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It's Time to Reengineer U.S. Government


There's no other way to make it efficient, says IBM's former chairman

In recent weeks we have seen heroic actions by financial regulators. From the Treasury Secretary to the Federal Reserve to the New York State insurance commissioner, public officials have worked tirelessly to control the chaos in the financial marketplace. Once again, it is clear that America has learned very well how to respond to crises.

But is that all we have learned? It's a question we need to ask ourselves and our candidates for President and Congress. Amid the ongoing turmoil, it seems obvious we must reinvent our government and create an efficient system that can anticipate and avoid major crises. Despite many opportunities, however, this is not a lesson we have taken to heart. Whether the task is fixing health care, upgrading K-12 education, bolstering national security, or a host of other missions, the U.S. is better at patching problems than fixing them. Part of the reason is that we have two parties lacking comity and a sense of shared national responsibility. But beyond the partisan divide, I would argue that the processes of government are broken, preventing us from taking responsible actions.

Visit USA.gov and you'll find thousands of directorates, agencies, boards, offices, and services replete with overlapping responsibilities, ancient priorities, and divided accountability. We do not need Departments of Commerce, Labor, and Education; we need a single Department of Skills that will promote an integrated approach to global competitiveness. Our military should be trained and structured around missions, not the elements of air, water, and land. That requires fundamental change, but instead, the Defense Dept. has established an overlay of "commands" to compensate for organizational deficiencies. Does it make sense, in 2008, even to have a Bureau of Alcohol, Tobacco, Firearms & Explosives? If so, why is it part of the Treasury Dept.?

Then there's the financial sector. Behind the debacles at Bear Stearns (BSC), Fannie Mae (FNM), Freddie Mac (FRE), Lehman Brothers (LEH), and Merrill Lynch (MER) lies a startling failure to modernize our regulatory systems, despite obvious changes in the financial markets. Ben Bernanke and his colleagues at the Federal Reserve have done an extraordinary job in the past 12 months, but the regulatory processes in place are ad hoc and depend on leaders undertaking risky initiatives. Now more than ever, we need a single federal organization to oversee all of our financial institutions.

If our new President and our congressional leaders accept the need to reinvent the federal government, it will take a bipartisan, multiyear effort that draws on the experience of our business community. I would like to see a team of business leaders and experienced government staff led by two co-chairs: one business executive and one former high-level Washington official. This reengineering team would report to the President and four to six congressional leaders, who would meet once a month to review its analyses and recommendations.

If the idea sounds familiar, it's because we tried this approach once before, under President Ronald Reagan. I'm thinking of the 1982 Grace Commission, which was led by 161 top executives from the private sector. The commission concluded that nearly one-third of all taxes collected by the federal government are squandered through inefficiency. And it came up with 2,478 recommendations that, together, might have transformed the basic processes of government while saving hundreds of billions of dollars. Few of the recommendations were ever tried.

Today, the goals of such a commission would be different but the spirit would be the same. Would it succeed? If nothing else, the gravity of the current financial and economic crisis might force new leaders to study the panel's findings and strive to make government more effective. The future of our country may hang in the balance.

Louis V. Gerstner Jr. is the retired chairman and CEO of IBM.

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