Why States Echo the Feds with 50 Shades of Policy Failure

San Francisco residents wait in line at the quintessential US bureaucracy: the Department of Motor Vehicles. (Gabriel White)
San Francisco residents queue at the quintessential policy failure: the Department of Motor Vehicles. (Gabriel White)

Español“Most Americans think the federal government is incompetent and wasteful,” states Chris Edwards in his new study for the Cato Institute. Edwards goes on to explain the myriad reasons why the federal government in particular fails to live up to even basic expectations of competence.

These are not unreasonable expectations. The basic belief in epistocracy, or rule by knowing, competent individuals is as old as Plato’s Republic. It is not asking much of government to be efficient at the jobs that citizens delegate to it. Yet time and time again, we see basic things that are not particularly challenging or complex fail. From buying helicopters to knowing where its employees work, to knowing which of its mines are causing water pollution, the stories of basic failure are endless. The feds are bad at their jobs at a very basic level.

Many will read this, and think “devolving power to the states will fix this.” Yet the states are no angels. Indeed, the same bureaucratic incentives also apply to state governments. Looking at the 5 dimensions of failure Edwards lays out, (1) size and scope, (2) bureaucratic incentives, and (3) political incentives all play very clear roles at the state and local level; while (4) local knowledge is better and the amount of (5) top-down coercion is lower than at the federal level.

Size and Scope

While smaller than the federal government, states and localities play a more hands-on role in the lives of average people. Most people do not interact with the federal government much beyond paying income taxes and collecting Social Security. But people do interact with the state bureaucracy on a regular basis. The Department of Motor Vehicles, Unemployment Insurance offices, Fish and Game commissions, local school and zoning boards. All are points of contact between the public and government, and most of those bodies named are notoriously inefficient and hard to deal with.

This all stems from the fact that state and local governments simply do too many things. State governments are large. They employ over 5 million out of a total of 140 million nonfarm employees. Local governments employ another 14 million. Nearly 1 in every 7 nonfarm workers in America works for a state or local government. When there are that many employees, is it any wonder that there’s regular failure to manage these employees well?

Bureaucratic Incentives

Without market incentives of profit and loss, there is little available to put a check on bureaucratic self-interest. Government workers have every reason to perpetuate new rules, to shift blame, to make it ever harder for citizens to interact with government. They understand that fixing some parts of the bureaucracy is a strictly political issue, and some areas do not lend themselves to reform.

We saw this with the muted response to the hacking of the Office of Personnel Management, a year after the Washington Post ran an investigative report on the department’s notorious bureaucracy. Yet two separate scandals have not brought a modicum of reform. Even media scandal sometimes isn’t enough.

If the federal government’s HR department can fail that badly without accountability, what perverse incentives exist among the 50 little bureaucracies at the state level? How about the thousands of public faces of other departments? Disinterested government employees may not be a big deal individually, but bureaucratic incentives keep entrepreneurs in limbo as they start businesses, developers as they build new housing, or tourists as they plan their camping vacation.

Political Incentives

In state and local politics, political pandering is even more prominent than at the federal level. Government is much closer to the people, officials usually employ some of their friends, and it provides tangible services that people use. With many points of interaction, states and localities have many ways to make people feel like political winners. They give some people what they want, often to the detriment to the community, in the case of popular regulations like zoning or popular spending like schools. Even if more money, or more rules, won’t make any outcomes better, some policies still generate political support.

We see evidence of this all the time, with state politicians touting how programs would touch every part of the state, even if there’s little need for spending in a particular area. Outcomes are measured in people reached, not value for taxpayer dollars.

It was famously stated that states are laboratories of democracy. They are different in many ways; their laws vary greatly across borders. Yet, everyday interactions that normal people have with government are remarkably similar across states. The DMV is always notoriously slow; the benefits office always has annoying hours; and local zoning officials are almost always intrusive busybodies. The federal government may fail a lot, but the states give it a run for its money.

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