Saturday, September 27, 2008
In his second chapter of A Government Ill Executed, Paul Light looks at the current composition of the federal work force, the trends, and what they imply for the ability of the federal government to operate proficiently.
Noting that his 2nd characteristic of of an energetic federal service is clarity of command, Light thinks this is one area where Hamilton nods to Jefferson. Hamilton, as Secretary of the the Treasury, was noted for the details of his orders, down to the armaments that would be on each Coast Guard cutter. "Nothing was too trivial for his attention," says Light. In addition, the federal government work force is undergoing with Light calls "thickening," which refers to the addition of more and more layers between those who run the agencies and those on the front line who execute policy and gain the insight as to what's really happening on the ground.
Additional layers are the result of two things, says Light. The first is additional missions that bring with them their own bureaucracy. The second is the misperception that more leaders equals better leadership. Instead of just a Secretary and a couple of Assistant Secretaries overseeing the civil service, we now have so many layers, especially of political appointees, that we now have people with titles that can barely fit on a business card: "Associate Principal Deputy Assistant Secretary." Modern developments along these lines include a proliferation of "Chief of Staff"s and C-level (e.g., Chief Financial Officer, Chief Acquisition Officer, etc.) to further confuse the thicken the executive branch hierarchy.
As a result, communication of what is expected from the top to the bottom becomes obscured and makes it all the more difficult for the President to get his agenda enacted. Also, key information from the "front lines" never gets to the decision makers at the top. Accordingly, we get faulty government responses to crisis like Hurricane Katrina, doubts about weapons of mass destruction never get aired at the level where decisions are made, and safety concerns about the space shuttle getting lost.
We also have a problem when we consider this with the broken confirmation system we'll discuss later. Because so many offices remain vacant for long periods of time, important information and decisions sit on empty desks. The more layers, the more opportunities for this to occur.
The key is to reverse this trend, says Light, "thin the system."
In this respect, Light looks to Jefferson rather than Hamilton for inspiration. Hamilton believed in highly prescriptive edicts that would filter down through a broad chain of civil servants. Jefferson believed in delegation, following broad principles rather than detailed orders and the use of informal communication over normal bureaucratic modes. Light noted that Jefferson understood that with new missions come new bureaucracy, which obscures clarity of command. Although the often start out flat, they have a tendency to thicken over time he observed.
While Light does a masterful job of describing the problem and the reasons for its evolution, he is much less enlightening on how to thin the federal government. He notes that most Presidents since Carter have understood the problem and endeavored to correct it, but little has been accomplished on this front other than cosmetically.
A few thoughts. First, a "thick" federal bureaucracy seems to be another price we pay for too many missions in addition to not having enough resources as we discussed earlier. Second, it's important to realize than "thinning" the government in this regard doesn't mean cutting workers but rather flattening so that information from the front lines goes through fewer hands on its way to the Oval Office.
Reforming the civil service in this way is clearly important, but it will require a big overhaul that will meet with fierce opposition from government employees and the unions that represent them. Perhaps one helpful step would be for the next President not to appoint someone to every box on the org chart. That would mean abstaining from awarding a "plum" however (and the political juice it creates for him). It's unclear whether that's asking too much.
Friday, September 26, 2008
Subject: SUBJECT: REQUEST FOR URGENT BUSINESS RELATIONSHIP
I NEED TO ASK YOU TO SUPPORT AN URGENT SECRET BUSINESS RELATIONSHIP WITH A TRANSFER OF FUNDS OF GREAT MAGNITUDE.
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YOURS FAITHFULLY MINISTER OF TREASURY PAULSON
(Update: 3:01 PM - we're ready to rumble)
The debate, hosted at the University of Mississippi, will focus on foreign policy. It's slated to begin at 9 EST. The four broadcast networks, NPR and C-SPAN are all planning to carry it.
While we can expect the candidates to segueway to discuss domestic politics, particularly the financial crisis, there are still some really important issues to discuss regarding foreign policy. They include:
(1) The war on terrorism - first and foremost. Terrorism is still the biggest foreign threat to the US despite everything else that has happened.
