The stories reminded me that, for the last 21 years of my Pitney Bowes career, I dealt continuously with the encroachment of state capitalism in the postal sector.  In the late 1980’s and throughout the 1990’s, we successfully fought a series of battles with the U.S. Postal Service to keep it from becoming another entity with all the powers and privileges of the federal government, but with none of the regulatory constraints associated with federal government agencies.  Several senior postal officials aspired to create a power base similar to many government-owned entities, such as the Tennessee Valley Authority (which Marvin Runyon, the Postmaster General from 1992 to 1998, had led) or the New York-New Jersey Port Authority.

Fortunately, we defeated efforts by the Postal Service to regulate the mailing industry and compete unfairly with it at the same time.  The Postal Service leadership teams succeeding Runyon and members of his senior team generally tried to operate within the boundaries set by Congress. We had a very collaborative, and mutually respectful, relationship with the Postal Service during most of my tenure as CEO.

The story was very different outside the United States.  While we had similarly respectful and collaborative relationships with the postal officials in the UK, Canada, Spain, Denmark, and Norway, we had a variety of challenges with postal authorities in many other countries.

We saw three distinct challenges:

• Some postal operators, which had appeared to become privatized, acted in very anti-competitive ways in their own nations, and also secured rights and privileges from their national governments that stacked the deck against partners and competitors.  The most extreme example was Germany, during the leadership of Deutsche Post by Klaus Zumwinkel, who resigned in early 2008 for reasons unrelated to his work-related performance.  Throughout Zumwinkel’s 18-year tenure as CEO, Deutsche Post acquired companies all over the world, including a disastrous acquisition of Airborne, a major package shipper, and the worldwide operations of DHL.

In Germany, where Deutsche Post realized most of its profits, postal rates were exceptionally high (well above $.60 per piece), service was not exceptional, but competition was ruthlessly suppressed.  At the end of 2007, a few weeks before Germany had committed to open its market to full competition from within the EU, Zumwinkel successfully prevailed on German legislators to pass a law that created a minimum wage for postal sector employees only, a wage pegged at Deutsche Post’s minimum pay grade.  The immediate result was to destroy its two largest mailing competitors, since neither could secure labor cost advantages over Deutsche Post.

In Italy, Poste Italiane took advantage of complex and onerous labor laws to fend off competition, since these laws made part-time and temporary workers prohibitively expensive.

• In many countries, postal operators expanded into businesses in which the marketplace was amply served by the private sector, but in which the postal operators would immediately have a competitive advantage, because of the implicit protection from national governments.  Australia, Belgium, Ireland, China and New Zealand all started retail banks.  Japan had always had a sizable postal banking system which paid almost no interest to depositors, but which became a huge source of loans to projects favored by politicians.  Prime Minister Koizumi staked his political career on an initiative to privatize the Japan Post, not because there was ferocious opposition to privatizing the mail or package business, but because the heavy governmental control of the flow of bank loans would be jeopardized. He barely avoided receiving a vote of no confidence because his initiative upset the way government favors had been delivered for generations.

Postal operators have played heavily in the money transfer business (competing with Western Union), in retail government services, in the sale of greeting cards and stationery, and in the sale of gift items often transmitted through the mail.  Postal operators like Australia, China, Finland, and Sweden moved seamlessly into mail services businesses. In countries with a strong tradition of state capitalism, these postal operators were able to operate freely in more businesses in which they competed unfairly with the private sector.

• The postal operators often carried mandates and missions inconsistent with a business focused on cost-effective customer service.  France and Canada were prime examples of this problem, as were Japan, Spain, and Portugal. In these countries, postal operators were saddled with explicit and implicit requirements that they keep a minimum number of people employed, even if the demands of the business would not justify such employment.  For Pitney Bowes, the government employment mandates made many of our productivity enhancement tools unusable by these postal operators.  They could not improve their productivity, even if they wanted to, because they were fulfilling social mandates.  Postal ratepayers paid more, in the form of a disguised tax, to create a welfare system for workers who probably could not have secured employment at comparable wage and salary rates.

I was able to experience the ugly underside of state capitalism for over two decades.  It made me realize that the United States should think long and hard about migrating down the path these other countries have followed.  It also is a cautionary tale for large multinational corporations that aspire to compete fairly in major markets in which one or more of the competitors are state-owned or state-controlled enterprises, or in which the state considers a particular industry strategically important.

Moreover, their fee structures would kill individuals and small businesses.  For example, UPS and FedEx charge over $10 for improperly addressed letters and packages.  This is a profitable source of revenue for both organizations.  They also have residential delivery surcharges, especially for more remote residential areas.  If they are to take on the responsibility for more mail delivery currently done by the Postal Service, they cannot use their current fee structure to do so.

How can the U.S. Postal Service take costs down?

Use self-service retail more aggressively

The Postal Service is far behind the banking industry, as well as the travel industry, in employing self-service kiosks, as well as online retail purchase systems.  You can do virtually all your banking at self-service kiosks, but the Postal Service has nowhere near the deployment of self-service kiosks it can and should have.

Share bricks-and-mortar retail with other retailers

There is no earthly need for dedicated bricks-and-mortar post offices anywhere in the United States.  Postal retail operations should be inside major grocery retail operations, rail stations, airports, gas stations, general stores in rural areas, and major shopping malls.

Reduce street collection boxes and replace them with shared mail collection systems

The letter carriers can collect a significant part of the mail currently going to collection boxes, when the letter carrier is still doing residential delivery to the doorstep or dedicated mailbox.  However, there should be collection boxes at the self-service kiosks, similar to what banks do with ATMs that collect deposits as well as dispensing withdrawals.

The Pitney Bowes shipping kiosks at Staples and Office Depot are paired with package collection systems at both stores.  The retail outlets that sell greeting cards should also have kiosks and mail collection boxes for people that want to write and send an individual card.  The types of mail used today need to be analyzed to determine the most efficient mail collection systems to reduce the number of mail collection vehicles and employees.

The mail processing functions should be completely outsourced to the private sector, with rate discounts that enable them to be profitable.

Pitney Bowes became a leading provider of mail sortation and processing services, and delivered mail into the Postal System faster, less expensively and more reliably than the Postal Service could have done with the same mail.

To be fair, Pitney Bowes and other companies offering presorting worked with more standardized and easy-to-process letter mail, as opposed to the bulkier and less standardized mail the U.S. Postal Service workers have to handle.  However, the biggest issue with the mail processing centers is not the non-standardized part of the mail, but the inflexible, high cost labor rules under which the Postal Service operates.  Mail volumes vary by day, week, month, and time of year.  Labor staffing needs to be flexible and part-time.  Over time, facilities need to be built, moved, and either reduced or increased in size.  Because the Postal Service is government-owned, its ability to react quickly to changes in mailing patterns is non-existent.  It takes years to build and move a post office, and it is virtually impossible to close a post office.  It is even extremely difficult to remodel a postal facility that remains in the same place.

