Government Performance Effectiveness
By Arnold Kling
Demanding that programs prove results in order to earn financial support, however obvious and sensible, marks a dramatic departure from past practice. No one has asked about the extent to which Elderly Housing Grants help the one million very low-income elderly households with severe housing needs. Is $4.8 billion in federal foster care funding preventing the maltreatment and abuse of children by providing stable temporary homes? Have federal efforts to reduce air pollution been successful? These programs seek to accomplish important goals but fail to provide evidence that they are successful in serving the citizens for whom they are intended.
Even programs known to be failing continue to get support. For example, the Safe and Drug Free Schools Program, which a 2001 RAND study determined to be fundamentally flawed, has only grown larger and more expensive. The current system discourages accountability, with no participant incentives to take responsibility, much less risks, to produce improvements in results.
…The vast majority of programs have measures that emphasize inputs (such as the number of brochures printed) rather than outcomes or results.
When I was an economist at Freddie Mac, we made a transition out of the public sector and into the private sector (there are critics who say that the privatization was not total, but that is another story). Once we became accountable to shareholders rather than regulators, senior management made a conscious effort, using the principles of what was called Operational Planning, to change our mentality from a focus on activities to a focus on results. It made sense, and it seemed to make a difference.
The OMB analysis describes previous attempts to introduce management discipline in government programs, without explaining why those efforts failed. My guess is that this effort will fail, also. Here are some reasons.
1. At Freddie Mac, we had to take senior management seriously. They were there for the long haul, and we could be fired at will. In the government, employees have tenure, and they can wait for any particular Administration to go away.
2. At Freddie Mac, the goal of management reforms was to make each department work better, rather than abolish departments. The OMB initiative is finding that most programs fail to demonstrate an ability to justify their costs. That makes it highly unlikely that departments will “buy in” to management improvements, or that such “buy-in” could turn around a fatally flawed program.
3. At Freddie Mac, it was clear that departmental habits would have to change if they were not consistent with overall corporate goals. With government programs, the flaws may be “designed in” by the legislation that created the programs. Congress very deliberately specifies activities, as opposed to identifying results and leaving it to departments to optimize activities in order to achieve results. The legislative mindset will be difficult to change. And government departments ultimately must please legislators, rather than shareholders or customers.
The OMB initiative may obtain some improvements here and there. However, a fundamental realignment of government to focus on results that serve the public, although a laudable a goal, is not going to be achieved with a management initiative. I do not believe that government can be made to run like a business in that sense.
For Discussion. Balaker is struck by the pie chart in the OMB report, which shows that most government programs fail to pass a benefit-cost test. Do you believe that the pessimism in the pie chart is justified, or overstated?