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Can the States Do It Better?

Think Tank Transcript: Can the States Do It Better?

ANNOUNCER: 'Think Tank' has been made possible by Amgen, arecipient of the Presidential National Medal of Technology. Amgen,bringing better, healthier lives to people worldwide throughbiotechnology.

Additional funding is provided by the John M. Olin Foundation, theRandolph Foundation and the Lynde and Harry Bradley Foundation.

MR. WATTENBERG: Hello. I'm Ben Wattenberg. Here in Washington,lots of folks think that big government and big think tanks shapepolicy. But all across the country, state governments and state thinktanks are tackling serious problems, sometimes with remarkablesuccess.

Joining us are some of the people who are shaking things up atstate and regional think tanks.

From California, Sally Pipes, president of the Pacific ResearchInstitute; from Michigan, Joseph Overton, vice president of theMackinac Center for Public Policy; from Colorado, Phil Burgess,president of the Center for the New West; and from Massachusetts,James Peyser, executive director of the Pioneer Institute for PublicPolicy.

The topic before this house: Can the states do it better? Thisweek on 'Think Tank.'

The 10th Amendment of the Constitution says that the powers notdelegated to the federal government 'are reserved to the States...'But over the past 50 or 60 years, the federal government has greatlyexpanded its authority at the expense of the states. The federalbudget is now bigger than all state and local budgets combined.

Many of the members of the new Republican majority in Congress saythey want to shrink the size and role of the federal government andsend power back to the states. They argue that individual states knowtheir own special needs and can often handle tough issues, likecrime, health care, welfare, and education, more efficiently thanone-size-fits-all federal programs.

In the states, the revolution has already begun. In Wisconsin andNew Jersey, tough new laws limit benefits to welfare recipients.Because of this, New Jersey saw a 13 percent drop in illegitimatebirths to welfare mothers. And Wisconsin has reduced its welfarerolls by 25 percent at a time when the number of welfare recipientswas increasing nationally by 30 percent.

In Michigan, the state legislature slashed property taxes, andinstead funded public schools with a small increase in the sales tax.And in Massachusetts, annual Medicaid costs were growing 19 percentper year; state health care reforms cut the increase to only 5percent per year.

These and other innovations have some states on the cutting edgeof reform. But can they shoulder yet a bigger burden, and will theybe able to manage social programs better than the feds, who so oftenseem bound in red tape a mile long?

Let us begin the conversation, perhaps once around the horn, witha short answer to the central question that we're dealing with today:Why should the states play a more active role than they are now, andthe federal government a less active role?

MS. PIPES: In the recent elections, both at the federal and thestate levels, we have seen a reduction -- in people's views -- thevoters rejected big government. It's time to turn that power ofspending taxpayers' dollars to the states because the states canmanage their funds much better than a central bureaucracy inWashington.

MR. WATTENBERG: All right, Jim Peyser of the Pioneer Institute forPublic Policy.

MR. PEYSER: Well, you know, I think there is frequently acombining of small government with federalism. And I'm not surethat's always the case. I think perhaps more important, especially togovernors, is the flexibility and accountability that comes withhaving control over the management of the programs.

And I think a lot of governors are looking at not so much cuttingthe programs as much as taking over responsibility for managing them.And I think the assumption is that that will produce efficiencygains, but also that there will be programmatic benefits that ensue.

MR. WATTENBERG: All right, my old friend Phil Burgess from theCenter for the New West, headquartered in Denver.

MR. BURGESS: Well, Ben, I think there are three reasons. One is,when the founding fathers set up the national government, it had twoparts to it: a central government and a state government. That hasbeen corrupted over the years, especially since the Civil War. We'vebegun to think of the federal government as the government and thestates as administrative units. That really overlooks some of thetremendous assets that we have.

The second reason is that almost all the innovation in publicmanagement since World War II has happened in state government,whether it's legislatures, executives or the reform of judiciaries.

The third reason is that state governments are closer to thepeople, and we live in a large, heterogeneous society.One-size-fits-all doesn't work. The answer to illegal immigration inCalifornia may be very different from the answer in Arizona, and wedon't need people from Washington coming out and telling us how to doit.

MR. WATTENBERG: How are we going to make a living? (Laughter.)