Change delivery economics to increase the use of clustered boxes

When I co-chaired the Mailing Industry Task Force with John Nolan, then the Deputy Postmaster General, one of the dumbest rate comparisons with which the Postal Service was stuck by its universal service mandate was that it was required to deliver mail free of charge every day to the bottom of the Grand Canyon, but was required to charge a mail recipient who could save it money for a post office box rental.

The economics of mail delivery need to be reversed.  Those who give up expensive residential delivery should be rewarded.  Those who secure a conveniently located delivery mailbox should get that service without charge.  Over time, the mail delivery should gravitate toward moving the mail to where people spend their waking hours, not where they live or do business.  We are a more mobile society than ever, and the Postal Service delivery system should recognize this.

Other observations

I have not discussed pricing for mail products because this is an infinitely more complex subject. Cost-based pricing has some perverse effects, such as increasing the cost of mailing for those direct marketers who are more selective in mailing to prospects in a ZIP code.  It is cheaper to deliver to every address than to honor “Do not mail” requests and cull out certain addresses for discontinued mailing, but we should encourage the Postal Service and direct marketers to stop mailing to people who no longer want to receive marketing mail. Rate structures should encourage, not discourage, more selective mailing and higher direct mail response rates.

The discounts given to not-for-profit mailers, and for certain classes of mail, such as books and other educational materials, have broader societal purposes.  Mail addressed to and from elected representatives and other government officials needs to stay at low rates, especially for people living in remote areas.

However, within existing rate structures and subsidies, there are potential improvements.  For example, there should be a discount for mailers who use self-service kiosks and get bar codes printed on single pieces of mail, such as greeting cards.  There should be a discount for mailers who drop mail at post offices or bulk pick-up services, as opposed to those who continue to use dispersed street collection boxes.  There should be discounts for those who use pre-printed envelopes to pay bills, versus those who create a hand-written envelope to do so. Finally, there needs to be a discount for metered, versus stamped, mail, which is happening in many countries in the world.

Final thoughts

I have seen no business succeed in the long run by saving money through causing its service and brand to deteriorate.  We need to prevent the Postal Service from following the path taken by Amtrak, which has become marginalized over a long period of time and required repeated government subsidies because of its deteriorating services and declining revenues.

Finally, let’s eliminate the inflexibility with which the Postal Service has to manage its medical benefits.  Years ago, in conversations with one of the Postal Service labor union leaders, I learned that there was an opportunity to save hundreds of millions of dollars a year by taking postal employees out of the federal health benefits system.  The Postal Service did not believe it had the freedom to withdraw from the federal system, even though it receives no taxpayer subsidies and it is an off-budget agency. That has to change.

Traditional mail volumes will decline further, but there are many opportunities, including those I have not described in this blog, for the Postal Service to be economically viable.  We need a better model, one with considerably less political interference, with which the Postal Service can operate.

I do not believe we can solve the deficit problem without raising taxes.  I also do not think that all tax increases on wealthier people are inherently bad.  I do not think the proposed tax rates are inherently bad relative to their effect on economic growth.  Furthermore, although I think we have a certain amount of “crony capitalism” in our country at all levels, money that gets redirected from the general public to a few favored corporate and union welfare systems, I think a certain amount of that will happen in any democract.

However, I have three fundamental issues with our tax system:

• Everyone should pay income taxes, except for the very poorest members of our society, and, for them, only for the period of time in which they remain below the federal poverty level.  Today, over 50% of Americans pay no income taxes.  That is wrong.  It disconnects over half of Americans from any economic stake in how income tax dollars are spent.  It has the psychological effect of deluding those not paying taxes that money will always be available from “the rich.”  Everyone should pay something.
• We need far tighter controls on how our tax dollars are spent.  I understand that, in a democracy, some uses of our tax dollars will go to causes that I would not personally support.  The majority of the voting public should help guide elected officials on the allocation of tax revenues.
• We need much more common sense in the way governments account for what they are spending, and what the long-term costs of that spending might be.  The whole issue of excessive retirement benefits has arisen because governments have hidden the long-term costs of these retirement obligations by using accounting rules that were prohibited for private businesses over two decades ago.  The Congressional Budget Office “scoring” of legislation is fundamentally flawed in two respects: first, it limits its evaluation to the ten-year period after the law is passed; and, second, it does not take into account the highly likely behavioral responses to a piece of legislation.  For example, any tax increase on businesses headquartered in the United States will cause some businesses to shut down U.S. operations and move investments and jobs abroad.  That kind of highly likely reaction to a tax increase is not factored into the CBO scoring model at all, even though any common sense evaluation of a tax law would take it into account.

However, at all levels of government, but particularly at the state and local level, taxes and bond proceeds are solicited for one purpose, and diverted from a completely different one, usually the enrichment of union leaders and other state employees.  When Connecticut created a fund for transportation improvements in 1984, most Connecticut residents would gladly support tax increases to upgrade our badly maintained transportation system.  However, year after year, the Special Transportation Fund has been raided for “general revenues,” which is a euphemism for paying rich retirement benefits to unionized and militant state employees.

Similarly, Connecticut established a fund for smoking cessation programs when it received a major settlement from the tobacco companies in 1998.  It has never used a penny from that fund for its intended purpose.  Every year, the fund has been raided for “general revenues.”

Connecticut is not alone in this regard. Diversion of funds from one budget line item to others is a regular practice of many states and localities, as noted in the Monday, November 14, 2011, issue of The Wall Street Journal, in an article entitled “Cities Hit as Funds From Bonds Pay Other Bills.” In that article, reports Ianthe Jeanne Dugan, Justin Scheck and Bobby White recount many examples of cities like Miami that routinely divert funds from their intended purposes.  The reporters stated:

“Cities and states across the country are using money designated for specific purposes—such as fixing roads or sewers—in order to fill financial holes elsewhere, according to public officials and records.”

We cannot allow governments at any level to use these “bait-and-switch” tactics, which, if used by large public companies, would subject them to SEC fines and penalties and investor lawsuits.

Governments need to clean up their acts before I feel comfortable with tax increases on anyone.  This is not about  dissatisfaction with uses of public money with which I disagree; it is about corrupt and dishonest uses of public money.

Finally, I believe all of us should know how our money will be spent and what the consequences of a particular government spending decision would be.  The projections and predictions about government spending are so flawed, as has been seen in the retirement benefits area, that I do not feel confident that we are getting the straight story.  This is not a result of dishonesty, unlike the fund diversion issue; it is just bad accounting.

For all these reasons, I would like to see some fundamental changes made in our taxing and spending policies before I would support any tax increases at any level.  At that point, I would be very comfortable paying my fair share of taxes.

