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The Election—IV

Jeffrey Sachs

The US federal government is the world’s largest enterprise, with $3.7 trillion in outlays, $2.5 trillion in revenues, and 2.1 million civilian workers. It is also the most complex, operating in every sector of the world’s largest economy, in every country of the world, and in every possible setting: markets, technology development, social programs, basic science, and much, much more.

Paul Ryan; drawing by John Springs

A behemoth of this size requires goals, plans, strategies, and budgets that look forward for years, even decades. This is especially true in our era, when unprecedented shifts in technology, demography, the world economy, and the physical environment require deep structural changes in our economic and social life. Old skills and sectors are obsolete. The energy, health, and education systems require large-scale overhauls. And yet we operate almost blindly, month by month, fiscal cliff by fiscal cliff, without any clear pathway ahead.

Imagine running the largest global Fortune 500 company, Royal Dutch Shell (at around one fifth the federal government revenues), without plans, strategies, and budgets. Some companies may try it but they don’t last long. The federal government has the advantage of the Federal Reserve’s printing press (which has been covering much of the deficit as the Federal Reserve buys up Treasury bills and bonds) as well as a constitutional monopoly on power. Still, these should be no excuse for running the government like a bumper-car derby, pushed and pulled by the random collisions of competing interests and factions.

The game of politics has almost completely overshadowed the hard work of governing. Most of the time of President Obama and his congressional counterparts is taken up by campaigning and fund-raising, posturing and messaging, negotiating and horse-trading on short-term transactions, and occasionally debating real issues of importance, such as government’s responsibility for supporting the poor and elderly. Yet none of this political activity substitutes for public management, which means the arduous task of defining goals, and then planning, strategizing, and budgeting toward them.

We’ve gotten so used to the breakdown of actual governing that the public is not aware of what’s gone. The prevailing interpretation is that our government is broken because of political gridlock. There is some truth to that, of course. Yet one of the main reasons that it’s gridlocked is that running the government is now viewed as nothing more than an extension of electoral politics, which in turn amounts to little more than a clash of competing interest groups that finance the politicians and try to keep their teams in power. If the government were approached differently, as a complex venture requiring serious planning, budgeting, and strategy, the process itself of governing would actually rescue the government from the current political trap that keeps it so dysfunctional.

Some government agencies still work brilliantly. NASA has had two recent triumphs this year: the publication of important research findings from the mission to Mercury, and more recently the remarkable exploration of Mars. NASA’s observation satellites have become indispensable in deciphering potentially devastating human-induced changes in the earth’s climate. And the National Institutes of Health (NIH) have recently scored another triumph with the significant advance in deciphering of the noncoding sites of the human genome. This is government at its finest: noncommercial activities with likely benefits of inestimable value.

Yet NASA and the NIH are not the norm. The government is mostly led by appointees or elected officials with little technical knowledge, less management experience, and an expected job duration of a few years at most, often culminating in a lobbying position on K Street after leaving government. The alternation of power between the two political parties does almost nothing to compel better managerial performance.

As our problems have gotten more complex in a more global, technological, and environmentally unstable era, the two parties have adopted increasingly naive ideological positions to justify their chronic managerial failures. The Republicans’ answer, of course, is that no management is needed: the market will do it. Their increasingly absurd elixir of tax cuts and deregulation is supposed to solve any problem: poverty, pollution, unemployment, health care, climate change, and even national security. Fortunately, it looks like the public is not buying this nonsense.

Sadly, President Obama and the congressional Democrats have had their own mythology that the economic problems will generally sort themselves out without long-term plans and with short-term patches such as a bit more demand stimulus. Democrats rightly believe in government, but they give little evidence that they believe in public management. The stimulus legislation in 2009 was a $900 billion hodgepodge thrown together in a few weeks, on the mistaken and panicked grounds that even a few months of delay for planning would have meant a great depression. And even if fear itself could justify the rushed first stimulus package, little can justify the continuing resort to short-run measures—temporary tax cuts, temporary spending programs, repeated quantitative easing—that have done almost nothing to restructure the economy. Keynesian stimulus policies have become the substitute for strategy, planning, and implementation.

I am an Obama supporter, and hope against hope that with an election victory in November, he will finally recognize that the country cannot bear four more years of improvisation. His reelection would offer a narrow window in which Obama can lay out real and long-term options for the country, before those options are overwhelmed by the deepening economic, social, and environmental crises wracking the US and the world. Consider three pivotal issues that will likely determine our country’s well-being for decades to come: energy, health care, and skills.

