Viewpoint: We can reduce government waste, fraud and abuse–just by not being stupid

This article originally appeared at Forbes and has been republished here with permission of the author.

Charlie Munger, financial wizard and vice-chairman of Berkshire Hathaway, once remarked to me, “Warren [Buffett] and I made a lot of money just by not being stupid.” I can’t think of a better strategy for reducing waste and abuse in government. President-elect Trump, take notice.

I encountered one ill-conceived, counter-productive boondoggle when I headed the Food and Drug Administration’s Office of Biotechnology, a lean operation with a half-dozen excellent professionals and support staff. I was asked by a senior agency administrator to take on an “underprivileged” Washington D.C. high-school senior who would work part-time, her salary paid by a federal jobs program. I didn’t really need another file clerk or secretary’s helper, and I had selected my existing staff carefully for their motivation and competence, so I demurred. But the administrator pressed me, saying she needed to place a certain number, in order to “make the agency’s statistics look good.” Finally, after she promised me a highly motivated, straight-A student, I agreed.

But an A student from a Washington D.C. high school was less than I bargained for. “Mandy” couldn’t spell or fill out forms or answer the phone correctly and took an hour to deliver an envelope elsewhere in our building. She spent most of her office time playing computer games or gossiping with other participants in the jobs program. Mandy’s deficiencies were distracting and disruptive to everyone else in the office. The staff’s efforts to train her were met with sullenness and “attitude.” I noticed that the others in the office began to frown while Mandy was around.

Then Mandy got pregnant. The only difference in her performance was that she spent more time talking on the phone to her boyfriend.

When I complained to our administrator that the experiment had been a failure and that Mandy had to go, she responded that it might look as though I was firing Mandy because she had become pregnant, which would both “look bad” and “compromise the agency’s statistics.”

I was disgruntled, but I relented.

For another few months, my colleagues and I continued our futile efforts to enhance Mandy’s skills. The frowns deepened.

Finally, Mandy herself provided the solution to my dilemma.

One afternoon, my secretary came into my office, closed the door and told me that an audit had revealed that Mandy was sending notes to her friends using our FedEx pre-paid envelopes. I thanked her, gritted my teeth, and telephoned the administrator. I told her that if Mandy showed up in my office again, I would call the FBI and report the theft of government property.

Mandy was never seen, heard from or mentioned again.

My experience was similar to that of many other FDA managers. These kids lacked self-discipline and a work ethic and resisted our best efforts to impart them. They showed no curiosity or initiative, let alone gratitude. Their presence actually detracted from the efficiency of the government (such as it was). But the bean counters needed to “make the numbers look good.”

The question that the incoming senior officials in the Trump administration should be asking is how wisely the relevant federal agencies are using their existing resources, and whether their priorities make sense. For example, they should be questioning programs like CDC’s “community transformation grants,” which were established by the Obamacare legislation and which have dispensed more than half a billion dollars over the past five years for projects like “increasing access to healthy foods by supporting local farmers and developing neighborhood grocery stores,” and “promoting improvements in sidewalks and street lighting to make it safe and easy for people to walk and ride bikes.”

Dr. Francis Collins, the director of the National Institutes of Health, complained during the Ebola outbreak that a decade of stagnant spending has “slowed down” research across the board and as a result, the research community has fallen behind on preventing and treating lethal infections. “NIH has been working on Ebola vaccines since 2001…Frankly, if we had not gone through our 10-year slide in research support, we probably would have had a vaccine in time for this that would’ve gone through clinical trials and would have been ready.”

If it’s true that insufficient resources are the reason for the lack of an Ebola vaccine (and, more recently, a Zika virus vaccine), the fault is shared by Collins himself, who has headed the NIH for more than seven years, and the Congress. As Collins knows well, all research carried out within or supported by NIH is not equal, and the projects funded by its National Center for Complementary and Integrative Health (NCCIH)–which was in the first place the brainchild not of scientists but of politicians–are clearly a weak link.

NCCIH’s mission is “to define, through rigorous scientific investigation, the usefulness and safety of complementary and alternative medicine interventions and their roles in improving health and health care.”  But the current system of peer-review permits the funding of many projects that are trivial, and almost all of the interventions tested have proven to be worthless. For example, a study supported by the center found that cranberry juice cocktail was no better than placebo at preventing recurring urinary tract infections. Other studies funded by the Center include, “Metabolic and Immunologic Effects of Meditation,” “Long-Term Chamomile Therapy of Generalized Anxiety Disorder,” and “Restorative Yoga for Therapy of the Metabolic Syndrome.” (In fairness, the NCCIH-funded research studies published last year seem a cut above those of the past, although few appeared in prestigious journals.)