Some large self-insured employers will move their employees to the newly created state and federal health exchanges.  They will pay taxes or penalties to do so, but it will be better economically, in the short term, for them not to have responsibility for employee health care costs.

However, many employers will invest in the health and wellbeing of their employees, and derive competitive advantage from doing so.  Why?  For employers free to design an optimal healthcare system, including onsite clinics providing comprehensive primary care and developing a selective specialist provider and hospital network, the ability to design a good healthcare system gives them much more control over their employees’ health status, sense of wellbeing, and health benefits costs.

Some employers, like American Express, are even building care delivery networks outside the United States, in countries that have single-payer systems and that have government-employed doctors and government-owned hospital networks.  The staff physicians for these employers provide far better care, which is very attractive for talent recruitment and retention.

What employers will opt out of offering direct health care coverage?  Companies that have lost control of health care costs, such as those with exceptionally generous collective bargaining agreements, will welcome the chance to offload their entire population to health exchanges.  In many companies, CEOs simply do not understand that they can manage employee health and wellbeing and deliver shareholder value.  In others, corporate benefits departments do not want to assume responsibility for health care cost reduction.

Employers who retain health care coverage will develop better provider networks, and may even create multi-employer consortia.  This is happening in Southeastern Wisconsin, with Quad Med, Briggs & Stratton, Miller Coors, and Northwestern Mutual Life.  It is also happening with a consortium of labor unions in the New York City in the UNITE Here Health Center.

What will these employer-based health plans look like?

• They will migrate toward consumer-directed plans with high deductibles and co-pays for plan participants;
• Plan participants will be given significant incentives for making the best choices for their health, health care, and health benefit plan spending;
• Plan participants will be given continuously improving tools for self-managing health, including consumer-controlled personal health management systems like Dossia, clinical decision support tools, choices among health and wellness vendors, and good information and technology tools for continuously monitoring health; and
• Employers will put more decision power into the hands of plan participants and will force health plans to market directly and successfully to consumers to secure revenues.

These employer-based “accountable care” systems will be among the world’s best health care systems.

The wealthiest Americans will leave the core systems of which they are a part and pay extra for concierge medicine. They will consult with physicians who accept no Medicare patients and who direct their patients to the world’s best care, wherever available.  These Americans may actually be consumers of medical tourism, when that care is superior outside U.S. borders.

There is precedent for this.  In the UK, the top layers of UK society initially acquired supplemental health insurance through BUPA and, more recently, seek out care wherever it can be best delivered, including India, Singapore, and the United States.  Medical tourism started to meet the demand from single-payer systems abroad, but it will get bigger here.

There will even be increased medical tourism within the United States.  Concierge doctors will refer patients anywhere in the country in which they can secure the best care.  This system will also deliver exceptional care.

Some Americans will receive world-class care because of the lucky accident of where they are living.  Those Americans in the seven states in which Kaiser-Permanente is licensed to do business, or in Utah, where Intermountain Healthcare is based, or in Washington state, where Virginia Mason is based, or in Southeastern Pennsylvania, where Geisinger is based, will get excellent healthcare.

Other systems around the country will attempt to copy them, and some will succeed, but most will have difficulty, because, for the most part, world-class accountable care organizations will have been created in business models in which the primary care physicians are staff doctors paid a salary and in which there are tightly controlled specialist networks.  These systems work because they effectively limit patient choice by steering patients into a single managed care network.  They will stop seeming like a satisfactory alternative when the limitation on patient choice produces bad outcomes in a handful of high visibility cases.

There is precedent for this.  Back in the 1990’s, payers were effectively controlling healthcare costs and utilization through tightly managed care networks.  These systems also delivered a reasonable level of care quality.  However, they were dismantled because there were a variety of high-profile cases in which it appeared that the healthcare delivered was of inferior quality because the patient could not select the provider of choice.

Most government-run systems outside the United States use some form of provider choice control or give patients no choice as to providers.  Some have “gatekeeper” systems in which the patient cannot directly consult a specialist.  In the United States, such systems can survive only if they can avoid getting legislated or regulated out of existence because of the appearance of delivering inferior care.  They survive, but are highly vulnerable to being dismantled.

Many people have used the Veterans Administration and Military Healthcare systems as models for great healthcare at an affordable cost.  They have electronic health record systems.  They take advantage of broad clinical learning.  They deliver convenient and low-cost care through staff physicians and nurses paid on salary, and they develop long-term relationships with their patients.

However, because premiums paid by users are so low, and raising the prices paid by veterans and military families is politically suicidal, the federal government will reduce the financial burden of this system by quietly reducing the supply of care, rather than working to reduce demand.  They will shrink the size of facilities, the size of their staffs, or the hours of service, rather than increase the cost of accessing them.  Although shrinking a hospital or outpatient center is politically challenging, demanding that users increase their premium payments by several thousand dollars a year would be politically suicidal.  For example, the military health care system charges a 60-year-old military retiree $426 per year in premiums, a ridiculously low payment, considering that this type of retiree costs the system in excess of $10,000 per year on average.  However, raising premiums to even $1,000 per year is the metaphorical “third rail” issue; politicians will not touch it.

The best place for low income Americans dependent on Medicaid or other safety net health care programs is at community health centers.  These centers are generally better equipped to handle the complex problems low-income Americans face, particularly those with language and cultural barriers.

The top community health centers have expert resources to assist patients in applying for government benefit programs, in managing transportation and childcare issues, in addressing related social service issues, such as domestic violence, and overcoming language and cultural barriers.  They also tend to manage appointments for patients with more unpredictable schedules far better than a traditional private health practice.  Finally, they develop expertise in managing the different kinds of health problems very poor people have, compared with their non-indigent counterparts.

The Medicaid legislation passed in 1965 contemplated that Medicaid and Medicare patients would be part of mainstream health care systems and that Medicaid and other safety net programs were simply ways of paying for health care for poor people. We now know, from nearly five decades’ experience, that low income people have other overwhelming life challenges.  Their health care, economic and family needs are different, and are interrelated.  They need expert care a community health center is better equipped to deliver.

Medicaid and other safety net programs could have paid more for health care, and enabled private practice physicians to handle Medicaid patients, but the reimbursement rates for Medicaid providers are so low that private practice physicians have increasingly stopped seeing Medicaid patients.

Therefore, the community health centers will end up handling them, and will actually do a reasonably good job delivering care.

In trying to address budget deficit issues, the Obama administration and its successors will try to reduce what Medicare pays for health care.  This will cause even more medical practices to drop Medicare patients, because these patients have more complex health challenges for which the doctors will be paid less.

We continue to see a hemorrhaging of primary care physician populations, which leaves the Medicare populations even more poorly served by private practice physicians.

Medicare patients will seek out more care at retail clinics for minor illnesses or injuries, at urgent care centers for serious conditions, at emergency rooms for acute conditions.

