Things have changed

HHS secretary Alex Azar speaks at the American Enterprise Institute

"We've learned from mistakes" is a common theme in recent policy presentations around Washington dealing with long-standing public problems. The solutions offered seem familiar as well, though possibly "Versions 2.0" that address earlier policy failures.

Government should make public policy where problems persist due to market failures i.e. where the private actions of buyers and sellers don't resolve some widespread public need. (Frustratingly, there is no metric for when the market fails. It's a matter of perception. One way of distinguishing conservatives from liberals is where and how often they perceive market failures.) Health care's market failure occurs because consumers lack information about price and quality they need to make informed decisions, because health insurance policies usually mean consumers aren't price-sensitive anyway, and because the traditional fee-for-service model creates incentives for providers to over-treat patients. Infrastructure's market failure occurs because while roads, bridges, sewer pipes and such are excludable in theory, in practice everyone gets to use them so generating profits is impossible. Basic research's market failure occurs because, as Maria Zuber of the National Science Board pointed out at the Bipartisan Policy Council last week, the payoffs are uncertain and occur in the very long term at a time when corporate shareholders have come to expect returns quarterly.

Governments, however, are not always effective in filling the breach when markets fail. Freed from the need to make a profit, political institutions must nevertheless be responsive to the public, or at least to the attentive portion of it. Moreover, without market price signals, it is difficult for governments accurately to perceive returns-on-investment, particularly when officeholders are feeling pressure from the public. No government in the world is flush enough to provide everyone with everything they might need. The amoral market does not allocate health care in any morally-satisfying way, but any health care system has to set limits on coverage, and that's a lot harder when it's as explicit as it is in a policy context. Infrastructure suffers because while new construction can be politically rewarding, routine maintenance is not, so funding is a constant losing battle. Basic research, on the other hand, sounds exotic and often goes down blind alleys, so it makes an easy target for people who target government "waste, fraud and abuse."

"Fixing health care" panel at American Enterprise Institute, 16 May

A panel at the American Enterprise Institute this week promoted private sector initiatives in health care aimed at reducing inflation, which has taken this sector of the economy from 8 percent of U.S. gross domestic product in 1980 to nearly 20 percent today without any observable advantage over other advanced democracies. Two themes that emerged from an energetic and wide-ranging discussion were providing at least primary care through Accountable Care Organizations (ACOs) as an alternative to fee-for-service medicine, and reducing expenditures by catching problems earlier through what Rashika Fernandapulle of Iora Health termed "high-impact relationship-based care." I've been hearing both of these for 25 years or more. Accountable Care Organizations, as defined by Kaiser Health News, are "networks that coordinate patient care and become eligible for bonuses when they deliver that care more efficiently." They are a key cost control tactic of the Affordable Care Act. They sound a lot like Health Management Organizations (HMOs), which were authorized in 1973, and when employer-based plans shifted in their direction on a large scale in the 1990s helped to restrain the growth of costs, but over time became infamous for denial of care. "Some people say ACOs are HMOs in drag," the Urban Institute's Kelly Devers told Kaiser, but there is more flexibility provided to patients in choosing specialists and there are more regulations to ensure the cost savings don't impact the quality of care.

Infrastructure panel at National Association of Counties, 17 May

A panel at the National Association of Counties celebrated Infrastructure Week by exploring the potential of public-private partnerships. John Porcari, a former transportation official now with the consulting firm WSP, suggested that private firms are essential to design and maintenance of infrastructure which are harder for governments to fund. Of course these sorts of partnerships are not new. The panel didn't mention the expansion of Stapleton Airport which was a byword for governmental failure in the 1990s, but they did raise Chicago's 2009 privatization of parking services, which has become a byword for bad contracting (see Kaehny 2009, Cohen and Farmer 2014). Indeed, today's Post reports on malfeasance by a contractor on Metro's Silver line that was reported by a whistleblower. Moderator Adie Tomer of the Brookings Institution raised other problems of the past, including overstretched city staff being outgunned in information and focus by the contractor and unable to do proper oversight, and contractors left in the lurch by sudden policy changes. The panelists noted these problems were widely understood, and could be anticipated in program design and process, as well as through intergovernmental information sharing. They commended value capture as a means of funding infrastructure spending (including ongoing maintenance), and praised its inclusion in the Trump administration's infrastructure recommendations.

(Source: chemistry.stackexchange.com)

Last week's panel at the Bipartisan Policy Council agreed on the need for government to fund basic scientific research; Erik K. Fanning, CEO of Aerospace Industries Association, added the need to educate "a well-prepared dynamic workforce." Again, these are long-standing policies, but our national commitment is being questioned even as "Chinese and Europeans are also making scientific research and development investments." 

