Can State Governments And National Agencies Run Like Corporations? Maybe (February 19, 2015)

Governments and Corps

For decades now, the Republican Party has been the party of privatization. The thinking goes that there’s no function of government that wouldn’t perform better and more cheaply if only we’d let the genius of infallible corporate strategy takes its place. This magical theory assumes both that state government is always the problem, and that private enterprise is always the solution. There’s no room in this model for inconvenient statistics, such as the fact that nearly 27,000 American companies filed for bankruptcy in 2014.

For the purposes of this column, let’s look at two different test cases of the GOP’s “private flight is right” hypothesis: newly sworn-in Governor of Illinois, Bruce Rauner, and the evolution of Veterans Affairs under Secretary Robert A. McDonald. At first gloss, the two men appear to have similar pedigrees. Prior to his November 2013 election, Rauner was the Chairman of R8 Capital Partners and Chairman of the private equity firm GTCR, both based in Chicago. Meanwhile McDonald spent 33 years at conglomerate Proctor & Gamble, retiring as the company’s CEO in 2013.

These basic biographical facts, however, are where the similarities end. And after just a few months on the job for both men, important differences in personal history and motivation suggest a surprising compromise. On the left, perhaps we can embrace the skills of a one percent business leader when leveraged for the right reasons in the right way. And on the right, though the party is not known for letting data drive ideology, perhaps they’ll come to accept that business acumen alone does not qualify one for government service.

President Obama nominated McDonald to his post last June on the heels of predecessor General Shinseki’s ignominious resignation. The VA was rightfully battered on Capitol Hill and the court of public opinion throughout 2014, upon discoveries of veterans who died expecting care as the agency concealed data on long appointment wait times.

Many of us (including this columnist) groaned inwardly at McDonald’s nomination. His corporate background suggested the worst kind of pandering to the Republican position. Heads might roll but would anything really change, as it must for uniformed men and women in need of care and services after enormous personal sacrifice?

While it’s true that 900 VA staffers have lost their jobs since McDonald took over, the firings are more than a symbolic gesture directed at baying media and political wolves. The Secretary sat down with Meet the Press moderator Chuck Toddlast Sunday to tout some early successes. Per McDonald, “Wait times are down 18% nationally. Our backlog of disability claims are down 61% nationally. Homelessness is down 33% nationally. We’re making progress.”

These are assuredly steps in the right direction. But other than the Secretary’s reputation as a competent corporate manager, what else could be in play? Perhaps this, according to a June 29 report from The Week: “The West Point graduate…served in the U.S. Army for five years in the 1970s, and was a captain in the 82nd Airborne Division.”

Ah yes, it seems so obvious now. McDonald actually walked a mile in a soldier’s shoes. He served his country, and is thus in the unique position of being able to combine authentic compassion with decades of business acumen to make a real difference. The Secretary is renowned for issuing his private cell number to ailing, frustrated veterans. He is using his privilege and experience to strengthen, rather than diminish, the impact of government.

At the other end of the spectrum, we have newly minted Illinois Governor Bruce Rauner, whose only prior political experience included acting as an advisor to Chicago’s current machine Mayor, Rahm Emanuel. This resume bullet point alone should have been enough to disqualify Rauner, but a discontented electorate often behaves in mysterious ways. Rauner is reported to have spent $26 million of his own personal fortune to unseat incumbent Democrat Pat Quinn by a margin of roughly four percentage points.

Any illusion that Rauner planned to thoughtfully consider what’s best for the state and its citizens before making any moves was immediately shattered. In his first executive order, he halted state hiring as well as discretionary spending, and called for state agencies to sell surplus property. He also fired a warning shot at labor unions, signing an order blocking “fair share” union fees from state employee paychecks. Then he lawyered up.

In response, IL AFL-CIO President Michael T. Carrigan said:

“The Bruce Rauner that managed to mask his true feelings about working families for most of last year showed his true agenda today. Much like his past proposal to cut the minimum wage, he is now going after workers on all fronts by supporting Right To Work, attacking Unemployment Insurance and Workers Compensation, as well as prevailing wage and Project Labor Agreements that benefit both workers and the taxpayers…

We suspected all along that Bruce Rauner would go back to his roots as a mega-wealthy corporate CEO and force the tired philosophy of increasing the bottom line on the backs of the workers. I haven’t seen any proposals from him on increasing Illinois’ low corporate income tax or closing big business loopholes. Where is his shared sacrifice?”

Rauner went straight from the halls of Harvard to GTCR. He hasn’t spent a day of his adult life struggling to make ends meet, furloughed, laid off or otherwise squeezed by strained municipal budgets and/or corporate greed. Thus in record time the Governor trotted out the usual GOP leadership playbook: a conveyor belt of gifts to the one percent at the expense of everyone else.

The two differing case studies point to a revised, more nuanced hypothesis. There are situations in which business strategies can be successfully implemented to reform government. There are others in which handing the reins to a former executive is a huge mistake. The difference between success and failure: compassion, as developed by firsthand, diversified life experience.

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