Why Government Fails So Often: And How It Can Do Better (53 page)

I do not count Medicare as a policy success despite its immense popularity and the universal access to vital health care for seniors that it affords. First, many national commissions have found for decades that because it reflects the large inefficiencies of the underlying health care system that it finances, Medicare is very cost-ineffective compared with plausible alternatives. Second, the most important policy implementers are three quarters of a million private providers whose strong professional commitments conflict with governmental priorities,
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and who need not accept Medicare patients at all and are increasingly refusing to do so.
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Third, and related, it made almost $48 billion in improper payments in 2010,
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far more than any other public program (and even more since then; see
chapter 6
). Fourth, based on current projections and current law on benefits and revenues, it is fiscally unsustainable due to implacable demographic trends and health care cost increases that are on track to render the Medicare Trust Fund for hospital care (Part A) insolvent by 2026.
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Fixing the health care system that Medicare finances will be much harder than fixing Social Security (a successful program discussed below); the necessary reforms will be far more painful, which of course is why our politicians assiduously avoid promoting them. Some compromise must eventually be reached, but one can only guess at what its contours might be.

Dramatic crime reduction is an indubitable government success,
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but I do not include it here because it is localities, not the federal government, that are mainly responsible for criminal law enforcement—as they are for community college systems, land use policies, and many public health gains. And because the book does not cover defense, national security, and foreign policy, I do not discuss successful policies instituted by the military,
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including the all-volunteer force and the integration of racial minorities and women.
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THE HOMESTEAD ACT OF 1862

The history of American land policy is a rich and complex one that goes back to the terms of the original colonial settlements and continues today in constant struggles between economic and environmental interests, and among all levels of government. One of the most important decisions at the Philadelphia Convention was to give Congress the responsibility for owning, managing, and disposing of public lands, as well as relations with the Indian tribes that occupied much of the territory that Americans were eager to settle. One reason for this decision was that land claims were at the heart of many international disputes and diplomatic relations. This momentous allocation of power simply shifted to the halls of Congress an unending series of legal, political, and policy disputes between the federal government and the states, especially the newly formed “public lands” states which, unlike the original thirteen, were denied title to the lands within their borders that Congress had not granted to them. These disputes ranged, among other things, over how best to encourage settlement and exploitation of the western and southern reaches of the continent, on what terms, for which purposes, and for whose benefit. The stakes in these political struggles were especially high because the federal government looked to the proceeds from the sale of public lands, along with tariff revenues and postal fees, to pay for the burgeoning country’s national debt and growing infrastructure (canals, railroads, post roads, and other “internal improvements”), as well as to reward military veterans and promote schools and other social institutions. At the same time, the states exerted immense pressures to release the lands under easy terms.

According to Paul W. Gates, the leading historian of our public land policy, fundamental disagreements about its purposes and methods have divided American political leaders throughout our history. That said, “the most fateful and basic decision was the one made at the outset and allowed to stand until the end of the nineteenth century:
that the lands should be disposed of rather than retained in public ownership…. [A]lmost at once, the new government began to give away significant quantities of land and thus undercut its own sales…. [T]hrough the year 1828, one finds that almost half the conveyances represented donations.”
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In addition to emphasizing the transfer of lands into private hands for private development, early policies instituted a title system tied to actual surveys and verification (“a victory of order over anarchy”) and sales through auctions in order to minimize sweetheart contracts and avoid the need for the government to set prices itself. The government put so much land on the market, however, that prices seldom rose much above the legislated minimum price and much of the land remained unsold, or if sold was neither settled nor developed; instead, it was occupied by squatters, exploited by trespassers, and held by large and small speculators. Lax enforcement and widespread use of false affidavits emasculated reforms authorizing squatters to obtain preemptive title through cash purchases at low prices if they could prove that they had occupied and improved the land through their efforts. Despite (or perhaps because of) several economic crises in more settled areas, Congress adopted new policies in order to accelerate the privatization of public lands. These policies included sliding scale pricing, large-scale donations to veterans and others if they would occupy the land, donations to new and future states for a variety of purposes, and grants to railroads. Nevertheless, underdevelopment continued, partly because the government-suppressed prices attracted so many speculators and partly because of endemic corruption, mismanagement, fraud, and nonenforcement in these programs.
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In the 1840s, reformers dissatisfied with this state of affairs began to mobilize in favor of free land for homesteaders. This movement, abetted by reformers like Horace Greeley, mustered a number of arguments for free land, including the safety valve that it would create for poor farmers and impoverished workers in the east, antipathy to land speculators and monopolists, the insignificance of federal land revenues, and opposition to slavery. The new Republican Party endorsed the idea, and Congress in 1860 enacted a watered-down version
of a free land program that protected speculators, state land sale revenues, and Southern interests. Even so, president James Buchanan vetoed it, exacerbating the sectional divide and contributing to Abraham Lincoln’s election later that year. The Republican victory assured enactment, and the Homestead Act of 1862 went into effect at the beginning of 1863.

The act looms large in the public imagination about how America’s continental “manifest destiny” was achieved. Our national identity and popular culture build upon stirring memories and images of courageous, entrepreneurial pioneers striking out with their families for the wilderness with little but their horse-drawn Conestoga wagons, hunting and farming implements, homespun clothes, and dreams of a better life. Frontier homesteading on free land, the stuff of Hollywood Westerns and family lore, was the quintessential exercise of, and metaphor for, freedom—a critical “safety valve” for American democracy, according to the influential Western historian Frederick Jackson Turner.
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Interestingly, policy makers were so eager to draw new settlers into their expansionist vision that the act promoted homesteading by noncitizen European immigrants as well. In this respect, Aziz Rana argues, the lawmakers’ key distinction was between residents they considered settlers (Americans and Europeans) and non-settlers (e.g., blacks, Chinese, Mexicans), not between citizens and aliens.
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This distinction also rationalized the brutal campaigns against Native Americans.