• Spending caps for the Department of Defense, the major source of basic research funding, are "coming back with a vengeance in FY20." 
• Education funding at both federal and state levels is under the gun (see Olen 2018 for the U.S. Department of Education, and widespread protests in many states). 
• President Trump has not nominated anyone to head the Office of Science and Technology Policy (see Waldman 2018 on why this matters). 

The United States, says panelist Maria Zuber of the Massachusetts Institute of Technology, "has to decide whether it wants to be a leader or a participant" as other countries adopt "our playbook for economic prosperity." So, needing a means of taking research to the next level in order to maintain our edge, we find ideological game-playing.

The policy panels were optimistic about market mechanisms in health care and public-private infrastructure partnerships, and at least the possibility of more assertive science policy. When pushed by the moderators, several of them were less optimistic that substantive policy could be achieved any time soon. I'd like to think that the reasons for earlier policy failures--including resistance to health care rationing, economic as well as political incentives that conflict with the general public interest, and budget pressures--have been addressed in the current versions of these approaches. I'm still working on actually thinking that, however.

SOURCES

The Bipartisan Policy Council hosted "Investing in the Nation's Future--A Renewed Commitment to Federal Science Funding" on 8 May 2018. Speakers were Erik K. Fanning (Aerospace Industries Association), Mark S. Berry (Georgia Power), John Keller (University of Iowa), Michael L. Telson (General Atomics), Maria Zuber (Massachusetts Institute of Technology and National Science Board).

The American Enterprise Institute hosted "Fixing Health Care: Driving Value Through Smart Purchasing and Policy" on 16 May 2018, co-sponsored with the Brookings Institution, Pacific Business Group on Health, and University of Southern California Schaeffer Center for Health. Speakers were Alex Azar (U.S. Secretary of Health and Human Services), Kevin Bozic (University of Texas Medical School), Rushika Fernandopulle (Iora Health), Mai Pham (Anthem), Jeffrey White (Boeing), Lanchee Chen (Hoover Institution), Chris Jennings (Jennings Policy Strategies), Mark Miller (Laura and John Arnold Foundation), Gail Wilensky (Project HOPE), Joseph Antos (AEI) and Paul Ginsburg (USC Schaeffer).

The National Association of Counties hosted "Collaborate to Build: Modernizing Infrastructure Policies to Advance Public-Private Partnerships" on 17 May 2018, co-sponsored with the Brookings Institution Metropolitan Policy Program. Speakers were Roy Charles Brooks (Tarrant County, Texas, and President of NACo), Elliott Bouillion (Resource Environmental Solutions LLC), Judah Gluckman (DC Office of Public-Private Partnerships), John Porcari (WSP) and Adie Tomer (Metropolitan Policy Program).

SEE ALSO:

James Morone, The Devils We Know: Us and Them in America's Raucous Political Culture (Kansas, 2014). Chapter 3 addresses the need for and political response to health care rationing.

Richard Rose, Lesson-Drawing in Public Policy: A Guide to Learning Across Time and Space (CQ Press, 1993)

Evidence-based policymaking: Moneyball, or GIGO?

A confluence of recent events around the capital city showed many people wish for better information when making public policy. This may seem surprising--the President's budget as well as the recent tax changes rely on supply-side economics, climate change denial is practically an article of faith for the majority party, and Congress may or may not be able to undo the 23-year-old provision that restricts the Center for Disease Control from researching gun violence--but it's fair to say the desire for data is here... co-existing with a lot of other desires.

As a U.S. Senator from Indiana, Dan Quayle sponsored the
Job Training and Partnership Act of 1983,
based on research showing the effectiveness of job training programs

Some years ago, as part of our long research project on policy making by the President and Congress (see note below), Paul J. Quirk and I examined the government's ability to manage complex or changing information. When issues are technically complex, as most have gotten to be in one way or another, we wrote "they must obtain the necessary information from reliable sources, as well as mastering it to the extent required to make good policy." The challenges are many:

Knowledge in a policy area may be limited because there is a large amount of material presented which is undifferentiated, or because there is not a consensus on how to interpret a given sequence of events.  Constituencies may be unaware of relevant information or refuse to accept it.  Alternatively, new information may pose difficulties for assumptions that have become entrenched among political elites. 

Our conclusions were guardedly optimistic: "[G]overnment is often able to make intelligent policy in the face of complex or changing information.... The key seems to be a predisposition to hear the news. [In most cases we examined,] policy initiative was taken by someone who was already committed to the position supported by the new research. Those people then used the new information to convince the rest of the government to go along with them." What's unstated is there were enough uncommitted people willing to be convinced by the policy entrepreneur. Is that still true, or has politics become completely overwhelmed by rigid constituency positions?