No. The -- all right, next, Joe Overton of the Mackinac Center forPublic Policy.

MR. OVERTON: Well, Ben, my first response would be, given therecord of the federal government in the last 30 years, what makes usbelieve that the federal government can be involved in really meetingthe needs that our citizens in Michigan have?

I think your initial comment about the principle of federalismembodied in the Constitution was one that was well analyzed anddiscussed at this country's founding.

I agree with Phil. We know our people, and it's not a greaterburden. We are already doing the work. Whether it be through unfundedmandates that we are trying to be responsive to or whether it'sthrough receiving funding for programs where our hands are tied atactually implementing those programs, we are doing the work in thestates. What we want is more flexibility, and we want more ability tokeep that money in our own state.

MR. WATTENBERG: Joe, you mentioned -- put a time frame on it, thelast 30 years, and you sort of 'cast asparagus' on the federalgovernment the previous 30 years. The reason this power migrated toWashington was, the states were regarded, I think with some merit incertain cases, as either racially segregated or corrupt. I mean, youhad vast numbers of scandals at the state level. Is that correcthistory? And has that changed?

MR. OVERTON: Well, first of all, I mean if you're talking aboutcivil rights, that's only one very small component of what thefederal government is involved in today. We have regulation ofindustry and commerce well beyond the authority in the interstatecommerce clause, we have regulation of -- we have banking andinsurance law. I mean, many of these areas have nothing to do withthose basic civil rights questions is my first response.

And secondly, I think in many states, we're dealing with thoseissues. Today, in Michigan, for example, we have redundant civilrights legislation that we deal with, both at the state and federallevel.

MR. BURGESS: Ben, I think the reason why power came to Washingtonwas because of an economic crisis, not because there was a loss offaith in the states. We were in a terrible situation in the 1930s andpower migrated to Washington.

But stop and think. The progressive revolution that began ahundred years ago in Omaha, Nebraska, with the convention reallyinvolved innovations at the state level -- the open primary, theinspection of foods, public safety and health. All the majorinnovations that were later adopted by the New Deal really startedduring a very exciting period of state government innovation fromroughly 1890 until 1932.

MR. WATTENBERG: Yeah, but after that, the innovations -- SocialSecurity, Medicare -- they came from the federal government, didn'tthey?

MR. PEYSER: I think the world -- I think your comment that theworld has changed, or at least the states have changed, actually isvery true. I mean, I think in the end, if you look at the sort ofradical reformers, Tommy Thompson or John Engler or Bill Weld orChristine Whitman, people like that are not advocating thedismantling of the social welfare safety net that's currentlyadministered by the federal level. They're saying, let us takeresponsibility for it because we can manage it better, we can be moreaccountable, not only to the beneficiaries, but also to thetaxpayers.

And I think the level of both responsibility and also the legaland constitutional infrastructure that's been built up over the last30 years ensures that the states are not going to fall into the typeof behavior that marked, I think, the pre-civil-rights acts and thepre-civil-rights movements of 30, 40 years ago.

MR. WATTENBERG: Do you buy that, Sally?

MS. PIPES: Yes, I do. And I think that, you know, Governor Wilsonhas just said in his recent election that he honors individualresponsibility and he wants to reward individual opportunity bycontrolling programs that are offered to the people. We've beenthrough a very difficult recession in California, we've had riots,we've had floods, we've had earthquakes. And now the state governmentand Governor Wilson should be able to manage the taxpayers' funds.And he's doing that by reducing taxes over three years by 15 percent,taking over welfare payments. But we have to have control at thestate level and take that back from Washington.

MR. WATTENBERG: Anybody, what are the best programs in your statesor regions that are now being considered by --

MR. BURGESS: Could I just make a -- just a point first --

MR. WATTENBERG: Sure, go ahead.

MR. BURGESS: -- on the idea that nobody wants to dismantle any ofthese programs. I don't really agree with that. I think that thereare a lot of people in this country who would like to replace thesafety net with a springboard. And that's going to requiredismantling some programs, putting more money back into states andcommunities and the back pockets of individuals.

I think one of the most important things to remember about the10th Amendment that you read in the lead-off to this program is youleft out part of it. It's to -- powers not exercised by the federalgovernment are retained by the states and the people. And I thinkthere are a lot of impulses in our part of the country, in theWestern states anyway, for having more and more responsibilitiesundertaken by the civic sector, by the voluntary sector.

