The Feds vs. Innovation

An impressive list of challenges faces even the most effective governor: Repair the bridges, provide health care to the uninsured, handle an overflowing number of prisoners and keep taxes at a competitive level. Yet in the face of all this Washington is at it again -- interfering in the business of the states and squashing state-level policy innovations under the pretense of "protecting the public interest." Rather than concerning itself with process, the federal government should be focused on measuring results.

In recent years, innovative governors and mayors in order to get in front of ballooning infrastructure deficits began entering into agreements with private companies for the operation of toll roads and bridges and the provision of certain government services. Unlike Washington, most state governments must present a balanced budget, and the pressures to provide critical services forces innovation in the "laboratories of reform" that are the fifty states.

Despite the fact that these transformative efforts are generating much-needed revenue for state and local governments and bringing greater efficiency to the provision of government services, a growing chorus of attacks against them is emanating from Washington. If allowed to succeed, these attacks could damage the fundamental American principle of federalism and force states to maintain an increasingly unsatisfactory status quo that cannot meet the needs of its citizens.

Congress is leading the anti-privatization charge. Consider the "farm" bill that was passed by the House of earlier this month which would inflict collateral damage on a path-breaking modernization of Indiana's antipoverty programs. Through a $1.16 billion, ten-year contract to a consortium led by IBM, the state of Indiana is attempting to streamline the process of applying for welfare, Medicaid, and other benefit programs that give assistance to almost one million residents. Despite analysis showing that privatization of these functions would result in more convenience and less waste, fraud and abuse, a provision in the House farm bill dictates that Indiana and other states cannot work with private companies to administer such programs. Although the Indiana plan provides private-sector jobs to all current state employees, national public employee unions -- concerned about representation -- lobbied Congress to insist that state employees separately review each food stamp application. If this provision -- which has nothing to do with farming -- becomes law, it would essentially kill Indiana's innovative antipoverty effort and block other state and local governments from following the Hoosier State's lead.

Congress is also attempting to stall innovation and protect the status quo in public infrastructure. More and more, local elected officials find that it makes sense to lease roads, tunnels and bridges to private companies to operate. For example, last year Indiana Governor Mitch Daniels raised $3.8 billion in capital by leasing the Indiana Toll Road to a private consortium and is now using the proceeds to finance other critical infrastructure needs. This innovative idea is bi-partisan. Mayor Richard Daley, a democrat, recently completed a similarly creative project in Chicago. These efforts have prompted widespread examination by other cash-strapped governors and mayors faced with major infrastructure improvement needs, which are projected to total $120 billion nationwide.

Rather than applaud these innovative experiments, the Chairman of the House Committee on Transportation and Infrastructure, Rep. James Oberstar (D-Minn.), and Chair of the House Subcommittee on Highways and Transit, Rep. Peter DeFazio (D-Ore.), sent a letter to state officials threatening to undo any future state public-private partnerships. Although they modified their position in response to a torrent of criticism from the National Governors Association and others, Congressional leaders still wrongly insist that they have a role in what clearly should be state-level policy decisions. The Minnesota bridge collapse should provide impetus for all levels of government to encourage, not discourage, private infrastructure investment.

The broader point is that Washington needs to let bold governors and mayors, who are directly accountable to voters, take their best shot at providing top-quality services to taxpayers and not dictate what the best means to provide those services is. The lines of accountability are too often inverted; instead of encouraging better service outcomes, Washington polices inputs, worrying about which sector, public or private, provides the services. Too many inside the Beltway are stuck on an outdated question: can we trust private capital, private employees and private companies?

The federal government has the ultimate responsibility to ensure access and equity, and to demand accountability for federal dollars. But the assumption that somehow a service is inherently better when paid for by government money, or provided by a government bureaucrat fundamentally misses the point. Federalism creates democratic laboratories that can produce policy innovations and improvements, but only if Washington holds the laboratories responsible for results and stops controlling how the ingredients are mixed.

Stephen Goldsmith, the former mayor of Indianapolis, is the Dan Paul Professor of Government at Harvard's Kennedy School of Government and chairman emeritus of the Manhattan Institute's Center for Civic Innovation.