Why Government Fails So Often: And How It Can Do Better (54 page)

In 1890, Congress enacted the Second Morrill Act, which extended the grants (now in the form of cash, not land) to the former Confederate states but required that they either adopt race-blind admissions or establish a “separate but equal” institution for persons of color. These states did the latter, creating what came to be called “black land-grant
colleges.” These colleges were never treated equally; under the dual systems established by the states, they suffered deplorable discrimination for many decades. Only after a quarter century of civil rights litigation did the Supreme Court finally order them to dismantle the dual systems and establish a unitary one.
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Tragically, the states often complied in ways that ostensibly conferred formal equality on the black colleges but in fact jeopardized their ability to continue their remarkable successes in educating minority students under very unequal conditions and in helping to build a black middle class.

SOCIAL SECURITY

Popular, well-intentioned programs may be ineffective (e.g., Head Start), and unpopular programs may be effective (e.g., certain taxes). Social Security Old Age, Survivors, and Disability Insurance has been both popular
and
effective since its inception in 1935. (The disability insurance portion of Social Security, in which states play an adjudicatory role, is much more troubled, as discussed in
chapter 5
.) Indeed, it is the single most popular federal program. Paying cash benefits to those who have reached retirement age or suffered the death of a spouse, Social Security provides an essential financial safety net beneath private savings. It has largely eliminated poverty among the elderly.
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While it has grown steadily since its inception, both its administrative costs and its error rate are very low.
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From the administrative and political points of view, the program enjoys immense advantages that few other programs possess. The program sends checks each month to a vast number of people, most of whom depend on them to pay for life’s necessities. Henry Aaron, a Brookings Institution economist and a leading expert on the program, notes, “Of families 65 or over, 64 percent received half or more of their income, and 22 percent received all of it, from Social Security in 2008.”
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Because these payments are calculated under a long-standing statutory formula, the agency need not exercise much discretion, case-by-case adjudication, or law enforcement, so its administrative costs are low. Most important, the payments are financed by dedicated
, automatically deducted payroll taxes and a substantial transfer of wealth from current workers to retirees, who are (collectively speaking) their own parents.

Until now, these transfers have been a very good deal for retirees, who received significantly more money than they paid in as workers, and have received it over a longer life expectancy than they likely anticipated. The use of a “trust fund” label, which is factually and psychologically misleading, imbues present and future beneficiaries with an illusory sense of immunity from claims by politicians wishing to use the funds for other purposes—an illusion that these same politicians take pains to maintain. The transfers have not been too onerous to workers in the past because of workforce, wage, and productivity growth, coupled with a healthy dependency ratio (i.e., of workers, including young immigrants, to retirees). Accordingly, political support for the program has been extraordinarily strong, particularly among present and future beneficiaries, who vote at much higher rates than the relatively young workers who pay into the system. Social Security’s special advantages have driven its singular policy and political success in the past.

Whether policy makers have squandered some of those advantages—and thus reduced the prospects for its continued success—is a question of the greatest urgency and importance. Consider what has changed in recent years. Rightly or wrongly, younger Americans, unlike their parents, no longer have confidence that the program will be there for them at the same benefit levels when they reach retirement age—or that it will continue to be a good deal for them. The economic and demographic conditions that have up until now sustained generous Social Security benefits, and hence the program’s popularity, no longer exist and are unlikely to return. Unless politicians can agree on the steps needed to shore up its financing given these new realities, past success will become future failure. Fortunately, the variables that policy makers can tweak—tax rate, taxable wage base, retirement age, inflation index, means testing of benefits, the phasing in of changes, and others—are fairly straightforward and (if adopted soon) need not be too onerous or threaten the universality that was
instrumental in the program’s original enactment and contributes to its popularity today. (The flip side of this universality, of course, is its target inefficiency.) For example, Aaron finds, “Gradually raising the fraction of earnings subject to tax from the current 84 percent of earnings to the historical target of 90 percent of earnings, boosting the payroll-tax rate from 6.2 to 7 percent, and taxing currently exempt cash compensation would fully close Social Security’s projected long-term financing gap.”
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THE GI BILL

Even seven decades after its enactment, perhaps no federal program is praised more, and more extravagantly, than the GI Bill. One historian of the Bill wrote, “I cannot overstate the value and meaning of the GI Bill. Its sweep was so vast, its impact so particular, that only one conclusion seems self-evident: The bill made a reality of Jefferson’s concept of creating independent yeomen.”
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Be that as it may, the GI Bill’s path to enactment—unanimous votes in the House, Senate, and conference committee—reflected an exotic combination of political forces led by the American Legion, the Hearst newspapers, and some very conservative Southern congressmen in opposition to the administration of president Franklin D. Roosevelt, which proposed a much more modest package. The legislative process was also complicated by the Bill’s omnibus form, which was most unusual at that time and crossed the jurisdictional lines of so many different committees.
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To returning veterans without a dishonorable discharge who had served for at least ninety days, it extended many different types of social benefits: approximately 80 percent of the age cohort in question; low-interest guaranteed loans for homes, farms, or businesses; financial assistance to pursue more education or training; and weekly unemployment benefits for up to one year. World War II veterans constituted 80 percent of the generation in question. Just over half of them, far more than expected, used the education and training benefits, which continued for a maximum of four years, depending on the length of service, and covered all tuition and fees as well as subsistence
payments to the veteran and dependents. By 1947, they accounted for 49 percent of students enrolled in American colleges. More than twice as many, a total of 5.6 million, used the benefits for vocational or business schools, apprenticeships, on-the-job training, and on-the-farm training.
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It is noteworthy that benefits for veterans of subsequent wars have not been as generous as the Bill.
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Suzanne Mettler, the leading scholar on the GI Bill’s social effects, makes a point about it that applies, mutatis mutandis, to so many other programs assumed to be effective. She notes that