(2) Iran - the mullahs are pushing forward on nuclear power. Iran is a terrorism supporting state according to the US State Department (a designation that both Republican and Democratic administrations have made). A nuclear Iran is definitely a major concern from the standpoint of non-proliferation.
(3) Non-proliferation - it used to be that nation state cooperation was necessary to develop weapons of mass destruction. Today, that's not the case. The next administration needs a new approach for a new problem.
(4) Russia - Russia recently invaded and trashed the independent Republic of Georgia over an ostensible border dispute. The real purpose was to send the message to the US that Russia is still a world power to be reckoned with.
Hopefully, those doing the questioning will hold the candidates' feet to the fire on these issues.
Senator McCain has not given any indication of his views on this, which is very troubling. His intervening in the process, then, is pointless showboating at best.
So far, Obama has shown a steadier hand in dealing with our nation's most pressing domestic issue.
On the other hand, Senator Obama has not shown an understanding of the nation's financial health that previously I credited him with having. When asked whether the bailout would alter his ambitious health care plan, he said "no":
Barack Obama told CNBC's Chief Washington Correspondent John Harwood that his plan to reform the nation's health care policy won't fall victim to the government's $700B bailout plan.
HARWOOD: So no change in your health care plan?
OBAMA: Well, the--but keep in mind, my health care plan is paid for. And I continue to believe that rolling back the Bush tax cuts on the wealthiest Americans makes sense. They are still going to be wealthy after those are rolled back. I still believe that it is important for us to make college more affordable. And I think it's important that all those things are paid for in light of this huge additional potential expense.
It may have been paid for, but the bailout isn't.
That's like saying that you had planned to buy a new car and had saved for it. Now that you find you need a new roof, and don't have any money saved. Are you still buying the car?
Not if you're responsible, or as Paul Krugman likes to call it, a "grown up."
In what is by far the largest bank failure in U.S. history, federal regulators seized Washington Mutual Inc. and struck a deal to sell the bulk of its operations to J.P. Morgan Chase & Co.The collapse of the Seattle thrift, which was triggered by a wave of deposit withdrawals, marks a new low point in the country's financial crisis.
the fact that no bank was willing to buy WaMu until it failed shows how badly confidence has eroded in a banking system awash with record profits just a few years ago. Faced with deepening losses on mortgages, credit cards and other loans, big and small banks across the country are struggling with what many bank executives say is a crisis far deeper than the savings-and-loan debacle.
Thursday, September 25, 2008
House Speaker Nancy Pelosi takes her name out of the running by declaring that she won't support a bailout unless a significant number of House Republicans (who are of course in the minority in that chamber) vote for it:
House Speaker Nancy Pelosi is telling Democrats that she will not support President Bush’s $700 billion bailout of the financial sector unless there is significant Republican support for the controversial plan...The politics of the bailout are tricky and dangerous for both political parties...As a result, Pelosi (D-Calif.) has effectively sent the message that if she is going to jump off a cliff to rescue Wall Street, she wants House Minority Leader John Boehner (R-Ohio) and George W. Bush holding her hands when she leaps.
This may make sense politically. There will be a fair amount of political backlash for the bailout plan.
As I've stated below, however, there are good reasons to be skeptical. But whether Speaker Pelosi supports it should turn on something other than how much political cover she has, don't you think?
Wednesday, September 24, 2008
The financial system is the heart of our economy and it is in trouble. If we do not fix it soon, we risk a serious recession...Bold action can be designed with lower costs to taxpayers, while accomplishing the goals Treasury Secretary Henry Paulson has laid out. Elected officials should act quickly -- but carefully.This quote contains only the beginning and end so you can see where the authors, including former Chair of the Council of Economic Advisers Glenn Hubbard (a Bush appointee) and his co-authors are coming from.
We need to act, they say, but we also need to get it right. Hubbard gives the Administration credit for taking urgent, decisive action, but he also gives due props to Senate Democrats who want to add some good ideas as well (unfortunately, some Democrats have less helpful ideas though). He and his co-authors provide three concrete suggestions for improving the Administration's proposal.