We will see shrinkage of the physician population with the skill and will to take on older patients with more complex health care challenges.

Most Americans who work in small businesses, who freelance or are self-employed, who are unemployed, or who work for large companies that have abandoned health care coverage will end up in health exchanges.  They will get a progressively poorer quality of care from private practice physicians. They will wait longer for care, have long waiting times in doctor’s offices and hospitals, have short visits with healthcare providers, get too many diagnostic tests in place of more careful physical examinations because the fee-for-service system will survive and drive dysfunctional behavior by physicians and hospitals.

They will also visit urgent care centers and emergency departments more than they should, because these parts of the healthcare system will be accessible to them.

While the quality of care delivered through this government-regulated system will decline, the cost for patients will increase significantly.  There will be high deductibles and co-pays, and the risk pool in this population will get worse over time.  The state-run exchanges and any other system created and managed under the Affordable Care Act or any regulations emerging from it will receive those members not wanted in other systems.  For example, employers with already healthy populations will retain their health plans; employers with unhealthy populations will happily dismantle their health care coverage and drive employees to the exchanges.  There will be an “adverse selection” problem.

The titanic battle between proponents and opponents of the individual mandate, that is, the requirement that individuals either purchase health insurance or pay a penalty for not doing so is constitutionally and politically critical, but arguably irrelevant to whether our country will end with everyone insured.

The individual mandate design created by the Affordable Care Act, as well as the Massachusetts design, both are flawed in driving individuals to secure health insurance because the penalties an individual has to pay if he or she does not elect to secure insurance are inadequate.  I have commented on this more than once: if an individual driving into New York City were to have a choice between paying $40 to park legally in a garage or paying a $20 parking ticket for parking illegally on the street, the vast majority of individuals would elect to park illegally.  It’s nice to have a symbolic penalty, but such a penalty works only if the cost of noncompliance is close to, or better yet, greater than, the cost of following the law.

Because our elected officials did not have the courage of their convictions to create meaningful incentives or penalties for getting every individual covered by health insurance, a significant part of the population, many of whom will be young, healthy people who usually subsidize older, less healthy people, will remain outside the health insurance system.

They will actually have more attractive health care options available to them.  They will access retail clinics for treatment of minor illnesses and injuries. They will have more retail choices for both immunizations and periodic screenings.  They may even be able to access medical tourism options for surgical procedures that would otherwise be prohibitively expensive, even in an insured health care system. They will continue to access acute care at emergency departments.

They really do not need to secure health insurance until they have a condition that is both expensive and chronic, one in which emergency department care is inadequate.  In the past, they would not have risked waiting to get health insurance until getting a chronic condition, but the Affordable Care Act eliminates any barriers to them securing insurance whenever they can no longer operate in the uninsured system.

Oddly enough, absent a much more punitive individual mandate, the Affordable Care Act may actually drive more individuals into the uninsured system for longer stretches of their lives.

Final Comments

It is very difficult to reform the multiple health care systems that, in aggregate, employ over 15 million people, most of them in middle-class jobs, that contribute almost $3 trillion per year to our economy, and that are perceived to deliver two public goods, healthcare and insurance protection against catastrophically high healthcare expenses. Change will come from a combination of evolutionary development of better care for those who can acquire it outside the systems heavily regulated by the government and increasingly complex and dysfunctional government interventions.

The goal of universal healthcare equitably available to all Americans will not happen.  Those smart, rich, or resourceful enough to demand great care will get it; the remaining Americans, overwhelmed in trying to manage their daily lives or not sufficiently “street-smart” or rich will be lucky to get adequate, affordable care.  The more government tries to intervene to achieve fairness or to correct fraud, waste, and abuse, the more the system will create new opportunities for fraud, waste, and abuse. Moreover, as noted above, the government’s misguided attempt to eliminate denials of coverage for preexisting conditions will provide a perverse incentive for more individuals to drop out of the health insurance system until it becomes economically untenable for them to stay out. Every government intervention will result in a new set of “gaming” opportunities.

Some people would say that we have a crisis in health, healthcare, and health insurance, and that the crisis should be a call to action.  Unfortunately, the history of our representative form of government would suggest that crises are noticed and acted upon when they are triggered by highly visible events, coupled with strong leadership and large movements to take advantage of them.

Moreover, even when there is a crisis, there has to be an agreed-upon paradigm for how to think about the issue.  We do not have that:

• We do not have a consensus on how to resolve the healthcare crisis.
• We want everyone to have health insurance, but are not prepared to take the hard steps to penalize those who refuse to buy it.
• We support the goals of unlimited patient provider choice, unlimited access, very limited penalties for irresponsible and destructive patient behavior, and the belief that more access to care always yields better care and better health.
• We know that unlimited access and unlimited choice yield bad economics, but do not fully understand that most of the cost of healthcare comes from preventable and controllable decisions that should be penalized more; and
• We have exceptionally little understanding of the degree to which more care often means worse care and poorer health.

Our system will simultaneously improve in certain respects and deteriorate in many others for the next decade, but I am confident that it will settle into a complex, multi-segmented system like what I have described.

On the morning of September 11, 2001, I was in Pitney Bowes Stamford Main Plant building, having a difficult meeting with a group of factory employees, explaining why we needed to outsource much of the low-end product then manufactured in that facility.

I received a call a little bit after 9 am from Karen Garrison, then President of Pitney Bowes Management Services, who had seen the video footage of an airplane crashing into the first of the World Trade Center buildings.  I immediately began to return to the World Headquarters, a few blocks away. During my brief trip back to the Headquarters, an airplane crashed into the second World Trade Center building, One World Trade Center.

As I tried to absorb what had happened, I reflected on the fact that my wife Joyce had worked at One World Trade Center when we first lived in New York City in 1981 and 1982, and that I had been in the building many times over the years to visit customers.  By 10 am that morning, we had set up a command center in our boardroom, from which I ran the company for two weeks after that.  I left the boardroom many times, to address groups of employees both in the Headquarters and in other buildings, and to visit our New York offices.

Pitney Bowes lost four employees, all members of the Pitney Bowes Management Services team, all of who were serving clients on the upper floors of One World Trade Center.  All four employees were initially directed to leave the building, but returned back to their work areas between the times the first and second buildings were hit.  They felt a need to be with their customers and to do the work assigned to them.  They paid with their lives.  One of them, David Vargas, left two teenage children behind, and I met with his widow and the children at the memorial service that took place several days later.

It was the best and worst of times.  We had profound problems comforting those grieving about the loss of loved ones.  Dr. Brent Pawlecki, then our Associate Medical Director, took the initiative to create a compassion center at our Midtown New York offices and staff it for several weeks to comfort not only our employees, who had lost colleagues, but their families and our customers, who had also lost colleagues.  His efforts were recognized and celebrated in an NBC special report a few days after 9/11.