despite the G.I. Bill’s popular reputation as a highly effective program, we know surprisingly little about even its first-order effects, meaning the scope of its coverage and the depth of its socioeconomic impact. To be sure, the bill’s higher education provisions in particular have been lauded, cited as the source of vast social change on the presumption that they expanded access to advanced education for over two million Americans. But evidence for such claims has been surprisingly rare. [Studies of its effects on educational attainment] are limited in their ability to explain the determinants of program usage, leaving it unclear whether the provisions were genuinely accessible only to the average veteran. They also tend to overlook entirely the effectiveness of the subcollege programs…. And inquiry into the G.I. Bill’s impact on subsequent participation in civil and political life … has been practically nonexistent…. [W]e know little about the actual effects of this program on the individuals who benefited from it.
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Several scholars have disparaged the program’s fairness and effect on inequality. Ira Katznelson, for example, characterizes the GI Bill as an affirmative action program for white males, while Lizabeth Cohen emphasizes its ratification of the discriminatory and inegalitarian status quo.
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In contrast, Mettler’s review of the empirical data (her own and others) considers the GI Bill as a creature of its time, asks whether it improved these unjust conditions, and concludes that it did. She and other students of the program acknowledge that it did not dislodge the entrenched racial and gender inequalities of the day—including racially segregated and gender-discriminating educational institutions, housing markets, and mortgage loan practices
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—but they argue that
the Bill helped to pave the way for future progress in these areas, especially with respect to the education and training benefits. Thus, Mettler finds that 20 percent of the veterans who attended college under the Bill reported that they would probably or definitely not have done so without its benefits, that 77 percent who used its vocational training benefits would not have done so absent the program, and that it reduced class and religious minority barriers to higher education. Although nonwhites were much less likely to be veterans, higher proportions of them than whites took advantage of the Bill’s education and training benefits.
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Women used them less not only because a relatively small number were veterans, but also because social mores made them less likely to work outside the home. Mettler also finds social benefits in terms of civil participation. Even controlling for veterans’ socioeconomic backgrounds and education levels, those who used the Bill belonged to 50 percent more civic organizations and participated in 30 percent more political activities and organizations than the nonrecipients.
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The GI Bill’s success, then, reflects a number of factors: its unanimous support in Congress, the feelings of admiration and indebtedness that Americans felt toward veterans of “the greatest generation,” the popular conviction that World War II was, at least by its final victory, the “good war,” and its focus on enhancing human capital. Finally, the program’s substructure was an example of Wilson’s “majoritarian politics” (
chapter 5
)—large, broad, diffuse groups of both beneficiaries (veterans) and cost-bearers (taxpayers)—that is a recipe for political support and sustainability.

THE INTERSTATE HIGHWAY SYSTEM

The Interstate Highway System occupies a special place in the American consciousness. In the words of Earl Swift, the interstate highways “are intrinsic to our everyday life, to the modern American experience, to what defines the physical United States. They form the nation’s commercial and cultural grid, binding its regions, bridging its
dialects, snaking into every state and major city in the Lower Forty-eight. They’ve insinuated themselves into our slang, our perception of time and space, our mental maps.”
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Such grandiose language matches the system’s physical scale, which runs for more than 46,000 miles, making it one of largest public works projects in world history. In 2011, vehicles traveled 2.9 million miles on it. This engineering feat was costly: between 1958 and 1991, federal and state governments spent almost $129 billion to construct the system; 89 percent of this came from the federal government.
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This enormous expenditure of federal funds was the culmination of a long political sequence, stretching back, by some accounts, to Thomas Jefferson’s 1806 plans for a National Road through the Cumberland Gap. While popular, the National Road remained the only substantial federal highway throughout the nineteenth century. However, the appearance of first the bicycle in the late 1860s and then the automobile in the late 1890s led to a demand for better roads, known as the Good Roads Movement.
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This, combined with New Deal fervor for federal expansion, resulted in the Federal Highway Act of 1938, which created a Bureau of Public Roads to test the feasibility of a toll-financed national network of highways. In 1956, the administration of president Dwight D. Eisenhower pushed through the Federal-Aid Highway Act of 1956, which provided for an interstate system of 41,000 miles and a Highway Trust Fund to finance it through gasoline and other automobile taxes on a pay-as-you-go basis, without technically adding to the national debt.
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Studies suggest that the system’s economic benefits have far outweighed its costs, by a factor of six to one. It has made long-distance travel faster, easier, and safer for millions of drivers, saved an estimated 187,000 lives, and prevented twelve million injuries.
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It helped to underwrite our rapid economic growth, expanding markets for businesses, giving consumers access to previously unavailable products, facilitating national supply chains, and otherwise enabling companies to reduce costs and improve productive efficiency.
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