Tilting at Windmills

By Charles Peters

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The only thing we have to fear is fear of big government

Obama’s stimulus promises to create or save three to four million jobs in the next two years. In the fall of 1933, a New Deal program created four million jobs in two months.

Timothy Noah and I described the miracle of the Civil Works Administration in a recent article in Slate ("Wrong Harry," January 26). The CWA was the brainchild of Harry Hopkins, who received FDR’s blessing for the idea in mid-November. By mid-December, he had employed two million people, and by mid-January four million.

Hopkins had two secrets that seem not to be understood by the Obama team. First, he put the new workers on the federal payroll, while Obama says that 90 percent of his jobs will be in the private sector. And instead of dotting every i and crossing every t to ensure accountability before workers were hired, Hopkins risked mistakes by moving fast. He still got accountability, however, by sending experienced journalists to visit his projects in the field in order to give him quick feedback. This enabled the CWA to fix its problems fast. In New York City, for example, a chaotic program became a showcase in just a couple of months.

Hopkins had seen how another program, run along the same lines as Obama’s stimulus plan, had moved much too glacially to meet the desperate needs of 1933. That program, the Public Works Administration, was designed to work through private contractors, and took care to dot every i and cross every t to avoid any scandal. The PWA would ultimately do great good. But by the fall of 1933, it had barely put a hundred thousand people to work.

The presiden’t stimulus bill requires "fixed-price" contracts. They usually take six months to negotiate. And Obama’s desire to scandal-proof the process would seem likely to take even longer. Of course, the bill has a "use it or lose it within 120 days" provision, but all that guarantees is a lot of pleas for extensions or contracts that are not signed, meaning work is actually not begun, until day 119. That’s why I hope he will consider Harry Hopkins’s approach. Remember, Hopkins did not say, "Damn the torpedoes, full speed ahead." What he did say was, "Full speed ahead, but watch out for the torpedoes and change course when necessary."

When Obama boasts that 90 percent of the stimulus jobs will be in the private sector, and Timothy Geithner speaks disparagingly of government’s ability to run an enterprise, they display the old Democratic fear of being stuck with a big-government label by the Republicans.

This, of course, is understandable. Every Wall Street Journal op-ed page seems to feature pieces like the recent "Beware of the Big-Government Tipping Point" by Peter Wehner and Paul Ryan. Similar sentiments are a constant refrain of Republican oratory in Congress, and on conservative talk shows.

And the fear is not new. Indeed, Franklin Roosevelt was so frightened by the risk he had taken that he canceled the CWA as the summer of 1934 approached and the congressional election campaign got under way. But once the Democrats won a great victory in that election, Roosevelt relaunched his CWA, rechristened as the Works Progress Administration, and provided jobs for more than eight million Americans.

Obama should learn from Roosevelt’s experience, and not let himself be paralyzed by fear of Republican attack. If putting the country back to work means putting more people on the government payroll, then so be it. When jobs like teaching Head Start, repairing roads, and cleaning up the environment can be filled more quickly by hiring people directly instead of by contract, Obama should not hesitate to have the government do the hiring. Nor should he hesitate to face the need of many government agencies for more employees.

Congressional conservatives have starved the budget of any agency that threatens effective regulation of the private sector. News of one outrage after another reminds us of the need for more and better government employees to protect the economy from the abuses of Wall Street, to guard the safety of food and drugs, to prevent defective products from reaching the marketplace, to keep the environment from being contaminated, to make sure that disease is effectively controlled, and to guarantee that workers are being provided with decent working conditions and fair compensation.

Government needs don’t stop there. AmeriCorps needs more volunteers. The U.S. Army needs at least a hundred thousand additional troops to relieve the strain Iraq and Afghanistan have imposed on far too many soldiers, who are now enduring their third or fourth combat tours.

To be sure, more government is not always the answer, and some government agencies are just plain bad. Constant criticism of the bureaucracy is necessary—indeed, such criticism has been a staple of this magazine since its inception—to keep government on its toes. But government can work—even agencies that have been bad can become good, and sometimes very quickly. Consider the contrast between the U.S. Navy’s performance at Pearl Harbor in December 1941 and at Midway in June 1942. The reverse is also possible—the U.S. Army’s performance in Iraq went from the sixty days of triumph of its conquest of Saddam Hussein’s forces to four years of failure in the occupation—and then back to relative success in the past year. Or take the Federal Emergency Management Agency—not so good in 1992, getting better from 1993 to 2001 under James Lee Witt, and then becoming much worse under Brownie.

A few agencies stay effective for long periods, most notably the U.S. Postal Service through the 1930s, ’40s, and ’50s. Throughout my forty-eight years in Washington, the Office of Management and Budget has maintained a very high level of competence among its staff, even though its political leadership has misused it from time to time. Also, for various but fairly lengthy periods, the Internal Revenue Service, the Federal Trade Commission, some divisions of the Department of Justice, and even, for a while in the past, the Securities and Exchange Commission have all established traditions of excellence.