MR. WATTENBERG: Is this the so-called 'war in the West' that wehear about?

MR. BURGESS: Well, that's part of it. I mean, the public land --the assault on the management of public lands by Bruce Babbittoverlooks the fact that the situation in each of the states -- noteven in a state, in each of the subregions in a state, the watershedsdiffer widely from place to place. MR. WATTENBERG: Weren't you a bigfan of Bruce Babbitt's when he was governor out there?

MR. BURGESS: Well, Bruce Babbitt was a governor of 43 governors Iworked for during the time. When somebody is a member of your boardof directors, you're usually a fan of him, Ben.

But no, I think the -- and Bruce Babbitt had some things I agreedwith. I mean, he was one of the few Democrats that was for NAFTA, andthat was a good thing, I think, and it was good that he could helplead that.

MR. WATTENBERG: Right.

MR. BURGESS: But, you know, his one-size-fits-all, top-down,scientific management approach to the management of public landssimply doesn't work. And that same approach can be found in HHS andelsewhere.

When Bruce Babbitt says, Look, come up with a local solution and Iwill give you a waiver -- why should states get on bended knee to geta waiver from an assistant secretary in HHS, or even the secretary ofthe Department of Interior? What we have today is a mainframegovernment in a PC world, and what we have to do is to understand theAmerican federal system is tailor-made for a PC world.

MR. PEYSER: If I might just carry that one step further?

MR. WATTENBERG: Go ahead, sure.

MR. PEYSER: I think just to use your computer analogy here, themainframe may be the federal government, but the states are often themini-computers. And I think getting down to the PC, which may be thecity government, municipal government, country government, may be infact be the more important endpoint for this devolution of power fromthe federal government. States are just as capable of creatingmandates, funded or unfunded, as the federal government.

MR. WATTENBERG: On the local municipalities?

MR. PEYSER: Absolutely.

MR. OVERTON: I would like to -- I think one issue that really hitshome to us at the Mackinac Center for Public Policy is the issue ofsocial assistance. I think it's one program where you -- that can'tbe solved by the federal government sending a check to a low-incomefamily in Michigan. It can't even be solved by Lansing, our capitalcity, sending a check to people.

We need to have people working with people in those programs. Weneed to begin to rekindle a sense of volunteerism, responsibility ofprivate or nonprofit organizations, churches, to be involved in thatat the local level, where they can know people, keep themaccountable, and help them. MR. WATTENBERG: Give me some specifics ofwhat has happened in Michigan in the last few years. I guess GovernorEngler has made a big deal about what he's been able to do at thestate level.

MR. OVERTON: Right. Exactly right. In fact, I think GovernorEngler now is really taking the lead among the nation's governors tohelp reform federal legislation to allow more flexibility. Bringingmoney back in the form of block grants perhaps is a first step.

MR. WATTENBERG: What is the single best example that you would --we have people out there that don't -- including me -- that don'tquite follow all of this.

MR. OVERTON: Okay. One good example is -- well, right now, just togive you background on the problem is that although the federalgovernment dictates that we will help people, we don't have theflexibility in the state of Michigan to determine how we'll actuallybe distributing those funds. Our hands are tied.

We have applied for waivers and have received waivers for aprogram that the governor calls Work First. This program requiresthat any individual receiving public assistance who is able-bodiedspend 20 hours a week either working or seeking job training orinvolved in job training programs.

MR. WATTENBERG: Did you get the waiver from the feds?

MR. OVERTON: We did receive that, and I think that's one thingthat we can at least give credit to the Clinton administration for,that they have been supportive for most of these waivers.

MR. WATTENBERG: What are the best examples that you can think ofthat are happening in your case, I guess, Sally, in California?

MS. PIPES: We are seeing changes in AFDC, requesting block grants,getting people, two years and a half and you're out if you'reable-bodied, reducing -- encouraging people to be work-dependent, notdependent upon welfare.

MR. WATTENBERG: So that welfare plan, two and a half years andyou're out, that's already in effect, despite the fact that they aredebating this federally now?

