Should the Federal Government Be More Like Wawa?

Mitt Romney was right, as I wrote yesterday, to praise Wawa as an innovative private firm. But Romney's point went further: Using Wawa as an example, he said the federal government needs to be more efficient and sensitive to its clients' needs.

Romney is right that the federal government is sometimes maddeningly difficult to work with. For example, the Census Bureau has a horrible website. Census divides its data into arbitrary silos, makes them available in inconvenient formats, and even peppers its website with dead links. (Seriously, go to this page and click on "age and sex." See?)

It would be nice if the Census shared Wawa's enthusiasm for user friendliness; it's good for a candidate to have that goal for the federal government. But there are also three important limits to Romney's intent to Wawa-ize government.

The first is that the public sector often fails to innovate or provides bad service for structural reasons. It's not like federal civil servants or Obama administration officials hold the view that the Census ought to make its data difficult to use. They just don't face the right incentives to provide good service -- and having a president who says they really ought to isn't likely to change much.

Sometimes, with the right management, structural problems can be overcome. Dan Grabauskas, who was the Massachusetts secretary of transportation when Romney was governor, rose to prominence as the guy who made the Massachusetts Registry of Motor Vehicles a non-hellish place to renew your driver's license. Maybe Romney can put Grabauskas in charge of Census. But again, it's not like Obama doesn't know that good management can produce good outcomes.

The second problem with the Wawa approach is that only a subset of the problems with the federal government can be solved with innovation or greater efficiency. State and local governments really do look a lot like Wawa: They spend large fractions of their budgets on employee compensation, and improvements in productivity can lead to more services provided per dollar spent.

But the federal government mostly moves a lot of money around. For example, 98 percent of spending on Social Security is actually going out as benefits. You can change Social Security’s finances a lot by changing benefit formulas and tax rates, but the program is already very efficient.

This holds across other government programs, too: farm subsidies, education grants to states, Medicaid and welfare programs (which are partly federally funded but state administered). Romney can give states more running room to innovate as they spend that money, and he has proposed to do so, but the federal government itself cannot become much more efficient.

There are big federal programs that do engage in significant direct spending and have major opportunities for innovation. But the third problem with Romney's Wawa approach is that he has made commitments that will limit his ability to innovate in these areas.

The part of the federal government that probably has the most opportunities for improved efficiency is the military. We buy weapons systems that the Pentagon doesn't want. The Pentagon wants equipment it probably doesn't need. We compensate military personnel in a Byzantine manner that emphasizes benefits over wages.

But Romney has promised to increase spending on the military. Theoretically, he could cut inefficient defense spending and plow the savings back into other areas of the military. But, if he plans to keep that promise, he can't Wawa-ize the military and use the savings to shrink the deficit.

Another inefficient area of federal spending is health care. America spends a far larger share of GDP on health care than any other country -- 18 percent -- but we don't get appreciably better outcomes than other rich countries. And even though we have a nominally private health care market, about half of health-care spending in the United States is government spending.

The problem for Romney is that there are really only two ways to make health care cheaper: Pay less for the same amount of things, or pay for fewer things. And both of these options are fraught with political risk. The conservative base is likely to be highly skeptical of any moves Romney takes to control the cost of health care that diverge from a Paul Ryan-style approach of simply capping public costs and therefore shifting them to consumers. But the Ryan approach itself would be a political disaster once Americans realized that Medicaid and (later) Medicare benefits were no longer sufficient to buy health care.

Another chunk of the federal government that could be made a lot more efficient is the United States Postal Service. The Post Office has a declining business model, far more employees and facilities than it needs, and unreasonable congressional mandates to provide money-losing service to far flung areas.

Unlike the military and the health care sector, Romney could probably succeed in getting a sweeping reform of the postal service enacted. Falling mail volumes and unfunded liabilities for retirees will soon force a financial restructuring at the USPS that will create a window of opportunity for big changes. In fact, when people ask me what I think a Romney administration would do, my first answer is almost always that it will fix the Post Office.

It would be a good thing if the Post Office were more like Wawa. In fact, we could follow the German example and close many freestanding post offices in favor of desks inside stores like Wawa.

But the dysfunction of the Post Office probably isn't one of the top 10 problems facing the federal government today. And that shows the limits of the Wawa approach: "Be like Wawa" can be a useful way of thinking about how the government should do what it does, but it doesn't tell you what the government should do.

The key policy questions of our time are mostly about what the federal government should do with the limited resources it has available. We can't innovate our way out of those questions; we'll have to reevaluate our views on what government will do. And unlike the "how" questions, Romney has been decidedly cagey on the "why" question -- that is, the purpose of government.

(Josh Barro is lead writer for the Ticker. Follow him on Twitter.)

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