We also had to locate our missing employees, which was more difficult than it first appeared, because many did not have cell phones or dedicated land lines, and lived in remote parts of New York and its suburbs. The surest sign that the four employees lost their lives occurred when they failed to come in on Friday, September 14, to collect their paychecks.  One of our top-rated sales professionals was scheduled to visit a client on an upper floor of one of the buildings, and we feared that he had lost his life when we did not hear from him later that day.  We were relieved when his manager found him at home the next day.  He had cancelled the appointment the morning of September 11 because of a dental emergency.

We had challenges getting remote employees paid all over the country, because the airplanes that normally transported their checks were unable to fly to their destinations between September 11 and 17. We knew that many of our employees lived from paycheck to paycheck, so getting them paid on them was critical. We had employees stranded all over the world who could not get back to the United States, and some who drove from as far away as San Diego within the United States to return to their homes in Connecticut.

We had to deal with the abject fear our employees felt about the future, to enable us to keep doing our business.  We came through all of this stronger, more united, and more confident of our ability to cope with crises, which turned out to be important, given the fact that the anthrax bioterrorism crisis hit us a few weeks later and preoccupied us during October and early November, 2001.

Several permanent changes happened to our business and our industry as a result of both 9/11 and the anthrax crisis that followed it:

• We communicated more frequently and in more depth with employees, because we learned about the value of frequent communications as a result of the daily voicemails we released during these crises.  We created a weekly Power Talk process in early 2002. Through it, we delivered a 4-minute message on a subject of interest every week.  Initially, I delivered every message, but over the years, we had different executives deliver messages of broad importance to the company.  Emails are very powerful communications tools as well, so we took the same message and emailed it simultaneously to employees on our email system.  We never forgot that our intensive communications processes helped us weather what could have been a devastating set of crises.
• We developed a sophisticated crisis management capability to deal not only with terrorist events and reputational risk issues like anthrax, but also with hurricanes, floods, earthquakes, and other natural disasters.  That capability was tested and improved upon many times, with such events as the 2003 Northeastern U.S. power outage, the 2004 Tsunami, and, obviously, the most challenging event, Hurricane Katrina in 2005.
• We had created a charitable foundation to provide temporary assistance for employees devastated by Hurricane Andrew in 1993.  We replenished that Foundation’s assets, which came in very handy in 2005, when we had to help dozens of employees affected by Hurricane Katrina.
• We recognized that, in times of disaster, traditional communication channels break down rapidly.  Landlines become harder to use, especially toll-free lines; cell phone systems become unusable; Internet service via email becomes harder to us.  Face-to-face communications become more difficult. We even experimented with walkie-talkies in offices likely to have hurricane-driven evacuations.  We also found that a toll-free number got overloaded, so we offered an additional toll line for employees to get through to us.
• As mailing industry leaders, the CEOs of the major companies came together in the Fall of 2001 to request that Congress assist the Postal Service because of the huge losses it experienced both during the aftermath of 9/11 and the anthrax crisis.  The unified industry became a significant advocacy force for comprehensive postal reform that occurred five years later.
• The Postal Service had used commercial aircraft to deliver mail long distances.  When commercial air travel was suspended for six days, the Postal Service decided to enter into a partnership with FedEx to have FedEx use its planes to do long haul mail transport, which was more reliable and secure. The partnership became a model for other partnership relationships into which the Postal Service entered over the past decade, and which helped it immensely.
• Pitney Bowes and other companies started to enhance their risk management processes to address a broader range of risks and opportunities.  We became far more systematic in assessing reputational, political and environmental risks.

Most of all, 9/11 was a time in which everyone pulled together and got out of their siloes and parochial views of the world.  They thought of themselves in terms of what was needed to achieve the greater good. They rose to the highest levels of compassion and love.

We need to find a way to recreate that feeling without another tragedy like 9/11.

Sometimes, the influence of bad human decision making on the scope of a disaster is obvious: Hurricane Katrina would not have been anything more than just another bad Gulf Coast hurricane, had the levees protecting big portions of New Orleans not failed to protect the city against water damage.  The levees were not built to protect against Category 4 or 5 hurricanes, so a disaster of the type that happened was inevitable and experts were not surprised when it happened.  Experts warned of this kind of problem, but were ignored year after year. Nevertheless, most of the time, we forget the degree to which we can anticipate disasters and minimize their impact.

In 1991, after Hurricane Bob, which hit Long Island, the Eastern Connecticut coast, and Cape Cod very hard, the homeowners association of which I was a board member could not initially secure a renewal of our property and casualty insurance policy from any carrier.  National media carried stories about horrific beach erosion in the 4-mile stretch of beach, beginning half a mile west of us.  The beach and the houses on it had been completely washed away by both the hurricane and a nor’easter that followed it a few weeks later.  The media story was that nature was getting more ferocious over time, and people had to stop building homes on the beach.

While it may be good public policy to provide better beach access for all residents of a beachfront community and for visitors, and to reduce the building of private homes on the beach, the story was wrong.  The beach erosion was not a result of nature’s fury, but of a misguided decision by the Suffolk County New York Supervisor some years before to refuse to pay the County’s share of a project to extend protective beach barriers for the last 4 miles of the barrier island.  The 4-mile stretch bore all the force of the ocean tides, instead of having it spread over the entire island.  Ferocious winds and tides destroyed the beach, but it was vulnerable to destruction, because of human error, a decision to leave the beach unprotected.

Similarly, power outages and flooding are usually a result of a number of human decisions.  In many communities, utilities are not permitted by homeowners to trim branches from trees on an appropriate schedule, with the result that those branches break off during storm, hit overhead power lines, and cut the lines.  Street flooding is usually a result of poor drainage from inadequately built or maintained roads.  Basement flooding is often the result of building codes that do not require adequate soil fill under the foundation of a house or other kind of building.  We discovered this when our basement flooded many times in the last decade, because our builder cut corners in having only four inches of soil fill, when best practice indicated that 12 inches of fill was the minimum desirable.  Trees are often uprooted and destroy or damage whatever they fall on because poor soil drainage erodes the soil that holds roots in place.

In the storm’s aftermath, we are seeing the consequences of decades of underinvestment in our commuter rail systems.  The commuter railroads were not  able to resume service as rapidly as the New York subways because they have suffered far more preventable damage.

Wind damage results from structures that are not built to withstand winds above a certain level of intensity, and items inadequately secured to the ground or not stored properly in anticipation of a storm become projectiles that destroy everything in their path. In the spring of 1979, Chicago experienced a freak 70-mile per hour windstorm one afternoon, with the result that a thick wooden restaurant sign hanging by two chains to the restaurant’s patio came loose and killed a pedestrian.

The 1906 San Francisco earthquake caused most of its fatalities because the fire department had not properly secured its water lines, so it was unable to get water out to extinguish some of the fires.  Similarly, communities often fail to think through how they will get rescue vehicles to stranded residents, which created many issues in the Gulf Coast areas after Hurricane Katrina.

