What Small-Government Fans Should Learn From Walmart

Even the staunchest left-wingers should admit there's waste in the system, but cheaper often isn't the same as better government.
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Reuters

Few people consider Walmart a paragon of public virtue. But no one would deny that Walmart is the avatar of low costs.

That's what makes a recent piece on Walmart's employee health-care plan so interesting. The company long resisted providing benefits to employees at all. But then it discovered that health care actually wasn't that expensive for most workers -- big costs were really driven by a small number with high-cost conditions. Then it realized that it could drive down those high costs through a simple expedient: providing even better care. All of a sudden, workers with serious health challenges were getting all-expenses-paid trips to the Mayo Clinic.

"We come at it from the perspective of how can we improve quality," a senior vice president told National Journal. "When we improve quality, often there will be a reduction in waste or unintended or unnecessary cost." (This echoes similar findings about Mayo's approach generally.)

Aside from what this says about health care, there is a lesson here about government. Look what Walmart discovered: Costliness generally isn't due to everyone and everything but rather a few specific problems. In most cases, investing in avoiding the problem costs less than enduring the problem itself -- as numerous companies have found when it comes to reducing waste of energy or, for that matter, anything else: Doing "the right thing" is often cheaper, because the "wrong thing" almost by definition produces "waste" of some sort. And "waste," by definition, is a cost -- or as Dow Chemical's highly profitable in-house effort puts it, "Waste Reduction Always Pays". (Here's an interesting paper that opposes so-called "triple-bottom-line" accounting, but argues that socially-conscious decisions by corporations benefit them in the long run.)

Think this is true only of a few high-end goods like health care? We all have experiences teaching that the "cheapest" item often is really the most expensive, such as the less expensive dish soap that's less "soapy" and dissipates faster than higher-priced brands, so that you wind up needing, and thus spending, more to do the same amount of dishwashing.

In short, saving money and doing things more efficiently do not necessarily mean cutting needed activities -- in fact, they usually mean quite the opposite. But if you want to start an online food fight, suggest "cutting government waste." You'd think waste wouldn't be such a terrible thing to mind, yet the suggestion seems to anger both poles of the political spectrum.

Until recently, politicians of both parties indulged the conceit that government and the taxes to support it could be significantly reduced without any pain, simply by cutting waste, fraud, and abuse. Not anymore. With the soaring deficits following the Great Recession and a Democrat in the White House, conservatives believed that the time had arrived for an all-out assault on the welfare state. Gone was the bromide that conservative objectives could be achieved without painful cuts to programs people actually like. "Painful cuts" were now the stated goal. Liberals were more than happy to meet conservatives on their chosen ground -- because, unsurprisingly, pain lost.

As a result, while a few years ago the only prescription on sale was "waste, fraud, and abuse" snake oil, it isn't even available over the counter today. Instead, suggesting that perhaps not everything in government is waste is enough for some conservatives to brand someone a quisling. Talk of cutting government waste also inflames liberals, as if acknowledging any inefficiency in government simply plays into the hands of the enemy. According to former Texas state comptroller John Sharp, when he wrote a 12-page memorandum to officials in Washington on how to implement a systematic search for savings, then-House Speaker Tom Foley told him it was a "personal insult to the Democratic Party."

Patrick Bresette of the liberal think-tank Demos has framed this as almost a Catch-22: Attempts to root out waste only reinforce public perceptions of government as wasteful. Nevertheless, as Bresette observed, cutting waste also increases public confidence in those who do so. The National Performance Review that identified waste and inefficiency in the federal government resulted in substantial savings and was part of an overall revival in Clinton Administration fortunes -- and public trust in government -- during the final six years of Bill Clinton's presidency.

In an earlier age, the critics of government waste were Democrats, like Senator William Proxmire with his Golden Fleece award and Charlie Peters of The Washington Monthly, who recognized that inefficient, ineffective government should be anathema to a pro-government party. A more recent exemplar of this tradition is centrist Democratic Senator Mark Warner, a successful entrepreneur who as governor of Virginia -- hardly one of the country's more left-wing states -- increased spending on education by the largest amount in the state's history and raised taxes to pay for it, all with the help of a GOP-controlled legislature. A Governing magazine story on these events is worth reading in its entirety, but here's the money quote:

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Eric Schnurer

Eric B. Schnurer is president of Public Works LLC, a public-policy and management-consulting firm that works with state and local governments across the country. He has served as a gubernatorial chief-of-staff and speechwriter or policy adviser to governors, senators, and presidential candidates.

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