Wednesday, March 26, 2014

Taking the Easy Way Out

"New" and "More" aren't always an improvement

Earlier this week I attended a conference on cyber security. Included in the speaker list were experts from government and industry as well as our Congressional representative who spent a lot of quality time with attendees. While the conference was ostensibly about security of information and the human risks associated with that task, one point made in the Q&A phase by our representative struck me as odd – yet thoroughly expected, in character, and within the boundaries of political orthodoxy.

Put simply: small businesses get favored status in government contracting to compete with large firms and small businesses often grow into mid-sized business that lose favored status, therefore mid-sized businesses need favored status to compete with large firms and, thus, our representative is authoring legislation to grant favored status to mid-sized businesses. Huh?

Instead of identifying, understanding, and counteracting the advantages that large firms have to give them competitive advantage in government contracting, we're going to make arbitrary distinctions between small, medium, and large business and hand out favors to the first two. Right. I run a small business and can tell you what advantages I have over large businesses; I used to work in large businesses and I can tell you what advantages and disadvantages they have.

So here we have kind of a perverse variant of an old government habit of picking winners: the government acknowledges that large firms have advantages – some of which the government itself created – but wants to add new categories of favoritism so that everyone is special.

During the 2012 campaign, our representative and I were at a business luncheon in Merrifield where we each had a chance to speak and answer attendee questions. During a discussion of the Affordable Care Act (ACA) I made the point the state-by-state insurance marketplaces were inefficient and that we needed a privately run nationwide market to increase competition and lower consumer prices. Our representative said it would be great to have nationwide competition, but now we have state-based markets ... and that's great, isn't it. Well, no, it's not and there's been no effort that I've seen from our representative to make a nationwide market a reality.

So instead of removing the existing impediments that impede private firms and broad markets, we nationalize fractured insurance markets. And once something gets imbedded it's hard to pry loose, making the transition to efficient markets more difficult.

In Vienna last year all three Congressional representatives from northern Virginia attended a breakfast meeting sponsored by Fairfax County Chamber of Commerce. As with a lot of political conversations in 2013, the discussion came around to expenditures, revenue, and a looming government shutdown. Our representative's answer to revenue issues was to hire more IRS agents and collect money that was "being left on the table".

So instead of making our tax code more efficient to make compliance more effective and less costly, we hire more enforcement and leave the bad old system in place? Transition from an old way of doing business to an improved way is always difficult no matter how bad the old way was. But adding new layers with greater complexity and cost is far worse, making any future transition harder.

The old adage of "getting it right the first time" doesn't mean getting it perfect. But it doesn't mean "throwing good money after bad" either.