Whatever the goal of a policy (e.g. containing health care costs, reducing barriers faced by small businesses, preventing terrorist attacks) we do better when we know what we're doing. There are reasons why we might not choose the most optimal solution--ideological beliefs, constituency group benefits, social norms--but on the whole someone promoting a policy is better off with the best information they can get.

It gets trickier when, as in most cases, we're talking about assessing government programs that are already underway. Again, if I want to, say, contain health care costs, I should want the best data I can get on how well existing programs are doing that, and if they're not doing very well, I can use those data to learn how to improve performance. If I'm worried that the results will be used to fire me, de-fund my agency, and/or repeal the Affordable Care Act, I'm going to see assessment as a threat. If I have to collect and analyze the data in addition to doing my job, I'm going to see it as a hassle at best if not a suicide mission.

Nick Hart (Source: Bipartisan Policy Center)

Nick Hart and Kathryn Newcomer allow as much. They're the co-authors of a new technical paper from the Bipartisan Policy Center, rolled out this week at a forum co-sponsored by the Forum for Youth Investment. They discuss evidence-based evaluation initiatives undertaken by the administrations of George W. Bush and Barack Obama administrations, noting that both adminstrations tended to use results to guide budgeting decisions. In Newcomer's words, "accountability does tend to trump learning."

(L to R) John Kamensky, Marcus Peacock and Shelley Metzenbaum
at the BPC/Forum for Youth Investment Event

In a follow-up panel, Marcus Peacock, who worked on the Bush efforts, praised President Trump's goal of repealing two regulations for every one promulgated, and called for nurturing "pay-for-success." In response, audience member Christine Heflin (who works in the Commerce Department office of performance, evaluation and risk management) called for finding ways to "reward learning." Panel member Shelley Metzenbaum, who worked on the Obama efforts, agreed, noting that pay-for-success "becomes a signal that we're going to de-fund what's not 'working.'"

I'm with Metzenbaum, particularly in today's fraught political and budgetary environment. It's hard to imagine good-quality evidence emerging when programs are justifiably concerned about ideological opponents who want them to die, not to mention fellow travelers who could use their resources for their own programs. Yet we need good information to achieve public objectives.

(L to R) Tamika Lewis, Andrew Guthrie Ferguson, Cornell William Brooks, Rachel Levinson-Waldman

At a more basic level, we should be suspicious of what Cornell William Brooks calls "the presumed infallibility of data." Brooks is an attorney, pastor, civil rights activist and senior fellow at the Brennan Center for Justice, which hosted a panel this week on how new data collection efforts affect criminal justice. The panel noted that more sophisticated data collection by police departments--and more recently, U.S. Immigration and Customs Enforcement--have resulted in greater attention to poor and minority populations, resulting in more arrests and a longer data trail that makes it harder to get jobs or housing in ensuing years (what panel member Tamika Lewis of the Our Data Bodies Project called "the cycle of injustice").

Panel members seemed divided over whether negative impacts of big data on minority populations were intentional or the result of institutional racism. You don't have to believe in conspiracies, in a country where racial differences are baked into the economy and society, to imagine that they're also baked into metrics from credit scores to risk for violence.

This doesn't mean data are inherently bad, or there are no useful metrics. Both panels talked about the need to include everyone involved throughout the assessment process. Lewis said data could be used to identify institutional racism instead of replicating it; Brooks suggested community members should be involved in deciding what would be measured and how; and law professor Andrew Guthrie Ferguson pointed out that even conclusive data don't necessarily point to a single remedy (more law enforcement), suggesting social workers, pastors and community members as alternatives.

People outside of government could use better data, too. Carl Wallace, shown above at a presentation to 1 Million Cups Fairfax in February, has developed C-Score, an algorithm for evaluating small business proposals he is marketing to banks, incubators and universities. It's a sort of "Moneyball" for entrepreneurship, attempting to aggregate what we know about the prerequisites for small business success, and get away from reliance on hunches however well-based. It occurred to several people in attendance that it could also serve as a diagnostic tool for entrepreneurs themselves who wish to improve their pitches. C-Score will operate at the policy formulation stage, serving the common interests of entrepreneurs, financial institutions and cities in developing a strong base of locally-owned small businesses. It's far from clear that government program evaluations have gotten to similarly common interests among the audiences for their evidence-based policy evaluations.

