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November 5th, 2012 4:45 pm
Want to Reduce Public Spending? Make Government More Efficient
Posted by Troy Senik Print

There’s a certain strain of thinking on the right that scoffs at the notion of “efficient government.” The skepticism of what seems to be an unobjectionable goal has a few sources.

First, many pundits point out that the nation’s constitutional design is predicated on checks and balances that make government anything but efficient — the explicit goal, after all, is to slow the lawmaking process in an attempt to ensure some measure of deliberation. They’re right about that, of course, but that’s an observation on the lawmaking process, not on implementing or enforcing the law.

Second, conservatives note (also rightly) that government by its very nature (i.e., the lack of market incentives present in the private sector) has a built-in bias towards sclerosis and waste. That’s true as far as it goes, but arguing that government can’t be administered perfectly is not the same as arguing that it can’t be done better.

For a good example of the potential of reformist public administration, one need look no further than the example that Indiana Governor Mitch Daniels set with that most hated of bureaucracies, the DMV (though in Indiana it’s the BMV — The Bureau of Motor Vehicles). Consider this excerpt from Andrew Ferguson’s fabulous profile of Daniels in a 2010 issue of the Weekly Standard:

The state Bureau of Motor Vehicles, another patronage sump that was routinely ranked one of the worst in the country, was drastically reorganized. “[Daniels] likes metrics,” [Director of the Indiana OMB Ryan] Kitchell said. “He likes to measure outcomes.” Every line item in the state budget has at least one objective formula attached to it to indicate how well each service is being delivered. Regulatory agencies track the speed with which permits and variances are granted. The economic development agency has to compare the hourly wage of each new job brought to the state with the average hourly wage of existing jobs. In the case of the BMV, the two most important metrics were wait times and customer satisfaction. Now each receipt is stamped with the time the customer arrives and the time his transaction is completed. Wait times have dropped from over 40 minutes to under 10 minutes. Surveys put customer satisfaction at 97 percent.

So it can be done. And by the way, it’s also a cracker jack method for keeping government outlays under control. From Walter Russell Mead, writing at his Via Meadia blog:

… By 2025, fully 34 percent of US GDP will be eaten up by the cost of providing public services. Throw in little items [like] interest on the burgeoning national debt and pension and other liabilities, and we are looking at basic governance costs and obligations close to 40 percent of GDP—and heading inexorably higher…

There are two basic drivers behind these numbers: the first is the well known demographic problem that comes from the combination of increased longevity and falling birth rates. Programs like Medicare cost more as people live longer, and reduced population growth means that the workforce grows more slowly than the number of old people drawing on government services and transfer programs.

But the second driving force, which [an] Accenture [study] highlights very usefully, is less well understood: the catastrophically slow growth of productivity in the government workforce. Think of this as “bureaucracy drag;” while productivity in the workforce as a whole is rising by 1.7 percent per year, and in private sector service industries it is rising by 1.5 percent each year, in government productivity is rising by a miserable 0.3 percent per year.

Bureaucrats aren’t getting the job done. And the rest of us are paying the price. It’s time for public sector executives around the country to take a page out of Mitch Daniels’ playbook.

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