The world faces an enormously important set of choices in energy policy. While the modern world economy has been built on fossil fuels, we now know that a continued reliance on and expansion of carbon-based energy will be environmentally devastating. As if this needed any further evidence, the twelve months from July 2011 to July 2012 were the warmest twelve months in US history; the drought in the Midwest has been the worst in decades; and the global frequency of extreme weather events has increased by an order of magnitude during the past quarter-century. It is a core task of the federal government to help devise a long-term path away from carbon, involving a range of highly complex choices over federal land use in our deserts, drylands, and coasts; new national electrical grids; a possible new generation of nuclear power; the deployment of carbon capture and sequestration; the mass conversion from internal combustion to electric vehicles; and more.

Obama did well to appoint a Nobel laureate science manager, Steven Chu, to run the Department of Energy. But the White House political advisers have done far more to keep Chu out of the press than to empower him to lead the development of a science-based national energy plan. Obama has completely conflated energy politics and energy policy, first by treating a monstrous, lobby-infected cap-and-trade bill as a real energy policy, and then reverting to piecemeal regulations once the cap-and-trade bill (predictably) collapsed.

The controversy over health care is only a bit different. Obama deserves high marks for his perseverance and political bravery in pushing the expansion of health coverage to the poor and uninsured and to the uninsurable with prior conditions. Yet we know the political price that the White House paid to win that expanded coverage: a near preservation of the status quo on America’s shockingly wasteful and corrupted for-profit health care system. Obama traded away real efficiency-enhancing reforms to guarantee that the private health insurers and big pharma would not fight the health care legislation. A stunning recent report of the Institute of Medicine is telling: the lack of a decent health care system leads to a staggering cost of $750 billion each year in waste and fraud, roughly 5 percent of the national income.

The education sector is a third matter where the lack of serious federal planning and management is taking a frightful toll. In every policy speech, Obama rightly says that only by educating our kids well do we have a chance to maintain living standards, compete with low-wage countries, and combat chronically high unemployment of poorly educated workers. The challenge is to ensure that all children, rich and poor, have access to the high-quality education, training, and job skills they need in a highly competitive global labor market. As Germany, the Netherlands, and Scandinavia have shown, there are highly effective programs for early childhood development, state-run quality day care and preschool, and skills programs such as apprenticeships and targeted training that make a vast difference. Yet the US is cutting rather than expanding such programs.

Effective governments in well-run countries (such as Sweden, Norway, and Singapore to name three) prepare white papers, make plans, set targets, prepare medium-term budgets, and create innovative new agencies to address novel problems like low-carbon energy, efficient health care, and lifelong education, and they do so with a strong sense of the power and positive contribution of private business, which creates jobs, fosters innovation, and pays taxes. In a large federal system like the US, the needed plans, budgets, and implementing agencies will inevitably require close cooperation of federal, state, and local government officials, as well as partnerships of the public and private sectors (to improve job training or to create new public infrastructure).

The year 1981 was a milestone on the retreat from governance. In his inaugural address, Ronald Reagan famously declared that “government is not the solution to our problem; government is the problem.” In the first presidential debate, through all of the smoke, mirrors, and half-truths, Mitt Romney’s commitment to the Reagan philosophy held strong and clear. His basic message was: cut tax rates and get the Feds out of the way, on energy, health, education, and more. As for the rest of the debate—on whose budget plan would do what and when—Romney certainly obfuscated more than clarified, and he ditched or disguised earlier positions to run (thankfully, in one sense at least) toward the middle from the extreme right.

Yet there was little solace in any apparent moderation. The man who declared, “I like coal,” without explaining the dire risks of climate change, who spent much of the debate disparaging the federal role in early-stage renewable energy, and who called for rollbacks of even the current inadequate federal programs for health care and education is not remotely the candidate who can or would lead the work of serious federal governance that we urgently need.

Obama is a very smart, honest, and ambitious leader. I am thoroughly relieved that he will most likely have a second chance to get governance right. But success will require a very different second term. America’s deepest problems are structural, not cyclical. We need to reinvigorate government for the twenty-first century, and to put away childish things, just as Obama once promised to do. Obama has faced childish opposition, it is true, but grown-up leadership that eschews gimmicks could recapture the support he needs to begin leading the nation away from its current morass.

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