It’s true that silly-sounding projects are sometimes valuable, but much of the “research” funded by NCCIH, to the tune of $130 million annually, often has been an affront to the NIH and NIH-funded investigators who are at the cutting edge of their disciplines but face increasing difficulty getting federal funding even for studies that are highly ranked on the basis of scientific merit. In Fiscal Year 2014, the percentage of investigator-initiated research grant proposals that were funded by NIH was a dismal 17 percent.

Why, then, has NIH Director Collins been colluding in the funding of second- and third-rate science instead of additional research that could lead to the discovery of targets for new antibiotics or to therapies for Alzheimer’s disease and ALS? Instead of making tough choices, he has chosen to cry poor, a common posture among the leaders of the nation’s scientific community. In a recent editorial in the journal Science, the president of the American Association for the Advancement of Science and former congressman Rush Holt (D-NJ) called for Congress to “make the investments that will pay large dividends: public and private scientific research, education in science and engineering, and infrastructure projects to support scientific growth.”

The 20th Century Cures Act, signed by President Obama on Tuesday, did just that, providing $4.8 billion of new money for biomedical research, but without any additional adult supervision over how it will be spent.

As an alumnus of NIH, where I was a postodoctoral fellow, and a long-time lab rat, I am an enthusiastic supporter of basic research–but we need more judicious expenditure of research funds. Much federal funded research will not, in fact, pay Holt’s “large dividends,” but simply funds cottage industries such as bioethics and the social and behavioral sciences. Read on.

The National Science Foundation is, if anything, even worse at setting priorities than CDC and NIH. Its politically correct Social, Behavioral and Economic Sciences Directorate is completely out of control, funding studies of things like how to ride a bike; when dogs became man’s best friend; whether political views are genetically predetermined; whether parents choose trendy baby names; the best time to buy a ticket to a sold out sporting event; and why the same teams always seem to dominate the NCAA basketball playoffs.

The squandering of research funds particularly shortchanges inexperienced laboratory scientists who do not have an extensive record of achievement (to say nothing of being unfair to taxpayers). Bruce Alberts, the editor of the journal Science and the former president of the National Academy of Sciences, wrote in a 2011 editorial, “There is an ominous sense of a major crisis brewing. Budget realities have begun to constrain scientific progress across the board, with an especially heavy impact on the careers of young scientists.” Given that technological innovation based on basic science is the lifeblood of American innovation, Alberts was right to worry.

Dubious research funding is the least of the feds’ problems. The nation’s most important regulatory agencies have longstanding severe problems and lack accountability. The FDA conducted a 22-year review of an obviously harmless, fast-growing genetically engineered farmed salmon that could have been an inexpensive source of high-quality protein; that absurd delay in approval virtually eliminated an entire sector of biotechnology, genetically engineered food animals. In addition, the FDA unnecessarily delayed for five years a genetically engineered variety of the mosquito that transmits Zika virus.

The EPA is worse. Much worse. The EPA is the prototype of agencies that, largely driven by politics, spend more and more to address smaller and smaller risks, and they do it poorly. In one analysis by the Office of Management and Budget, of the 30 least cost-effective regulations throughout the government, the EPA had imposed no fewer than 17. For example, the agency’s restrictions on the disposal of land that contains certain wastes prevent 0.59 cancer cases per year–about three cases every five years–and avoid $20 million in property damage, at an annual cost of $194 to $219 million.

Also, perversely, the very act of removing asbestos from existing In his excellent book Breaking the Vicious Circle, written shortly before he was appointed to the U.S. Supreme Court, Stephen Breyer cited another, similar example of expensive, non-cost-effective regulation by the EPA: a ban on asbestos pipe, shingles, coating, and paper, which the most optimistic estimates suggested would prevent seven or eight premature deaths over 13 years–at a cost of approximately a quarter of a billion dollars.

He observed that such a vast expenditure would cause more deaths than it would prevent from the asbestos exposure, simply by reducing the resources available for other public amenities. Also, perversely, the very act of removing asbestos from existing structures poses greater risk from asbestos than simply leaving it where it is: During removal, long-dormant asbestos fibers are spread into the ambient air, where they expose workers and bystanders to heightened risk. When the EPA banned asbestos in 1989, it was already an old product whose risks and benefits were well understood. Nevertheless, political pressures from environmental activists pushed the EPA into making a decision that actually increased health risks.

