How to fix Washington: a 5-step plan from a former Bush economic adviser

The Republicans now have control of both houses of Congress. This speaks to Americans’ dissatisfaction with how the Democrats have been running Washington. I was head of the Council of Economic Advisers under the last Republican president, George W. Bush, so I know that having a new party in charge isn’t how you change the way the federal government works. To really reinvent government, we need to take lessons from the private economy. Think Apple, not Healthcare.gov. Think the Cleveland Clinic, not the VA.

Here’s why the private-sector lessons are important: it’s less about government’s lack of competence than government’s lack of nimbleness. We have much to learn from the ways in which the nation’s vibrant businesses and social sector organizations adapt and prosper.
Organizations become successful by responding nimbly to changes in economic conditions and individuals’ preferences. Here are five ways the government can change to improve its nimbleness.

Improving accountability is the first step toward a more nimble and transparent federal government: make agency leaders and decision-makers responsible for their actions. Poor management decisions at agencies that should command the public’s trust — recent scandals at the IRS, Secret Service, and VA come to mind — should be met with explanation and disciplinary action, not obfuscation.

No change in the law is needed here; responsibility for accountability must reside with the president: “the buck stops here.” Firings should not be a dragged-out afterthought. Outside experts can advise the Executive Office of the President on difficult problems ranging from the culture of the Secret Service to managing Ebola, but trust will improve only when the president enforces accountability quickly.

The second and critical step is fostering competition among programs and alternative ideas to achieve legislative goals. Products, services, and even the organization of firms are shaped by the battle to win over consumers and investors. Monopolies are slower to innovate, and true monopolies require regulatory fiat (think the Postal Service).

The government needs to introduce competition in the ways federal funds support individual beneficiaries. One example is Personal Reemployment Accounts, an idea I developed when I was chair of President Bush’s Council of Economic Advisers. In this system, unemployed Americans would receive a transfer to use to purchase the job training of their choice. Such accounts allow the unemployed to choose the training that is best for them. Then, once the unemployed person finds a job, he or she would get a reemployment cash bonus. This would give the unemployed an incentive to find work quickly.

Another example is premium support proposals for Medicare, which would allow recipients to use federal subsidies to choose among alternative private health insurance plans. Gains from competition can be achieved even in redistributive programs. The amounts of subsidies in Personal Reemployment Accounts or Medicare can vary by income or other characteristics, but still give individuals access to the greater choice and quality made possible by competition.

While accountability and competition are important features for advancing performance in any organization, the threat of exit, or elimination — either directly, or via replacement by a superior organization — is critical. Unlike business firms threatened by competition, government programs and agencies can take on a life of their own. Such stasis has two consequences that worry the electorate.

The first and more obvious consequence is that policy reform proposals — for Social Security or Medicare, energy or financial regulation, and health care or housing subsidies, for example — face an uphill battle against entrenched rules. Any reduction in the future growth of program benefits or subsidies is a “cut.” Any updating or correction of the rushed Dodd-Frank Act or Affordable Care Act faces opposition as “weakening regulation.”

The second, less obvious consequence is that a kind of passive voice, or bureaucratic shrug, envelops government administration: existing policies make certain courses of action inevitable, regardless of how well they fit contemporary policy needs. Examples include failure to address regulatory confusion in the mandates in the Affordable Care Act, or clarifications of rules to apply to so-called systemically important nonbank financial institutions.

Two reforms come to mind: changing the time period over which spending and regulatory rules remain in force without review; and forcing regular congressional debate over spending and rules. While these changes cannot replace needed policy debate, they make such debate more likely to lead to action.

Significant programs and regulations should “sunset” after a period of time, requiring explicit reauthorization or change. Sunset provisions do not preclude continuing a program exactly as is, but they shift the default from bias toward the status quo to a renewed debate on the program’s merits. Such a debate ensures that programs are appropriately designed for current conditions.

Returning to a budget system with strong congressional chairmen for both policy and appropriations committees — as the nation had before the mid-1970s — can once again force timely debate on all twelve appropriations bills, and meet overall spending on Social Security and Medicare objectives.

Congress should be willing to shift “mandatory spending” on Social Security and Medicare to regular multi-year appropriations. If it is unwilling to do that, it can at least place changes in the liabilities those programs accrue on budget. Such a change would force a debate over the cost trade-offs among mandatory spending, discretionary spending, and tax proposals. Importantly, this turning back (to strong committee chairmen) and turning forward (to placing “mandatory spending” on-budget) of the budget process should make elimination or replacement a viable option for out-of-date programs or program organizations, just as the debate enhances competition among policy ideas.