SEE ALSO:

Andrew Guthrie Ferguson, The Rise of Big Data Policing: Surveillance, Race, and the Future of Law Enforcement (NYU Press, 2017)

Nick Hart and Kathryn Newcomer, "Presidential Evidence Initiatives: Lessons from the Bush and Obama Administrations' Efforts to Improve Government Performance," Bipartisan Policy Center, 28 February 2018

"The Promise of Evidence-Based Policymaking: Report of the Commission on Evidence-Based Policymaking," September 2017

OLDER SOURCES ON POLICY LEARNING:

Jane Mansbridge, "Motivating Deliberation in Congress," in Sarah Baumgartner Thurow (ed), Constitutionalism in America (University Press of America, 1988)

William Muir, Legislature (University of California, 1986)

Richard Rose, Lesson-Drawing in Public Policy: A Guide to Learning across Time and Space (Chatham House, 1993)

My research with Paul J. Quirk on policy learning was never completed for publication. We did present a paper, "The President and Congress as Policy Makers: Dealing with Complexity and Change," at the Midwest Political Science Association conference, April 15-17, 1999. Quotations are from a book draft.

Small business and the ideological divide

Eric Dinger of Lincoln, Nebraska, CEO and Co-Founder of Powderhook

Small businesses are essential to the future of the American economy and American towns, agreed a panel convened by the Bipartisan Policy Center Tuesday morning. Small businesses account for more than half of national job growth, but have seen their formation decline for decades and experience continually difficult access to financing.

Beyond agreement on those points, however, participants, particularly the two members of Conress who served as keynote speakers, painted two quite different pictures of the universe in which small businesses operate. I would have liked to have seen more efforts to reconcile those pictures; the ability to do so will be critical to future policy choices, not to mention the center's own report on this issue, due out later this year.

Sen Jeanne Shaheen (D-NH)

Jeanne Shaheen, a New Hampshire Democrat and ranking member on the Senate Small Business and Entrepreneurship Committee, described structural disadvantages faced by small businesses relative to large businesses. The Small Business Administration, which her committee oversees, is in this view critical to leveling the playing field, particularly when it comes to loans. She noted small business lending has decreased 13 percent since 2008 while lending to large businesses has increased, and blamed the consolidation of commercial banks, automated application processes and compliance burdens. Other ways governments can help small businesses solve problems include worker shortages (e.g. H1B and H2B visas for skilled immigrants), access to international markets (the Export-Import Bank), access to high-speed internet and in some places even cellular service, access to federal contracting and the special challenges faced by female- and minority-owned small businesses. She argued small businesses in particular suffer from the week-to-week funding of the federal government, which creates dangerous levels of uncertainty. When government gets its act together, it can be a vital source of support for small business creation and expansion.

Rep Blake Luetkemeyer (R-MO)

Blaine Luetkemeyer, a Missouri Republican and vice chair of the House Small Business Committee, described small businesses as innocent victims of governmental overreach, particularly an "onslaught" of regulations over the past few years. While arguing the problem was accumulation of multiple compliance requirements rather than any individual policy, he singled out for special mention the Affordable Care Act and the Dodd-Frank financial regulation, the latter of which has resulted in the loss of one small bank or credit union per day. All this government had businesses "hunkering down," not even trying to get credit due to the uncertain return-on-investment. But... victims no more! The regulatory rollback and tax cuts produced in 2017 has "smiles on their faces." With the heavy hand of government removed, small businesses are reinvesting into their communities, good times are ahead, and investment from abroad is sure to follow.

Reconciling disparate policies isn't necessarily impossible. One surely could see a constructive role for the SBA while at the same time, in the words of former FirstMerit Corporation CEO Paul Greig, "tailoring" federal regulation Dodd-Frank regulation of banks "to risk, size and complexity." It's harder to reconcile antithetical visions of government and the private marketplace, particularly when those visions also implicate assessment of the current presidential administration and thus the political fortunes of the parties. (Luetkemeyer's rosy outlook for small businesses was echoed that night in President Trump's State of the Union address.) If we "view all economic policy discussions through a small business lens," as former Senator Olympia Snowe suggested, can that encompass recognizing both burdens of taxes and regulations on small business as well as entrepreneurs' needs for the social goods those taxes and regulations are intended to promote? Unfortunately, both keynote speakers faced pressing business and departed without addressing the points the other raised.

Interestingly, neither keynoter suggested a third possiblity, that policies of governments at all levels significantly place locally-owned small businesses at a disadvantage (see, for example, Henninger 2017 on the effects of transportation funding).

Another interesting theme of the discussion was the equation by some panelists of small businesses with small towns. Main Streets exist in every community, of course, from the tiny South Dakota town that produced entrepreneur Eric Dinger all the way up to New York City. So do small businesses. How far do we want government to go in facilitating--guaranteeing?--the existence of every town in America? Is there a metric for what help (broadband? venture capital?) should be extended?

SOURCE: "Main Street Finance: How Can the Financial System Better Serve Entrepreneurs and Small Businesses," Bipartisan Policy Center, 14 December 2017

SEE ALSO: "Community Allies: The Virtue of Locally-Owned Businesses," 29 October 2016