• Inverted incentives. Prevention is 6-to-14x cheaper, but savings take decades. Budget cycles run annual. Officials are going to defer.

• Remove/Reduce the ability to defer. Cities that implemented automated dispatch means a detected pothole triggers a repair order without a human deciding whether to act.

• Institutions compound, mayors don’t. NYC’s system over the past 20 years got better across four administrations because each inherited what the last built. The machinery survives the election.

On March 15, 2026, a Saturday, more than 80 New York City Department of Transportation crews fanned out across all five boroughs starting at 6 a.m. and filled 7,200 potholes before the day was over. That is roughly a full week’s worth of repairs compressed into a single shift. A second five-borough blitz followed the next weekend. By mid-March, the city had repaired over 66,000 potholes since Mayor Zohran Mamdani took office on January 1, maintaining an average response time of about two days. And they were doing it in the worst pothole season in recent memory: 311 complaints were running roughly 33 percent above the same period in 2025, driven by what Commissioner Flynn described as an extended cold spell that caused potholes to form “all at the same time” once conditions finally thawed.

The numbers are impressive. But the numbers are not the point (in this case). The point is the bet Mamdani is placing; one most American mayors never would (FOR SOME REASON).

The conventional (and cliché) political playbook says mayors earn capital from new things. Bridge openings. Park dedications. Groundbreakings with hard hats and oversized scissors. Economists have a name for this tendency: the “ribbon-cutting bias,” describing the documented preference of political systems for new construction over maintenance. The logic is straightforward. Maintaining existing infrastructure is invisible, unglamorous, and generates no ceremony. Building something new gets your name on a plaque.

Mamdani is running the opposite experiment. His framing, “no problem too big, no task too small, no pothole too deep,” is not subtle, and it does not need to be. Eighty crews at dawn is the ceremony. The Saturday deployment schedule guarantees local news coverage, or at least crew-members’ TikTok videos. The real-time 311 dashboard is that oversized ribbon. The pothole count is a metric every voter understands. He is making maintenance visible, making it fast, and betting that mundane competence generates more durable political loyalty than any groundbreaking ever could.

And if that bet pays off in New York City, the implication for every other American city is uncomfortable. If Mamdani’s DOT can hold a two-day average response time under historically bad conditions, the question for every other mayor is pointed: what’s your excuse? Can you beat the city that can’t get a building permit processed in under six months?

I think the answer, for most cities, is that they could. They just haven’t.

Before we explain why, a few things to note. A 2015 audit by the New York City Comptroller found that DOT’s tracking system contained duplicate and triplicate entries that inflated reported repair counts. Whether those data quality problems have since been corrected is not established in available documentation. Every pothole figure in this article, from every administration, should be read with that finding in mind. Beyond the counting question, more than a quarter of pothole service requests were still listed as open, pending, or in progress at the time of a recent review, and Queens alone accounts for nearly half of the city’s 11,300-plus complaints. The two-day average masks a distribution with real tails. And on March 9, Jaikarran Seenarian died after his electric scooter struck a pothole on Liberty Avenue in Richmond Hill, Queens. Like always, be very wary of aggregate statistics, they do not capture the distribution of failures. A single unaddressed pothole has killed.

His roughly two-day average sits slightly above the Adams administration’s benchmark of 1.8 days, but maintaining that level of performance under a 33 percent demand increase is arguably the harder achievement from an ops standpoint, especially how nasty the winter storms were.

The caveats are real. The improvement is also real. And the question this article sets out to answer is not simply “why are there potholes?” but something harder: why do cities that know potholes are coming, know how to prevent them, and have the technology to fix them still fail, year after year, to get the problem under control? The answer is institutional. And NYC’s trajectory from unmeasured chaos to two-day response is the proof.

But first: how big is the problem we are actually talking about?

How Big Is This (Pot)hole?

Pothole damage costs American drivers more than the GDP of Iceland. A 2022 AAA survey put the figure at $26.5 billion in vehicle repairs in 2021 alone, roughly $600 per affected driver, with one in ten drivers sustaining damage severe enough to require a mechanic. Earlier AAA estimates from a multi-year survey had put the figure at around $3 billion annually. The nearly ninefold jump reflects both worsening road conditions and the rising cost of vehicle repairs, but even the lower estimate understates the problem, because it counts only the direct cost to drivers and ignores the costs borne by municipalities, transit systems, and taxpayers.

