How Obama Can Redeem Himself for the Obamacare Mess

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Obama may be changing view on private vs. public sector
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James Rosen reports from Washington, D.C.

Imagine for a moment that President Obama wants to rebuild his credibility following the botched launch of Obamacare, and reasssure Americans worried about bureaucracy run amok. Here’s how he could do it: Kill part of the government.

Thousands of U.S. companies have endured the equivalent by laying off workers, consolidating divisions and eliminating bloat during the past several years. The U.S. government, by contrast, now casts a larger shadow than it did when Obama took office in 2009, thanks to the creation of new agencies such as the Consumer Financial Protection Bureau and the additional  bureaucracy needed to look after Obamacare. The federal payroll, not counting the beleaguered postal service, is about 8% bigger than it was before the latest recession began at the end of 2007.

If Obama were to fling a thunderbolt and announce a plan to shrink the government, it might be a welcome way to offset the new federal role in the nation's healthcare system. It would also be the political equivalent of seizing enemy terrain, since Republicans are usually the ones who want to slash spending. It’s hard to imagine many Americans would complain. A record number of them think their government has become too powerful, according to Gallup, including 65% of independents, who are critical to winning a national election these days.

"Beginning in the 1980s, the private sector got rid of an entire layer of middle management,” says Douglas Holtz-Eakin, president of the American Action Forum and a former top economic advisor to President George W. Bush. “The government hasn’t done that.” 

Plus, Obama could shrink the federal bureaucracy with no impact on popular entitlement programs such as Medicare and Social Security, which are Democrats’ true sacred cows. Such a plan might even give Democrats fresh negotiating leverage as new talks begin in Washington over paring the federal budget. Here are three ways Obama could get started: 

Kill two or three Cabinet departments. Rick Perry gave this sensible idea a bad name while running for the 2012 Republican presidential nomination, when he forgot the details of his own plan on national TV. As a reminder, Perry proposed killing the departments of Commerce (annual budget: $8 billion), Education ($70 billion ) and Energy ($27 billion), which was the one he couldn’t remember. It's not as crazy as Perry made it seem. 

Republicans are usually the torch-bearers for the idea of killing Cabinet departments (which would require Congressional approval), but Democrats Bill Clinton and Al Gore proposed various ways to consolidate government functions in their 1993 “Reinventing Government” initiative. Other agencies that might not warrant a full Cabinet department, if you were starting the government from scratch, include Labor ($12 billion), Interior ($11 billion), Agriculture ($23 billion), and Housing and Urban Development ($35 billion).

Killing those seven departments wouldn't save the entire $186 billion they cost each year, since some key functions, such as overseeing nuclear energy programs or administering student loans, would be transferred to other parts of the government. And the lion's share of federal spending goes toward entitlement programs and defense, so killing a handful of agencies wouldn't produce huge savings. But proving the government can do more with less like much of the citizenry would be a winning move for any politician, and it might even reverse the intensifying distrust of government. 

Combine regulatory agencies. The Federal Register lists 429 federal agencies. Surely we could get by with 300 or fewer. At least half a dozen major agencies regulate financial institutions. Several others look after consumer interests, on top of similar organizations in every state plus private groups such as Consumers Union and the Better Business Bureau. Economic statistics come from numerous Cabinet departments, whereas in Europe —  Europe! — such data is consolidated in a single agency that covers 28 nations. The sprawl goes on and on, with new agencies created from time to time but old ones hardly ever closed.

Promote ruthless efficiency. The Clinton-Gore initiative targeted the size of the federal workforce, and succeeded: The number of government workers shrunk by 384,000 from 1992 to 2001. The size of the federal workforce rose modestly under President George W. Bush and has risen further under Obama, as the following chart shows (the spikes represent temporary workers hired to conduct the decennial census):

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Federal workforce, excluding the postal service. Source: Bureau of Labor Statistics


 

In the private sector, meanwhile, the last decade has been characterized by the rapid substitution of technology for workers, which has boosted efficiency and profitability. It may be hard to do that in the government in the midst of a tough economy, but that doesn’t mean the federal bureaucracy should amount to a jobs program — especially since we’re already borrowing to fund normal government operations.

Obama has made a few token gestures at streamlining government, but put no presidential muscle behind big reforms. No president does, for good reason: A big effort to kill or consolidate government agencies would be the mother of all turf battles, sucking energy away from other priorities. In Congress, even small-government conservatives sometimes fight behind the scenes to preserve pet agencies, because losing them would detract from oversight authority, political power and, perhaps most importantly, campaign contributions. 

It’s a mathematical fact, however, that we can’t afford the government we have for much longer, and one way or another the federal bureaucracy is going to shrink. Obamacare, at the moment, looks like the nightmarish quagmire its critics predicted it would be. Obama might get a much-needed boost if he were to turn the tables on his small-government opponents. 

Of course, there’s little chance much would change during the remainder of Obama’s presidency, no matter how hard he pushed. But Obama already champions more stimulus spending and many other measures that will never get through Congress. If he started campaigning for smaller government, it would compensate a bit for the Obamacare mess and start a discussion we need to have anyway.

It’s hard to see what the president would have to lose.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.

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