New agencies like the CWA tend to perform the best. They attract people dedicated to their mission, instead of those just looking for a job. Because they are usually designed to meet an immediate need, they impart a sense of drama and urgency to their workers. Bad bureaucratic habits have not had time to establish themselves. As a participant in the birth of the Peace Corps, I remember that, instead of the long meetings and lengthy memoranda that make boredom and inaction so characteristic of too many mature agencies, decisions were often made by quick phone calls and informal gatherings in the hallways.

So I urge Obama to not only refuse to be afraid of adding employees to the government, but not to fear starting new agencies. Franklin Roosevelt was constantly criticized for his alphabet soup of agencies—e.g., the CWA, the PWA, and the WPA. But they made the New Deal work and won World War II. Forget the Republican propaganda that the New Deal didn’t work; between 1933 and 1940, it cut unemployment by more than half by all estimates, and by more than two-thirds according to many. And don’t let them kid you that the New Deal was a failure saved only by World War II. Military spending did not increase until the second half of 1940, and by then wages had increased by 25 percent in just the preceding year in the state of West Virginia alone.

Can I take your coat for $1,000?

We’ve all heard about the World Economic Forum’s gathering of the global financial and corporate elite in Davos, Switzerland, every winter, but if you’re like me, you’re more than a little vague about the details. For instance, could you or I attend? The answer is yes, if we have $16,000 to pay for a ticket, or $37,000 if we want a corporate membership. If you want a private meeting with "industry leaders," the tab gets steeper—in fact, it rises to $220,000. And if you want to be a "co-chair" of the meeting, according to Eduardo Porter of the New York Times, to whom I’m indebted for these details, you must part with $435,000.

But, after all, you will be exposed to such insights from world leaders as this from Tony Blair: "If we are interconnected and the world is interconnected, the only way for the world to work is to have a set of common values. We have no option but to work together."

I know you’ll need time to ponder this profundity, but I must proceed to the next item.

People who live in HUD-funded glass houses …

Senator Tom Coburn, a conservative Republican, recently expressed shock that one in five of the jobs produced by the stimulus plan will be government jobs. But he got his comeuppance from Steve Pearlstein, a financial columnist for the Washington Post, who points out that one in five jobs in Coburn’s home state of Oklahoma is a government job, too. Somehow, I can’t imagine Coburn’s zeal for fiscal discipline extending to eliminating 20 percent of Oklahomans’ jobs.

The unbearable possibility of life without a chauffeur

"You try to live on $500K in this town," challenges a recent headline in the New York Times Style section. Among the essential expenses that would be threatened by Obama’s proposed limit on top Wall Street salaries: a nanny, at $45,000 a year; a chauffeur, at between $75,000 and $125,000; a personal trainer, at $12,000; one vacation in the sun and another on the ski slopes, at $16,000; and for the women, three party dresses at $35,000. And how can we expect anyone to give up that summer home in South Hampton, with its annual mortgage payment of $240,000?

Remember the henhouse, Mr. President

I’ve been troubled by two of Obama’s regulatory appointees, whose records suggest excessive solicitude to the institutions they are to regulate. The previous job of Mary Schapiro, Obama’s choice to head the Securities and Exchange Commission, was head of the Financial Industry Regulatory Authority (FINRA), a private agency established by Wall Street to regulate itself. In that job, according to the Wall Street Journal, she "missed the mortgage crisis and Bernard Madoff’s alleged $50 billion Ponzi scheme."

And Gary Gensler, Obama’s appointee to head the Commodity Futures Trading Corporation, according to Harold Meyerson’s column in the Washington Post, "drafted the legislation in 2000 that exempted derivatives, including credit-default swaps, from regulation."

It seems ironic that in choosing Gensler, Obama ignored the chance to reappoint Brooksley Born, who as chair of the CFTC in 1998 had the foresight to recommend the regulation of derivatives, only to have her proposal squelched by Alan Greenspan’s Federal Reserve and Bill Clinton’s SEC and Treasury Department.

I carp because I care

This column is so full of criticism of the Obama administration that I fear some readers will get the impression that I’ve turned against him. I have not. I still think he has the potential to be one of the truly great presidents in American history.

What I remind myself of now is the liberal critics of the New Deal whose articles I read as I was growing up. They were constantly trying to nudge FDR back onto the true path from which they feared he either was straying or might stray. But when campaign time rolled around, they would become virtual propagandists for Roosevelt, until they were sure he was safely reelected. So I knew that their criticism came from love, and the desperate desire for him to succeed.

Setting an example

One good deed for which I have not seen Obama get any credit is the freeze he placed on the pay of the top White House staff on his first day in office. It seems to me that those who complain about Obama’s $500,000 ceiling on top Wall Streeters should acknowledge that that’s still more than the president himself is making, and roughly three times what senior White House staffers make.