In New York City alone, potholes and road defects cost the city nearly $138 million in legal settlements for pedestrian injuries and vehicle damage over a six-year period, on top of an additional $7.3 million the city allocated to DOT in a single winter to address an extraordinary volume of repairs. Multiply that pattern across thousands of American municipalities and the total dwarfs any individual city’s budget.

The 2025 ASCE Report Card for America’s Infrastructure gave roads a D grade. As the Report Card documents, 39 percent of major U.S. roads remain in poor or mediocre condition, an improvement from 43 percent in 2020 but still a failing grade by any standard that takes driving seriously. Poor road conditions cost the average driver an estimated $1,400 per year in vehicle damage and time lost to delays.

But the backlog is worse than the current snapshot suggests. The Pew Charitable Trusts, in a careful 2025 analysis of Bureau of Economic Analysis data, found that state and local governments have accumulated a deferred maintenance liability of nearly $105 billion on roads and bridges since 2004. That number represents the cumulative gap between what governments spent on preservation and the value of annual depreciation. Even with nominally increasing dollar figures, real, inflation-adjusted road investment actually declined over the first two decades of this century. ASCE estimates that an additional $2.9 trillion is needed across 11 infrastructure sectors to reach a state of good repair, with a $684 billion gap specific to roads over the coming decade.

And the damage is not distributed evenly. Research from Mavis Tire finds that the Northeast experiences 60 percent more pothole-related tire repairs per location than shops in the South and West. The reason is physics: freeze-thaw cycles are the primary mechanism by which potholes form. Water penetrates pavement cracks, freezes, expands, and then thaws, progressively destroying the pavement structure from within. The Northeast and upper Midwest are structurally disadvantaged by their climate, and no technology fully overcomes that.

Most people’s response (especially suburban voters with pavement princesses) to numbers like these is to say the country needs to spend more on roads. That is true, to a point. It’s more about the distribution of the money being spent, rather than spending a total amount.

The Money Problem Is Real. Also Not Real.

The funding argument is correct as far as it goes. The most structurally important fact about American road funding is one that almost never appears in local news coverage of potholes: the federal gasoline tax has been frozen at 18.4 cents per gallon since October 1993, and it is not indexed to inflation. According to the Peter G. Peterson Foundation, that 18.4 cents is now worth roughly 45 percent less in real terms than when it was set. Wikipedia’s fuel tax tracking datashows that inflation has risen more than 122 percent since 1993 with the rate unchanged, and construction costs for roads have risen faster still. The net result, as Transportation for America documents, is that annual gas tax revenue declined by roughly $10 billion per year in real terms from 2010 to 2025. Congress has been patching the Highway Trust Fund with general revenue transfers, $53 billion over a recent five-year period according to Tax Notes, rather than raising the underlying tax.

Why does no one raise it? Before the whole breakdown in the Persian Gulf, increasing a visible per-gallon tax is politically costly in a way that deferred road maintenance is not, at least not until the pothole blows out a tire and the driver calls 311. The result is a revenue system built on a 1993 assumption that has decayed in real terms by more than half, funding a network of roads that costs multiples more to maintain than it did three decades ago.

The Infrastructure Investment and Jobs Act, signed in November 2021, provides approximately $500 billion for roads and bridge programs over five years, a 34 percent increase in surface transportation funding. That is substantial. It is also, given the scale of deferred maintenance, not sufficient to close the gap. And the IIJA is set to expire in September 2026, with reauthorization most likely going to be a no.

All of that is true. But even the money we do have goes to the wrong places.

The Congressional Budget Office has documented this: in 2022, 96 percent of the $52 billion the federal government spent on highways went to capital investment, meaning new construction and major rehabilitation of existing structures, rather than to routine operations and maintenance. That allocation has been typical since the 1950s. The federal government builds. States and localities maintain. And CBO’s reauthorization analysis makes the structural mismatch explicit: federal highway funds are restricted to “federal-aid highways,” the Interstate system and other major roads, leaving most local streets and roads entirely outside the program. The neighborhood streets where potholes cause daily misery are, by design, ineligible for the bulk of federal road dollars. Local roads account for 99 percent of road length in the United States and carry the majority of pothole complaints, yet they are maintained by counties and municipalities from their own general fund revenues, with no systematic federal support.

