Initiatives with certain characteristics are more likely to succeed at reasonable cost
April 26, 2014 8:34 PM
Daniel Marsula /Post-Gazette
By Peter H. Shuck
Which federal programs and policies succeed in being cost-effective and targeting those who need them most?
These two tests are obvious: After all, why would we spend taxpayers’ money on a program that isn’t worth what it costs or helps those who do not need help? Yet most domestic federal programs have not been shown to meet even these minimal standards.
A smattering of the numerous examples: farm subsidies, flood insurance, ethanol requirements, Amtrak, student loans and many housing programs. All the more reason, then, to study the successes to learn from them.
To this end, I selected for closer analysis a dozen programs that academic studies generally consider successful. Three were implemented long before cost-effectiveness analysis: the Homestead Act of 1862, which distributed the government’s vast western lands, cheaply, for settlement and cultivation; the Morrill Act of 1862, which granted land for agricultural and technical colleges; and the GI Bill, which subsidized higher education for veterans.
The other nine programs generally receive high marks from economists for both cost-effectiveness and targeting of the groups they’re intended to benefit. (Not on this list, notably, are Medicare and much environmental regulation. While they’re popular and confer large benefits, they’re also far costlier than they should be — Medicare because it is built on top of a notoriously inefficient health care system and environmental regulation because so much of it is heavy-handed and creates poor incentives.)
In looking closely at my top 12 programs, I could find no single formula for success, but I did identify some important attributes that made each program successful. Here’s my list of the best strategies government has shown it can deploy:
Eliminating barriers to opportunity
Government succeeds when it creates opportunities by changing the social and legal contexts in which people pursue their goals. For example, the civil rights laws of the 1960s, including the Voting Rights Act, dismantled unjust barriers to minority advancement, opening doors so that more people could walk through them to greater equality. The 1965 immigration reform enabled people to come here from countries which for years had been subject to arbitrary national origins quotas. By expanding opportunity, these programs promote fairness, individual well-being and national progress.
Strengthening work incentives
Two programs — the earned-income tax credit law of 1974, which targeted the working poor, and the 1996 welfare reform, which targeted unemployed mothers dependent on welfare payments to raise their children — clearly increased the incentive to work. These programs, respectively, raised incomes for the working poor and reduced child poverty and adult dependency with a combination of carrots (higher benefits and subsidized work support programs) and sticks (time limits and work requirements for welfare benefits). Recessions, alas, have eroded some of these gains.
Giving resources to those able to exploit them
As it did with the Homestead and Morrill acts, the federal government can sometimes distribute its valuable assets to large numbers of citizens who then use them to advance national goals. Today, government auctions of unused portions of the broadcast spectrum, for wireless and other uses, serve a similar purpose.
Simplifying rulesand administration
The country’s antitrust laws protect competition with simple rules that encourage private initiative. Motivated by the prospect of winning treble damages, competitors aid in enforcement. Whistleblower laws use similar techniques, recruiting private citizens to improve government programs.
Deregulation of the aviation, freight railroads, trucking and natural gas industries during the late 1970s and early 1980s strengthened those industries and hugely benefited the public by replacing notoriously complex, inefficient, government-controlled systems with the discipline of private markets.
Administrative simplicity also helps explain the success of Social Security, a program that processes basic demographic information, applies straightforward rules and instructs its computers to send out monthly retirement checks accordingly. (In revealing contrast, Social Security’s disability program is a dense forest of complex procedures, ambiguous standards, federal-state overlaps and incentives not to work — factors that have combined to produce an out-of-control fiscal nightmare.)
Fulfilling basic moral imperatives
Some programs succeed because almost all Americans believe that fundamental fairness requires them, even if we differ on their details. With the GI Bill, the government gave a kind of delayed compensation. Sending veterans to college proved socially transformative — an achievement celebrated despite the program’s shortcomings. Providing food stamps to assure basic, life-sustaining nutrition for dependent children, the disabled and other needy groups is another moral obligation that almost all Americans favor. Despite recent cuts, Congress continues to support the food stamp program at a high budgetary level. (The program’s political link to farm subsidies also buttresses it.)
Going where markets fear to tread
Sometimes the government invests in public goods and services that are essential to economic vitality, basic research and national heritage — and that the market won’t adequately supply. Examples include the interstate highway system, regional dams and other infrastructure; national parks, monuments and museums; research through the National Institutes of Health and the National Science Foundation, and the patent system.
To be sure, each of these successful programs has had its problems. Were we writing on a blank slate, we might design them differently.
Much of the land allocated under the Homestead Act, for example, was available only because it had been seized from Native Americans. The Morrill Act’s land grants wound up disadvantaging historically black institutions that served their students well under difficult conditions.
Many of the more recent successes must be brought up to date. Remorseless demographic changes threaten Social Security’s solvency; some straightforward solutions are available that politicians will eventually have to adopt. The 1965 Immigration and Nationality Act helped make us the most diverse, dynamic nation on Earth, but it desperately needs renovation. Parts of the Voting Rights Act also should be updated — by Congress, not by the Supreme Court, contrary to its decision last year.
Like food stamps, the earned-income tax credit is subject to fraud and error-inducing complexity, and Congress will likely reform the latter. Some industries that Congress deregulated to promote competition, as well as some such as telecommunications that it continues to regulate, need more vigorous antitrust oversight. Many experts believe that our patent laws now slow innovation rather than promote it and need fundamental reform.
Success and failure, of course, are relative concepts, and reasonable people differ in their assessments. But what is most important are the principles that seem to generate successful programs: removing unjust barriers to opportunity and membership, maximizing the social returns from government assets, strengthening work incentives for the underemployed, simplifying regulation where possible, and providing public goods for all and the necessities of life for those who can’t provide for themselves.
God is in the details, of course, and noble aims don’t necessarily produce good policies; they merely point us in the right directions. Understanding exactly how and why they’ve succeeded can help us to design more like them — and to abandon or improve the many more that fail.
Peter H. Schuck, a professor at Yale Law School, is the author of “Why Government Fails So Often: And How It Can Do Better.” He wrote this for Slate.
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