We are better at responding to disasters today because of the intense focus on what went wrong with Hurricane Katrina, but the problems with our infrastructure and the underinvestment in rebuilding, maintaining, and renovating roads, bridges, tunnels, and buildings will continue to make the impact of natural disasters far worse than they need to be.

We need better ways to hold elected officials accountable for decisions they make that put us at risk, not immediately, but over time.  Since we do not know when “natural disasters” will hit, it is tempting to defer maintenance, repair, and renovation that will secure our facilities from damage, but insurance companies, bond rating agencies, and watchdogs acting on behalf of voters should do a better job warning us.  As citizens, we need to send strong messages to elected officials that using their office to redistribute wealth and income from taxpaying citizens to favored constituents, instead of using taxes to maintain and strengthen the assets for which they are responsible is wrong.

• The near-term insolvency of the Postal Service was created by a Congressional action in the 2006 Postal Reform legislation which required the Postal Service to prefund all its retiree benefit obligations over the first 10 years after the legislation passed.  Why?  Since the Postal Service is off-budget, and it was getting its overpayments into the federal pension system returned to it, the artificially fast prepayment was a budget-balancing gimmick.  The Congress should have made the Postal Service prefund the retiree benefit obligations the way any private sector company would do so: over the expected 30-40 year life of the obligations.
• The longer-term problems of the Postal Service are driven by rapid and deep declines in mail volumes.  The Postal Service needs to reduce its cost structure much faster.  There are many good ideas that have been proposed for years, but that have not been adopted, such as the relocation of retail postal functions into convenience stores and supermarkets.  However, the Congress and the White House have to step aside and let the Postal Service take some of these steps.
• The Postal Service wants to reduce mail deliveries from 6 to 5 days.  I am not convinced that this step can be taken without damaging the growth potential of certain categories of mail.  What the Postal Service needs to consider is whether it needs to do 6-day-a-week to every address.  Sweden has variable frequency delivery, with 5 days in urban areas, three days in remote mainland rural areas, and two days to remote islands.  The Postal Services needs to begin delineating differences between profitable urban delivery routes and unprofitable rural delivery routes.
• On the flip side, the Congress and the Postal Service need to consider whether pricing for mail originating or being delivered to remote areas should be priced the same as mail traveling a few city blocks.  Uniform pricing has always been seen as a core feature of a communication system on which Americans have depended for political discourse, educational content management, charitable purposes, and other important social causes.  The broad penetration of the Internet makes many of the needs for uniform pricing less compelling.  However, to the degree that we continue uniform pricing, it can be for certain categories of mail, with others starting to move toward distance and cost based pricing.

There are some opportunities for cost reduction or revenue enhancement Leonard did not discuss.  Also, his comments about European and other international postal services reflect a lack of understanding of the degree to which governments supported unprofitable non-core services undertaken by their national postal services.  DuetschePost, for example, entered many non-core businesses and lost money in most of them, including disastrous acquisitions of DHL and Airborne.  The U.S. government cannot afford to bail out the Postal Service as it dabbles in non-core businesses, loses money, and exits those businesses.

There are still many revenue opportunities in the core business which, although no one of them will address the insolvency issue, collectively can help the Postal Service dig out of the deep hole in which it finds itself:

• The Postal Service has failed to educate its huge small business base on the e-Commerce opportunities available from marketing over a longer distance provides it.  Businesses often miss opportunities to market their services directly to consumers far removed from their local catchment area, simply because they do not know how to market their products and services remotely.
• The Postal Services has also failed to help businesses that normally do not use the mail start to grow their business through highly targeted direct mail marketing.  At Pitney Bowes, we showcased a New York Japanese restaurant in an annual report several years ago that used direct mail, instead of delivery of flyers by its delivery personnel, to reach out to occasional customers and to potential new customers to grow its business.  The restaurant not only grew its own business, but also became a direct marketer for other restaurants.
• The Postal Service and the mailing industry should be advocating a movement from face-to-face retail for both government services and voting to the delivery of services by mail.  Passports, licenses, and vital records should arrive by mail, so that labor-intensive and highly inconvenient retail operations can be shut down or scaled back.
• The Postal Service should promote voting by mail, rather than face-to-face voting.  Oregon does all its voting by mail, and Washington, California, and several other states do a majority of voting by mail.  In these states, ballots are sent in the mail and returned by the voters.  The Northeastern and Southeastern states are still laggards in allowing voting by mail, but this can add several hundred million dollars a year to mail revenues.
• Finally, the biggest need for product manufacturers is to build direct relationships with the people who use their products.  The retailer typically “owns” the customer and knows how the customer is.  However, there is nothing to stop manufacturers from building a parallel relationship with those who buy or use their products.  Kraft did these extremely effectively through a combination of Internet and mail-based systems years ago.

Crises can be disasters, or they can give rise to innovation that strengthens an organization.  For the sake of the American people, it is my fondest wish that the U.S. Postal Service not let this crisis go to waste, and that Congressional and White House decision makers give the Postal Service the support it needs to innovate.

I had previously understood the excessive licensing requirements states impose on professions that can be available to people without 4-year college degrees. For example, I learned this past year that, in Connecticut, a person aspiring to cut hair at a beauty salon must take a course costing $20,000 for one year and pass a licensing exam.  While requiring barbers and beauticians to be licensed is a reasonable exercise of state regulation, because of the degree to which a beautician is handling and applying dangerous chemicals to their customers’ hair, scalp and face, I believe that there has to be a lower-cost way of preparing and qualifying individuals for this profession.

I thought the Connecticut example was extreme. I was wrong.  According to Mellor and Carpenter, whereas only 5% of all workers required government licenses to pursue their chosen occupation in the 1950’s, that figure is 33% today, according to University of Minnesota Professor Morris Kleiner.  Governments can justify licensing requirements for any job, based on the theory that consumers can get defrauded by someone pretending to have the ability to do a job, when he or she is not qualified.

However, there has to be a line drawn between jobs and professions that, if not regulated, create a serious risk to health and safety, and those that simply create a risk of claims of inadequate performance. For example, why would Florida, Nevada, Louisiana, and Washington, DC regulate interior designers?  There is no obvious health or safety risk to someone doing a bad interior design job.  In fact, given my wife’s and my experience with several interior designers, some of our worst experiences were with highly credentialed designers.  Interior design is a profession that depends on skills that are highly unlikely to be tested and measured through a credentialing process or improved through a mandated education or training system.  The best members of that profession have the ability to listen actively to clients and make recommendations that match client needs and preferences, soft skills that almost never emphasized in a training or education program.

