Reform With A Capital "R"

Anyone who's even remotely following the narrative impact of our current economic woes on the deficit should be well aware that our government is living way beyond its means. And in fact, it was living way beyond its means in debt and liabilities even before this economic crisis began. Calls for reform have surfaced in many forms and been made more pressing by the multitude of crises on the horizon, from energy to health care, not to mention Medicare and Social Security.

The McKinsey Quarterly (viewable after free site registration) is out this month with a compelling and rather sweeping case for reform in light of the government's recently expanded role. They suggest that $45 billion to $135 billion a year could be saved if the government were to make significant changes to its productivity and operations. The writers of the study argue: "Tax increases and budget cuts may be unavoidable in the coming years, but governments could minimize them by concentrating on raising efficiency and effectiveness, so that public spending yields the maximum benefit." And there are some empirical examples, in the Defense Department and the IRS, of how such efforts to improve productivity can have a pretty significant result.

And while the study offers case studies from the U.K. and France to paint a picture of how all governments can trim down while maximizing public services, the tune sounds awfully familiar to the White House's call from a few months back. Recall OMB director Peter Orszag's conference in March on "terminations, reductions and savings," at which he proposed $17 billion in budget nips and tucks for next year. Some balk at the idea; while $17 billion sure sounds like a lot of money, it pales in the context of a $3.5 trillion budget.

But perhaps what's missing from this debate is the public's voice. Even if they aren't informed on every corner and nuance of the overall budget debate, Americans have time and again, in our studies, emphasized that trust is a two-way street. For the public, the government's ability to do small things helps build trust needed for taking on the big things. And our long term fiscal issues are a big thing.