Some appealing news

There are now sixteen vacancies on the Federal Circuit Courts of Appeal. By blessed coincidence, four of them are on the Fourth Circuit, whose opinions since the Reagan era have often seemed to have been written by Rush Limbaugh. Because of recent retirement of Republicans from the court, their margin over Democrats is only six to five. Thus Obama could actually turn it into a bastion of liberalism. This is important because circuit courts, not the United States Supreme Court, make the final decisions in the vast majority of cases that are appealed.

Ayatollah? Is that like hummus?

The political views of Reuel Marc Gerecht, a former Central Intelligence Agency official, are more conservative than mine, but his knowledge of the inner workings of the CIA and feel for its culture make him worth listening to. Recently, he wrote an op-ed for the Washington Post lamenting the CIA’s history of incompetence in Iran. I knew about the agency’s failure to report the longstanding hostility to the shah on the part of the great majority of Iranians. I had heard about it from Peace Corps volunteers as early as 1964, but the CIA didn’t seem to have a clue until fifteen years later. Gerecht says that as far as he knows, the situation has not improved. As an example, he tells of seeing "a case officer who barely spoke Farsi debrief a potentially high-value Iranian official who barely spoke English."

Gerecht points out that Iran is probably the "easiest" of the hard targets that the CIA has, because of the many travelers who enter Iran every day and the many Iranians who go abroad. But, he worries, "I’m not aware of one instance since 1978 … that an American president requested a thorough assessment" of the CIA’s efforts in Iran. Let’s hope Obama quickly becomes an exception.

When we spend peanuts on regulation

To me the most shocking fact about the recent peanut scandal is that neither federal nor state regulators require a company to notify the public or the government if it finds salmonella contamination.

And if you doubt the need for more government employees in our regulatory agencies, consider the fact that the FDA had only enough inspectors to check less than one out of every twelve food plants in 2008.

Hush money

The latest evidence that the drug industry’s dedication to the public interest remains firmly under control: the stimulus bill provided $1 billion to support research comparing the efficacy of different medical treatments. But, reports the Wall Street Journal’s Alicia Mundy, the drug and medical device industry lobbied to gut the provision, "portraying it as the first step to government rationing." Why are they afraid of the public finding out which treatments are the most effective and the least expensive?

Solvay Pharmaceuticals, according to a suit filed by the Federal Trade Commission, has bribed other drugmakers not to manufacture a cheaper generic version of one of Solvay’s drugs. What I found most disturbing in Lyndsey Layton’s story in the Washington Post describing the suit was this sentence: "The FTC found that nearly half of all settlements between generic drugmakers and brand-name manufacturers in fiscal 2006 and 2007 resulted in some kind of payment to the generic maker in exchange for a pledge to stay out of the marketplace."

Can the DOE do it?

The new stimulus plan assigns roughly $40 billion to the Department of Energy, including money for loans and contracts. The DOE’s loan guarantee office "has yet to approve a single project," according to the Wall Street Journal, "since the loan program launched in early 2007." And according to the Government Accountability Office, the "DOE’s record of inadequate management and oversight of its contractors has resulted in the high-risk designation" that the GAO awards to programs it deems "at high risk for waste, fraud, abuse, and mismanagement."

Freedom is cheaper than the alternative

In a time when state governments are struggling to maintain essential services, here’s a way for them to make major savings: release nonviolent inmates from prison. The nonviolent constitute a majority of prisoners, yet many of them are serving time for minor offenses, and they pose no danger to the public. To be sure, we would have to exercise greater care with our wallets and pocketbooks, and be sure to lock our house and car doors. But the inconvenience seems minor compared to the potential savings.

Virginia is presently considering just such a release program. A proponent, state Senator Janet Howell, tells the Washington Post’s Tim Craig: "In talking to my constituents, they are not interested in spending $25,000 a year to incarcerate these people when we are talking about cutting higher education, public education and health care."

Nonprofit and nonhelpful

Nonprofit hospitals receive an estimated $12.6 billion in annual tax exemptions. Most of us would assume the nonprofit status would have something to do with community service. But an IRS survey, reported by the Wall Street Journal, has found that less than one-fifth of hospitals provide 78 percent of the community benefit expenditures, most notably in the form of charity care. So why are the other guys getting away with calling themselves nonprofits?

Who goes postal?

I have long been fascinated by the contrast between jobs in the Postal Service. Letter carriers usually come across as nice people who seem happy going about their work. By contrast, those who work inside post offices often seem surly and unhappy.

Florence Cooke, who is retiring after thirty-one years delivering mail on a rural route in Virginia, told Holly Prestidge of the Richmond Times-Dispatch, "I have loved my job all these years. I have really nice people on both routes. I’ve gone through a whole lot with all of them. The good times, the bad times, when they’ve lost family members … I know when the garden is coming up. I know when [a homeowner] painted the house. I know when the house goes up for sale."

Why is delivering the mail so satisfying compared to working inside the post office? I suspect it is because no one is looking over your shoulder. You still have to meet the goal of completing your route each day. But it’s up to you how you do it: when you want to stop and chat, or just take time to sit down for a while. It’s your choice, not a supervisor’s.


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Charles Peters is the founding editor of the Washington Monthly.  
 
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