This article is the exact opposite of 90 percent of what I've seen and heard on the situation - one with no exterior motive to help position one candidate or ideology.
Art: the cartoon accompanied the original article in the online Wall Street Journal.
Tuesday, September 23, 2008
Thank goodness someone has a plan. Don't bother me with the details, just do what it takes to fix it and let's get on with our busy daily lives.
First, a summary of the problem via Paul Krugman:
1. The bursting of the housing bubble has led to a surge in defaults and foreclosures, which in turn has led to a plunge in the prices of mortgage-backed securities — assets whose value ultimately comes from mortgage payments.
2. These financial losses have left many financial institutions with too little capital — too few assets compared with their debt. This problem is especially severe because everyone took on so much debt during the bubble years.
3. Because financial institutions have too little capital relative to their debt, they haven’t been able or willing to provide the credit the economy needs.
4. Financial institutions have been trying to pay down their debt by selling assets, including those mortgage-backed securities, but this drives asset prices down and makes their financial position even worse. This vicious circle is what some call the “paradox of deleveraging.”
One big question will be "how much will the government pay?" As law professor Hal Scott notes, pay too much and the public will be outraged. Pay too little, though, and we'll fail to accomplish our objective. Another is whether this is even the right model. Some, such as Krugman, have suggested that the Fannie Mae bailout from a few weeks ago is a better model, with the government actually taking ownership.
Normally, we're all for people know more, rather than less, about key government policy makers, but there's a more than a grain of truth to the above. At right is Andrew Mellon, who was Treasury Secretary during the stock market crash of 1929. Mellon would have been decidedly opposed to the Federal Government's proposal to purchase assets from financial institutions (or "cash for trash" as Paul Krugman has dubbed it).
A few weeks ago, I came back into town to learn that the Federal Government had taken over Fannie Mae and Freddie Mac.
On Monday, the Wall Street Journal reported that Wall Street as we knew it was over, as the two largest remaining investment banks had opted to convert to bank holding companies:
With Goldman Sachs and Morgan Stanley becoming commercial banks, and the other three big investment banks/brokerage houses being acquired by commercial banks, politicians and the press won't have Wall Street to kick around anymore. Headlines now shout about a $700 billion "Bailout for Wall Street." Yet strictly speaking, Wall Street as we knew it no longer exists. (emphasis added)
You know, you go out to the country to pick some pumpkins and buy some cider, and Wall Street goes out of business. This is becoming all too typical. What's next perhaps? The Onion gives us a clue in the photo above.
Monday, September 22, 2008
Sunday, September 21, 2008
He noted a few McCain character traits:
McCain’s governing style displays a healthy balance between loyal insiders and outside advice. McCain has attracted loyal long-term staffers, such as chief of staff and co-author of his best-selling books, Mark Salter, but he also seeks counsel from a wide range of advisers inside and outside his campaign...This is important because one of the chief failings of the current administration, in my view, has been insularity. People from inside Bush World were given key posts, even when not suitable. Outsiders who were tapped really didn't wield real power. Compare that to Ronald Reagan who made his chief GOP rival's campaign manager his Chief of Staff. A good leader will reach out and hire the best people, regardless of their past affilations.
With McCain’s emphasis on fiscal responsibility, lower spending and cutting congressional pork, a McCain presidency would likely see vetoes of appropriations bills and budget showdowns with Democrats. On this front, McCain would probably find strong backing from his Republican colleagues, who while in the minority would support fiscal restraint wholeheartedly.As a Republican President with a strong record of fiscal restraint dealing with a Democratic Congress, McCain would likely do a fairly good job keeping spending in line. That's a big advantage he's got in my view over Senator Obama, who likely will go along with Congressional spending wishes because he's got some ambitious plans of his own, e.g., health care.
Fortier surmises that McCain's record of bi-partisanship and independence from his own party's line means that he'd work better with a Democratic Congress than any of his GOP rivals would have, which I find to be a reasonable assertion.