In fact, as a general rule, education, training, and licensing requirements are generally inappropriate for professions that depend heavily on so-called “soft” skills, that is, interpersonal skills that heavily depend on the personal chemistry between the person practicing the profession and the people they serve.  For example, North Carolina regulates community association managers, a job that depends heavily on the ability of a manager to balance the needs of a diverse set of community stakeholders and to manage conflict.  Such a skill can be improved to some degree by courses in conflict management and negotiation, but the most effective community association managers are those with the predisposition to manage conflict in a constructive way.

For those professions or jobs that benefit from licensing, the question then becomes: how much regulation is needed and for what purposes?  If we go back to the 19^th century, the legal profession was one in which lawyers were trained through apprenticeships.  The advantage of an apprentice process is that it allowed an individual to get a foothold in the profession, to make a living, and to improve his or her skills over time to be ready to take on higher-value tasks when ready.  In virtually every profession, the licensed professional performs a mix of high and low skill tasks.

For example, when I started in legal practice in 1974, attorneys performed many tasks which, today, are performed by paralegals or even clerks or administrative assistants.  I was fortunate to be spared the drudgery of proofreading lengthy documents, a task that required someone of single-minded focus on document accuracy, as opposed to someone of exceptional skill and training.  Firms deployed attorneys for these tasks because they could get clients to pay for them, not because attorneys were needed.

Today, given the high and growing unemployment rate, we do not have the luxury of leaving these protectionist regulations untouched.  States need to be pressed to revisit every licensing requirement for every job and to modify, or even eliminate, these licensing requirements.

Why have these licensing requirements persisted in the face of common sense analyses that suggest that they should be eliminated or modified?  Licensing requirements create special interest groups of those who get the licenses and are overpaid for their work because of the artificial entry barriers those licensing requirements create.  Each of the special interest groups is organized, powerful, and single-minded, whereas those excluded from the profession are unorganized, lacking in power, and often not as committed to overcoming the entry barriers the government has created.

Our elected officials need the moral courage to take on every one of these special interests to create middle class jobs that are readily available for many people currently unemployed.  Moreover, we would probably find that, as more people enter these professions, the public would pay less for goods and services which carry artificially high prices because of the excessive labor costs built into them.

When governments, private insurers, and self-insured health plans try to drive drug prices down and, specifically, to convert patients from using generic drugs instead of branded drugs, there is a limit in terms of cost-saving opportunities available, without putting patients at risk.  To push cost savings beyond that point inevitably raises a huge risk of acquiring generic drugs priced at a level that does not optimize patient safety.

We cannot solve our health care cost crisis entirely primarily by driving prices down for drugs, supplies, devices, and medical services.  We have to reduce unnecessary usage of the health care system, and to drive the healthier behaviors that are the most sustainable way of reducing health care system usage.

Publicly held businesses and governments under stress for excessive costs often have the tendency to flex their muscles in procurement processes to demonstrate their ability to save money.  The unit cost savings are visible, the savings opportunities are often immediate, and the purchasers can present themselves as fiscally responsible.  Moreover, it is far more comfortable for payers to beat up on suppliers through the procurement process than to deal with the messy questions associated with inappropriate usage of the health care system, or driving people to engage in healthier behaviors.

There are two things wrong with relying on procurement strategies as the primary cost reduction tool:

• Unless there are tight controls on what is purchased, cost reductions are often covered by sellers cutting corners in what they are providing, or reserving the right to charge for what had been given away.  Government contractors have mastered the process of low-balling initial contract price offers, and then making huge profits from “extras” which are inevitably required by the government at a later time.  The so-called savings are phony; they are merely costs that are deferred to a later time and are often higher than a more comprehensive competitive bid.
• The sellers who agree to accept lower prices and try to honor them according to their terms often find themselves unable to perform profitably.  Over time, the pool of sellers willing to bid on business that is consistently likely to be unprofitable shrinks.  Eventually, the purchaser has no competitive options.

In the pharmaceuticals context, the corner cutting can be fatal to patients, as was the case with heparin.  Although I obviously cannot know what happened in every health plan procurement negotiation, I would not be surprised that purchasers which drove a hard bargain on pricing for generic drugs created an environment in which the supply chain functions of pharmaceutical manufacturers attempted to acquire ingredients for the drug at a price that could not be supported with the extra cost of a tightly controlled supply system.

There are no “magic bullet” ways to take drug prices down beyond a certain point.  Major drug manufacturers are administratively inefficient; they spend excessively on marketing and sales; and they may still have less efficient research and development processes.  However, beyond a certain point, cost cutting will cause people in their organization to take actions that put processes at risk.

Employees of pharmaceutical companies are not excessively evil or reckless compared to other businesses or governments; this is true of every large organization.  Employees under severe pressure anywhere to cut costs make stupid and reckless decisions to keep their jobs.  They particularly cut costs in areas in which the consequences are less visible or more likely to appear at a later time, especially if they can transfer the risk to someone else.  They are unlikely to go after the most sustainable cost reductions, which involve messy structural reform of their organizations.

In the health care marketplace, this was illustrated particularly with the Johnson & Johnson manufacturing safety problem in the last few years.  Much of the publicity about that case demonstrated that the root cause was a culture that, over time, became excessively focused on cost cutting at the risk of patient safety.

Relative to other areas of health care, the same principle applies: there is no free lunch when costs are cut excessively in the procurement space.  One major firm was very happy with the fact that its insurance plan administrator significantly reduced the payments due to physicians, hospitals, and other healthcare providers. The plan administrator secured a very good long-term contract because it presented itself as having a better ability than other administrators to negotiate prices with providers.

Unfortunately for the Company, the consequence of this hardball negotiation process was that many providers left the network and stopped treating patients with whom they had long-term relationships.  As a result, the Company lost in two ways:

• Some patients stayed with these providers, who were now out of the network and were charging much higher prices.  Even with lower reimbursement percentages for out-of-network care, the Company still paid more.  Out-of-network costs shot up.
• Some patients changed providers, received disruptive and suboptimal care, and were very unhappy with the Company for causing this to happen.

As a CEO, I was never comfortable with strategies based predominantly on procurement-based price reductions.  They tended to work for 2-3 years, and then fell apart.  The better strategy was to work with vendor-partners to get better products and services through sustainable cost reductions.  For example, I always liked solutions in which parts were re-engineered or packaging was reduced, or a less expensive, but equally reliable, way to ship the product was found.  These kinds of cost reductions were more challenging, but they worked.  Cost reductions based solely on price concessions struck me as a very lazy way to reduce costs.  I supported them, but, to a limited degree and for a limited period of time.

Ultimately, the challenges of reducing health care costs will require us to make deep and broad structural changes on how we live our lives, and allocate societal resources.  The move from branded to generic drugs is a small step in health care cost reduction, but, like every other, it has limited value and has to be managed with great care.

