing realities is not only necessary to resolving our fiscal challenges , but is the ultimate requirement for restoring public trust in the public sector.