Consider EPA’s fundamentally flawed approach to cleaning up toxic wastes. “Superfund” (officially the Comprehensive Environmental Response, Compensation, and Liability Act) is an ongoing EPA program intended to clean up and reduce the risk of toxic waste sites. It was originally conceived as a short-term project—$1.6 billion over five years to clean up some 400 sites (by law, at least one per state and, not coincidentally, about one per congressional district). But it has grown into one of the nation’s largest public works projects: more than $35 billion spent on about 1,300 sites.

How could cleaning up toxic waste sites not be a good thing? Well, various studies have attempted to evaluate the effects of Superfund’s massive and costly cleanups, but the results are equivocal. Putting that another way, after the expenditure of tens of billions of dollars, no beneficial results have been demonstrated. On the other hand, Superfund projects have caused a great deal of harm.

University of California economics professor J. Paul Leigh has analyzed the occupational hazards of environmental cleanup projects and concluded that the risk of fatality to the average cleanup worker a dump-truck driver involved in a collision or a laborer run over by a bulldozer, for example—is considerably greater than the cancer risks to individual residents that might result from exposures to unremediated sites. (And consider that cancer risks are theoretical estimates over many years or decades, while worksite fatalities occur during the much shorter time of the cleanup.)

Even former EPA administrator William Reilly admitted that Superfund’s risk-assessment paradigms are flawed. In a speech at Stanford University while a visiting lecturer, he discussed the excessive costs of basing cleanups on exaggerated worst-case scenarios:

The risks [Superfund] addresses are worst-case, hypothetical present and future risks to the maximum exposed individual, i.e., one who each day consumes two liters of water contaminated by hazardous waste. The program at one time aimed to achieve a risk range in its cleanups adequate to protect the child who regularly ate liters of dirt…And it formerly assumed that all sites, once cleaned up, would be used for residential development, even though many lie within industrial zones. Some of these assumptions have driven clean-up costs to stratospheric levels and, together with liabilities associated with Superfund sites, have resulted in inner-city sites suitable for redevelopment remaining derelict and unproductive.

Justice Breyer also addressed in his book a related issue–the EPA’s counterproductive efforts to eliminate the “last 10 percent” of risk from a substance or activity, noting that it involves “high cost, devotion of considerable agency resources, large legal fees, and endless argument,” with only limited, incremental benefit. Breyer quotes an EPA official as observing that “about 95 percent of the toxic material could be removed from [Superfund] waste sites in a few months, but years are spent trying to remove the last little bit.” Moreover, overly stringent rules are also more likely to be challenged in court and overturned on judicial review.

Another example of flawed decision-making at the EPA was the imposition of overly stringent ambient air standards under the Clean Air Act. Clean air is desirable, of course, but an EPA rule finalized in 2012 that created new emissions standards for coal- and oil-fired electric utilities was ill-conceived. According to an analysis by Diane Katz and James Gattuso of the Heritage Foundation:

The benefits are highly questionable, with the vast majority being unrelated to the emissions targeted by the regulation. The costs, however, are certain: an estimated $9.6 billion annually. The regulations will produce a significant loss of electricity generating capacity, which [will] undermine energy reliability and raise energy costs across the entire economy.

The most recent travesty is the EPA’s new regulations on methane emissions, which have elicited more than a dozen legal challenges. The regulations, which are based on dubious data and driven more by politics than science, would bring the American energy revolution to a halt, devastating not only the economy but also the environment.

EPA has long been a rogue, irrational, corrupt bureaucracy in which the inmates run the asylum. But systematic problems are widespread in the federal government; excesses, dysfunction and malfeasance at the IRS, VA, USDA, National Labor Relations Board and Department of Justice, to name just a few examples, are legion. In a Wall Street Journalcolumn this week, Bill McGurn condemned the government’s “soft despotism”: “This is the unelected and increasingly assertive class that populates our federal bureaucracies and substitutes rule by regulation for the rule of law.”

Nobody should expect consistently flawless decision-making from massive federal bureaucracies, but if we approach federal spending as a blank slate and simply try not to be stupid—whether the subject is jobs programs, new weapons systems, environmental regulation or research funding—maybe Americans will become convinced that the system is at long last working in their best interest.

Henry I. Miller, a physician, is the Robert Wesson Fellow in Scientific Philosophy & Public Policy at Stanford University’s Hoover Institution.  He was the founding director of the FDA’s Office of Biotechnology. Follow him on Twitter @henryimiller.