The act, according to Gates, culminated “a series of moves intended to end the policy of using the public lands as a source of revenue for the government.”
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It entitled any person who was the head of a family or twenty-one years of age, and who was a citizen or who had filed a declaration to become one, to homestead by entering 160 acres of land held at $1.25 per acre or eighty acres held at $2.50 per acre. The act also allowed for “preemption”—the right of squatters who had worked the land to acquire title free or at a very low price. Gates’s exhaustive analysis of the twists and turns of land policy during the rest of the century defies summary, and it is probably impossible to separate the act’s significance from the effects of the large
number of other laws that together constituted the nation’s land policy in the nineteenth century.

Gates found that the act succeeded in some important respects and failed in others, contrasting his view with that of other historians who stress its failures.
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First, “many blunders were made in legislating for the administration and disposal of the public lands, [including] poorly drafted legislation, the mediocre and sometimes corrupt land officials, the constant effort of settlers, moneyed speculators and great land companies to engross land for the unearned increment that might extract from it.” Second, Congress was aware of the history of abuse of the public land laws by speculators and others, and sought to prevent their repetition by requiring that the land be settled and cultivated and that title go only to actual residents, but the law’s safeguards were relatively weak, allowing such abuses to continue. Third, the effort to promote homesteading was constrained by other policy goals. Indeed,

Anxious landseekers moving westward after 1862 may well have wondered whether the Homestead Act was the boon it was supposed to be. The 125 million acres of railroad lands, the 140 million acres of state lands, and the 175 million acres of Indian lands were all closed to homesteading. So also were the millions of acres held at high prices by speculators who had bought in the fifties. In every public place advertisements called attention to privately owned land whose advantages were said to surpass those of lands open to homestead.
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Despite these shortcomings, and maladministration of the act, Gates found the federal land system

to have worked surprisingly well, if we may judge by the results. Outside the cotton-growing South where the plantation system prevailed before 1860 and tenancy and sharecropping subsequently, suitable public land was being acquired by small owner operators and tenancy was less common. Disregarding the southern states, a total of 1,738,176 farms had been created in the public land states by 1880 and only in four states … did the farms average over 160 acres. Of these farms, [80 percent of the total] were owner operated. This is good evidence that the railroad grants, the land given to endow the states, and even the speculative purchases were being divided into single family farms.
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What can this brief account of the Homestead Act—which Gates called “one of the most important laws which have been enacted in the history of this country”
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—teach us about policy effectiveness, either in that particular case or more generally? One answer is, not very much. More than 150 years after enactment, over a century after open land homesteading ended, and lacking the kind of program-specific data and policy assessment tools that are often available to today’s analysts, no clear judgments about effectiveness are possible. The rapid settlement of the West, moreover, was “overdetermined”; many factors besides the act caused it.

Still, two points about the act’s putative success can illuminate contemporary policy-making challenges, the first by analogy and the second by comparison. First, the act’s implementation was by all accounts (including Gates’s) seriously flawed. Some of those flaws may have been peculiar to a time when the bureaucratic apparatus was relatively limited, immature, and highly corrupt.
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But other flaws continue to apply to today’s policy making: skewed official incentives, poorly informed predictions, legal ambiguity, market dynamics, ease of evasion, and weak enforcement. Second, the act’s purpose was highly attractive: to give a resource (land) to a sympathetic target group (homesteaders) for a socially desirable purpose (cultivating empty land), on an administratively objective basis (essentially first come, first served), and with no opportunity cost (at that time, unoccupied land had no better use). No contemporary policy can boast anything remotely like these remarkable, success-promoting features.
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THE MORRILL ACT OF 1862

In a largely agricultural, decentralized society that also esteemed education highly, the notion of establishing institutions of advanced education and research in agricultural science was attractive. In the 1850s,
proposals were advanced in Congress to make federal land grants to states for the purpose of creating such institutions. Members were divided over the amount of these land grants and how they should be distributed among the states, with Senator Justin Morrill of Vermont proposing that the land be allocated to states according to the size of their congressional delegations. When Congress enacted his proposal in 1859, President James Buchanan vetoed it on federalist grounds. In 1861, with a new president waging a new war against secessionist states, Morrill sponsored a new bill—this time requiring that the land-grant colleges teach military tactics in addition to agricultural science and engineering—which was enacted the next year. It was among the earliest federal programs using grants to encourage states to implement federal policies.
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Each of the remaining states received a land grant of thirty thousand acres for each of its members of Congress. The land, or the proceeds from its sale, must be used for a college “without excluding other scientific and classical studies, and including military tactics, to teach such branches of learning as are related to agriculture and the mechanic arts … in order to promote the liberal and practical education of the industrial classes in the several pursuits and professions in life.” The act excluded states in rebellion but later extended the grants to them as well as to states that subsequently entered the Union and to territories. Where the federal government did not own enough land in a particular state to fulfill the grant terms, it gave that state scrip with which it could acquire and then sell federal land in other states, using the proceeds to purchase land for the college within its own borders. (Cornell University, my alma mater, cleverly used scrip to acquire valuable timberland in Wisconsin, which when sold generated disproportionate proceeds [relative to the statutory formula] for its beautiful campus in upstate New York.) In the end, 17,400,000 acres were granted under the act.