MS. PIPES: Right, right, so we have to get that removed. Andanother thing is, we passed Proposition 187 in California, whichmeans that illegal immigrants are not entitled to welfare benefits,such as health, education and general welfare. Now, this is beingbattled in the courts right now, but the feds mandate that we payillegal immigrants for these services, and this is costing theCalifornia taxpayers over $3 billion a year. That is not fair.

I mean, we should be able to determine who is getting funds, whois in our state. And if we cut welfare, we'll have far less of anillegal immigration problem in the state of California. MR. BURGESS:And if the feds want the illegal immigrants to have benefits, theyshould pay for it.

MS. PIPES: Right, or take them to Washington.

MR. BURGESS: I think there is another point, though, here, andthat is -- that's easy to forget, but, you know, I don't think peoplevoted to get the federal bureaucracy out of their face just to have astate bureaucracy put in their face.

MR. OVERTON: That's right.

MR. BURGESS: The biggest enemy of innovations in education today,Ben, are state bureaucracies that are wholly-owned subsidiaries ofthe National Education Association. And it seems to me, to pretendthat there aren't serious problems in state bureaucracy is to putyour head in the sand. It seems to me that the revolution that NewtGingrich represents and the Republican contract represents here inWashington also has to be repeated in the states.

There are some states, like California and Michigan andMassachusetts and others, that are making tremendous headways onthis, but, you know, a lot more needs to be done.

MR. WATTENBERG: But no state on its own -- you brought upeducation -- no state on its own has yet passed a school choicevoucher system for private schools.

MR. BURGESS: Right.

MS. PIPES: No, but in California, as in Michigan, we do havecharter school legislation allowing a hundred schools. Now, in Pete's--

MR. WATTENBERG: Within the public system, not private charters.

MR. OVERTON: But the enemy of the charter schools in almost allthe states is the state education bureaucracies.

MS. PIPES: But I just want to make the point that in Pete Wilson's'State of the State,' he said that by 1997 the 11-volume, 7500-pageeducation code will be dismantled. He is getting rid of teachertenure. He's going to bring in merit pay. He's going to empowerparents to have control over their children's education. This is avery important step.

MR. WATTENBERG: And those are all things that he says he can dowithout federal approval?

MS. PIPES: Right. Yes, absolutely. And this is going to --

MR. WATTENBERG: If he can prevail on the state senate and thestate assembly?

MS. PIPES: Right. But --

MR. BURGESS: And that's the way it should be. He doesn't have toask 'Mother, may I?' to the Department of Education to do thosethings.

MS. PIPES: Yes, exactly, Phil. And education is the future of ourcountry and of the state.

MR. WATTENBERG: Jim Peyser of the Pioneer Institute for PublicPolicy in Boston, what is your sort of best example of what thestates --

MR. PEYSER: Well, you mentioned at the outset the Massachusettstrack record on Medicaid management. And essentially what's happenedis they have converted virtually all of the Medicaid recipients intoa managed care system. And under a managed care system, they broughtthe -- essentially the inflation rate, if you will, down from almost20 percent to under 5 percent.

That's been done, and had to be done hand in hand with the federalgovernment. But there continue to be tongue wars between the Medicaidbureaucracy on the federal and the state levels over how to implementthis program, how to determine eligibility, how to determine what's areimbursable service. There are all kinds of things that continue topromulgate skirmishes.

And the amount of time that's wasted focusing on these largelyperipheral issues is immense. And the distraction for the stategovernment is quite significant.

So I think Medicaid is a good example of where there could besignificant reforms and savings at the state level that, by the way,produce better benefits for those who are receiving the services.

MR. WATTENBERG: Joe Overton of the Mackinac Center for PublicPolicy, which is what, in Lansing?

MR. OVERTON: No, we're actually located in Midland.

MR. WATTENBERG: In Midland, Michigan?

MR. OVERTON: Yes.

MR. WATTENBERG: Tell me how your think tank works with GovernorEngler. I mean, do you -- are you an extension of the stategovernment de facto, or are you working with lots of differentpeople? And has the governor adopted many of the ideas that havebubbled up from your operation?

MR. OVERTON: We have a very good relationship with the Engleradministration, but we are very much an independent, nonprofitresearch organization. The governor has been very receptive to ourideas. We have been out front on the issue of educational choice,charter schools, welfare reform. We have quarterly a Michiganprivatization report. Privatization has been a key issue for thecenter.