Nevertheless, I grew up reading about historical figures like the Roman leader Cincinnatus who left his farm to serve in a leadership position, fulfilled his public responsibilities, and then returned as quickly as possible to his farm and his family.  George Washington was admired because he completed his two presidential terms, and then went back to his Virginia home.  Both of these leaders represented a set of values which placed public service above personal ambition.

My dad was a member of the International Typographers Union, which was noteworthy because it had term limits for union leaders.  I have also admired great companies like UPS because they have had implicit terms limits by enforcing early retirement rules for CEOs. I attempted to stay consistent with these values by retiring well before I could get drawn into believing that Pitney Bowes could not survive without me.

Public service has changed from a temporary service environment in which a very broad range of people are drawn upon for their expertise, their diverse perspectives, and their vision of the common good, to one in which a smaller, more ideologically rigid, less diverse, and more partisan group of people have established themselves as part of a relatively permanent government bureaucracy.  This is true of elected officials, appointed officials, government union leaders, and civil service managers.

Government at all levels has become like joining a fraternity in which there are vicious hazing rituals, exclusionary admission practices, and an isolation from people outside the fraternity once a member gets admitted.

This did not happen at once, but it’s time to take a brief look at where we are today.

Running for office or being considered for appointive office

A candidate for elective office opens himself or herself to every possible form of disparagement.  We need to be held accountable for our decisions, but the ability of opponents to disparage us or any member of our immediate and extended families without any accountability is outrageous.

This is an unintended consequence of a 1964 U.S. Supreme Court decision Sullivan vs. The New York Times, in which a plaintiff lost a defamation case because the Supreme Court held that, in the pursuit of free speech, defamation claims by “public figures” were subject to a much higher standard than claims by ordinary citizens. This much higher standard of liability made it almost impossible for public figures to sue those who disparaged them falsely.

The ability to “terrorize” someone running for office or being appointed to an office is far greater than ever.  The First Amendment framers could not fathom capturing an individual’s random remark with a digital video camera, posting it globally and permanently within seconds, and building a disparagement campaign around it.  In fact, dirty tricksters follow candidates to provoke them into intemperate remarks to post them online.

We have also created such a complex set of disclosure, campaign finance, and election laws that we have increased the cost of running a campaign exponentially, or even the cost of being considered for an appointive office. Incomplete, false, or misleading disclosures, especially of financial data, have been criminalized. What is disclosed becomes the raw material for further disparagement.

Much character assassination that occurs at the national, state, and local levels relative to government officials is a kind of violence, or, if not a directly violent act, an invitation to violence by others.

Throughout history, democratic societies have been served by the collective wisdom of imperfect people in an imperfect, but effective, system of government.  I worry about the effectiveness of a person whose life is so devoid of imperfections that he or she could pass through every conceivable public screen.

Being an elected or appointed government official

Even if an individual survives the rigors of either a political campaign or a high-stakes appointment process, we have made many incremental decisions that have crippled the ability of government officials to have a significant impact on the entities they lead.  Our civil service system, combined with collective bargaining for a sizable percentage of the government workforces, has created a long-term set of stakeholders that will outlast any elected or appointed official.

I strongly support civil service. The most compelling logic for civil service reform was to insure that government had a system for selecting as many jobs as possible on the basis of merit, not political affiliation, and that there be knowledge and experience continuity in the middle and first-line management ranks during senior leadership transitions.

The key to making civil service systems effective is that the system be designed to retain people with good experience, knowledge, and judgment, not to protect incompetent or even immoral managers from being terminated.  It is virtually impossible to take effective disciplinary action in any reasonable period of time against a non-performing manager in most governments.

If an elected or appointive official is blessed with competent and motivated people to make decisions and carry them out, that leadership cadre has very difficult obstacles in getting anything done. Requirements for open meetings significantly reduce candor required for good decision making processes to take place.  We do not share publicly every half-formed thought we have, especially on important issue.  We have private conversations with people until we have a good sense of what we want to say publicly.  The notion that even preliminary discussions must be in public is an over-reaction to the Nixon White House crimes, not a rational way to run government.

When I was growing up, we used to hear about decisions being made in “smoke-filled back rooms.”  Today, the back rooms may no longer be “smoke-filled,” but they exist, and they take place outside the regulatory reach of a government meeting.   Even in government, there needs to be a zone of privacy in which leaders can have small conversations in which they can formulate their policies and actions.

The other craziness with government is the obsession with process for its own sake.  Back in 1991 through 1993, I chaired a public-private task force appointed by Governor Lowell Weicker to implement the 1990 Clean Air Act amendments for large Connecticut-based employers.  The task force was filled with the best-qualified people, and it functioned very efficiently and completed its work within a relatively short period of time.

The task forces in which I participated over the last three years were larger, more cumbersome, and much less efficient or effective.  There was a much higher level of distrust and many more stakeholders felt that they had to be represented.  The groups became larger and the meetings degenerated from problem-analysis and problem-solving sessions to a series of speeches made by each participant.  The participants no longer saw themselves focused on the best outcome for the public, but for the group they represented and on whose behalf they were selected.

The other set of issues that make public service challenging were those associated with getting changes made.  We have made so many more processes subject to elaborate reviews, comments, and litigation challenges that it is extremely difficult to get anything done.

For example, we cannot renovate a bridge or road or rebuild it, even when it desperately needs renovation, without spending years studying the problem.  There has been a broad consensus for at least two decades, that the Tappan Zee Bridge over the Hudson River desperately needs rebuilding, but the processes for getting the work done are hopelessly complex and time-consuming.

We also overcomplicate what should be simple processes.  When I chaired the Governor’s Commission for Reforming the Connecticut Department of Transportation, I discovered that the State had made the hiring of an administrative assistant so complicated that the hiring manager had to interview all 28 qualified candidates, rather than the top 3-5 candidates.

Getting rid of non-performers is equally cumbersome.  My Reform Commission members who ran government agencies told me that the average time to terminate a non-performing civil service employee was 18 months, if the agency did everything perfectly.  This is ridiculous.

How do we solve these problems?

• Recognizing the problem is a start.  When good people are discouraged from joining public service, something is wrong.
• We should relook at every law, regulation, process, and procedure to determine whether it serves its intended purpose, and, if so, whether there are excessive side effects.
• We probably need to relook at the First Amendment, as it relates to the way the Internet and modern digital media amplify the effects of false statements, or even true, but misleading, statements.
• We need to retain the civil service system, but assess whether there is a point beyond which the protection of employment and of existing processes does not serve the ultimate merit-based system goal.
• We need a nationwide effort led by the President to rebuild trust among Americans.  Many dysfunctional processes are built on distrust.
• We need to reexamine campaign finance, election, and lobbying laws to see if they violate the rights of Americans to exercise their First Amendment rights.  The Supreme Court case last year that struck down some campaign finance laws is a good start in provoking a national debate on the harmful effects of these laws.
• We need to reduce the criminally punishable financial disclosure and background questionnaire laws that discourage public service.