For Obama's reform agenda, counterterrorism excess is a timely warning

By Steven Pearlstein
Wednesday, July 21, 2010; A15

The Post's splendid and eye-opening series of articles on the government's counterterrorism empire ought to be required reading for those in charge of implementing the sweeping reforms of financial regulations and the health-care system, and for those still crafting legislation to deal with global warming.

The series is a powerful reminder that it's not only bleeding-heart liberals who fall into the trap of trying to solve seemingly urgent problems by throwing too much money at them. It turns out that supposedly tough-minded conservatives are no less prone to runaway spending when their top priorities are involved. Sometime in the next week I expect some Republican who has railed against the scope and complexity of the Democrats' domestic initiatives to stand up in the Senate and, with Goldwater-like conviction, declare that profligacy in defense of security is no vice.

One of my favorite features of the series so far has been the organizational chart of the 66 different counterterrorism command centers in the Washington area, not counting the White House Situation Room, each with its secure bunkerlike facility, its 24/7 staff, its high-tech control room, secure database, command staff and cadre of outside contractors. Looking at that chart, you don't have to be a McKinsey consultant to understand that the 9/11 Commission's dream of streamlined coordination has lost to the imperative of bureaucratic survival.

Perhaps all this was inevitable given the urgency of ramping up the counterterrorism effort after the Sept. 11, 2001, attacks. For years, the message from the public and political leaders was to get it done fast and don't worry about the cost -- the bureaucracy and the contracting community were only too happy to oblige. An optimist might argue that now that we know what works and what doesn't, we can move on to Phase II, the rationalization and consolidation. But the realist would point out that that rarely happens. For those setting out to fix health care or the financial regulatory system, the takeaway should be that it is a lot easier to do it right the first time.

Doing it right means, first and foremost, keeping things simple, even when the work to be done is complicated. Setting up complex structures not only increases cost and reduces speed, it tends to badly blur the lines of authority and responsibility. And by insisting on simplicity right from the start, organizations are forced to step up and make the difficult tradeoffs that, if not addressed structurally, will become a constant drain on people's time, attention and patience, or will never be addressed at all.

The second lesson is that bigger is not the same as better. In the wake of the financial crisis, there was a consensus that one problem was that the resources of the Securities and Exchange Commission had failed to grow with the size and complexity of the financial markets it was supposed to oversee. Although inadequate resources were surely a factor, it doesn't really explain why the agency basically sat back and failed to respond to the dangerous leverage taken on by investment banks, or ignored flagrant ratings-shopping by issuers, or did nothing about widespread use of undisclosed off-balance-sheet vehicles by public companies. Nor can it explain how several sets of inspectors managed to look in on Bernie Madoff and never notice that he never actually traded any stocks.

In government or in private industry, what sometimes lies behind the call for additional resources is that the people already assigned to perform a task are not very good or very productive. An example of this is the National Security Council staff, which over the decades has grown from a small, elite group at the White House charged with coordinating policy on international issues to what amounts to a mini-State Department, with a staff of 200 to 300. The unspoken rationale for this growth has been that, at various times, presidents and top advisers were unhappy with the work done in the agencies, or didn't trust the people doing it. But the result is not only wasteful duplication of effort, but diminished morale and sense of purpose in the agencies. Similar complaints are heard about the new empire growing around the director of national intelligence.

Problems with the government's counterterrorism complex also stem from its reluctance to get comfortable with the 80-20 rule -- the remarkably robust observation that organizations often achieve 80 percent of what they want to accomplish with 20 percent of their people and resources. The ethic in counterterrorism is that the stakes are so high that anything less than 100 percent success is unacceptable.

But the problem with 100 percent is that in trying to detect and foil any conceivable threat from any terrorist anywhere in the world, you wind up not only spending enormous sums, but creating an operation so vast and complex that it is impossible to manage. In the end, as the Post series suggests, we run the risk of missing things that almost surely would have been picked up with a smaller, simpler and more focused structure.

The 80-20 rule, for example, is crucial when thinking about reforming the health-care system, where it turns out that relatively few diseases and a minority of patients account for the vast majority of the care and the spending. By focusing efforts on those diseases and patients, huge gains can be made in controlling costs and improving health outcomes while minimizing the backlash about government rationing and meddling.

What my colleagues Dana Priest and William Arkin have discovered is that there can be powerful diseconomies of scale and scope when organizations get too big, too broad and too complex. It's not just government -- Citigroup and AIG learned that lesson as well. In the real world, it turns out, there are limits to how many hours there are in a day for the leaders of an organization, how much information human beings can process, how many balls we can juggle and how many dots we can connect, even with the help of powerful new technologies.

As the Obama team sets out to reshape health-care, financial and environmental regulation, it would do well to remember this final lesson from the Bush team's war on terror: Along with all the ambition and conviction, bring along a good supply of patience and humility.

Steven Pearlstein will host a discussion at 11 a.m. on

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