We don't view ourselves as a political organization. We viewourselves as an association of scholars who are building on the last40, 50 years of economic scholarship that points out that centralplanning just simply cannot work in a complex society.

Friedrich Hyack (sp), Milton Friedman, Ludwig Von Miesus (sp),these scholars and recent Nobel prize winners in economics -- I thinkyou see a trend toward awareness of that. And that's what we'reworking on, to implement these policies in the state government.

MR. WATTENBERG: Jim Peyser from Boston, is that sort of where youcome out on it? How do you work with Governor Weld?

MR. PEYSER: Well, we have, I guess, a couple of alumni who arecurrent Weld administration appointees, and that certainly doesn'thurt in terms of getting our voice heard. But we are similarly anindependent, nonpartisan group. And we're out there publishing booksand ideas and promoting them independently of whatever the Weldadministration might be doing. But we hope they're listening.

MR. WATTENBERG: Is there cross-pollinization going on among thesevarious state and local think tanks --

MR. PEYSER: Very much.

MR. WATTENBERG: -- which most people, I think, are sort of unawareof, but it's becoming a major force in American policy. Do you alltalk to each other?

MS. PIPES: Yes. There is an organization called State PolicyNetwork, there is Atlas Foundation. There are a number of -- just asthe focus is moving away from Washington, the state think tanks dotalk.

For example, at Pacific, we copied the Pioneer Institute'sprivatization competition a couple of years ago, and in GovernorWilson's recent budget last week, he included three of our finalists'proposals in his budget to privatize state services. So --

MR. WATTENBERG: So that's really one-size-fits-many. I mean notall.

MS. PIPES: Right. Many, yes.

MR. WATTENBERG: Just as the state legislatures have their ownorganization and cross-pollinating. MS. PIPES: Right, and governors'organizations.

MR. BURGESS: One size cropped here and there, cropped here and there, without having to ask for permission, fits some.

MR. WATTENBERG: Let me just cut this off for a minute and go on toanother area, which is sort of the problems that this might engender.If we allow each state to decide what to do about things likewelfare, for example, you not have what I guess the economists in theinternational trade arena call a race to the bottom, because if youlower welfare standards, your tax rate gets lower, businesses say,oh, great, we'll come in there. And then the neighboring state says,oh, we can lower welfare even more, and then you end up without anysafety net for poor people.

Now, there are abuses in the welfare system, but I don't thinkanybody wants to really run it out of town. And isn't that thedanger?

MR. OVERTON: I think that's to vastly underestimate the people, atleast in our state of Michigan. We have the opportunity in the stateto lower many forms of benefits, whether they be in workman'scompensation and so forth. And yet we continue -- even thoughMichigan rates are out of line, actually higher than surroundingstates, we still find it difficult to muster the political will tobring those rates in line.

I see no difference in welfare programs. People in Michigan wantto help people. What they don't is to have their money wasted in aWashington bureaucracy or even a Lansing bureaucracy. They want thatmoney to help people.

MR. PEYSER: And I think if you look historically at welfare andMedicaid and some of the other programs, states have frequently addedto the entitlement rather than attempted to take away from it. Ithink we may be seeing a swing of the pendulum in the otherdirection, but it's certainly not any evidence of a permanentresistance of states to all benefit programs. And I think differentstates react in different ways, and they're going to come todifferent equilibriums on these various issues.

MR. BURGESS: I think that's an important point. I also --remember, we're a democracy -- I mean, at the state level, too. Andwe're a society that paid $3 trillion to keep the communists at bayand made great sacrifices. We're a society that has paid trillions ofdollars for welfare which we now know didn't work. And I think wecan't overlook the quiet destruction of people's lives that goes onwith the current welfare system run the way it is.

And, sure, people are going to make some mistakes, but we live ina society that most of all, more than anything else, values humantalent. And we can't turn our backs on human beings, not just becauseof our Judeo-Christian heritage, but also because of raw economics.

And so I think you're going to see almost every state making majorinvestments in their human resource base.

MR. WATTENBERG: All right. Thank you, Sally Pipes, Joe Overton,Jim Peyser, and Phil Burgess.

And thank you. We enjoy hearingfrom��

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