Even if Congress doubled highway funding tomorrow, most of the increase would flow to state DOTs for state highways. The potholes on your street would remain your city’s problem, funded from your city’s budget.

But spending does not reliably predict outcomes. High-spending cities have persistently terrible pothole records. Lower-spending cities with better-designed systems sometimes outperform them. If money were the binding constraint, that could not happen. Something else is going on.

The way American cities maintain roads is shaped by a set of interlocking incentive problems that make individually rational people choose collectively expensive, irrational outcomes, repeatedly, predictably, and at every level of government. This makes road spending one of the few places where we can cut budgets, and quality can improve. Reducing the amount of roads built, redirecting the existing budgets towards deferred maintenance, or even making roads more manageable by shrinking them.

Why Cities Keep Choosing the Most Expensive Option on the Menu

Consider the math. The Federal Highway Administration has documented that every dollar spent on preventive pavement preservation can save up to six dollars in future reconstruction costs. Michigan DOT research found that proactive maintenance is 14 times cheaper than reactive maintenance, and estimated that the state could save $700 million over eight years through systematic preventive intervention. A widely cited 1996 FHWA report puts preventive treatments at four to five times more cost-effective than allowing pavement to deteriorate to the point of reconstruction. Research summarized by the IMF and FREE Network finds that one dollar of deferred maintenance generates over four dollars in future repair costs, with some industry estimates running as high as seven to one over five years.

The physics compound the economics. Pavement deterioration is non-linear. It begins with cracks. Water (in addition to making new cracks) infiltrates the old cracks, freezes, expands, and destabilizes the road’s base layer. Traffic then removes the compromised asphalt in chunks. Each stage accelerates the next. A crack that costs pennies to seal becomes a pothole that costs dollars to patch and eventually a structural failure that costs thousands to reconstruct.

This isn’t new; most civil engineers will tell you this. That means every transportation agency in America is fully aware. And yet cities systematically choose cold-patch repairs, which last approximately one year, over permanent repairs that require excavating and replacing the base material. The same pothole gets filled three or four times before it is finally reconstructed at five to seven times the total cost of a single proper repair. The math is unambiguous. The behavior is economically irrational. So why does it persist?

Because the people who pay for prevention are not the people who benefit from it. Preventive treatments yield savings over a 10-to-20-year horizon. Municipal budget cycles run annual. The official who authorizes a $50,000 crack-sealing program today will not be in office, and may not even be in the same job, when the savings materialize. The official who lets roads deteriorate and then funds a high-visibility pothole-filling blitz gets to take credit immediately, on camera, with a crew and a truck behind them. The incentive structure is inverted. The economically rational choice and the politically rational choice point in opposite directions, and politics wins every time.

The ribbon-cutting bias runs deeper than preference for novelty. The IMF and FREE Network research identifies four compounding reasons that governments systematically underinvest in maintenance: political economy, meaning officials prefer projects that generate visible credit; fiscal, meaning maintenance budgets are cut first in lean years; institutional, meaning capital and operating budgets are managed separately (with FHWA’s own guidance actually drawing a sharp bureaucratic distinction between “preventive” and “corrective” maintenance that reinforces the silo); and informational, meaning asset condition data is often simply unavailable. The Economic Policy Institute adds a further wrinkle: because most states operate under balanced budget requirements, infrastructure maintenance is discretionary spending that gets squeezed during recessions, exactly when potholes proliferate most as neglected roads face winter freeze-thaw cycles and revenue-starved cities defer even routine crack-sealing. Maintenance spending is procyclical. Conditions are countercyclical. The system is designed to fail at the worst possible moment.

Even if these incentive problems were fixed, the underlying math of American development patterns would still make the task harder every year. Since World War II, American municipalities have systematically extended road infrastructure to accommodate new development, accepting near-term tax revenue in exchange for long-term maintenance obligations that the new revenue stream rarely covers. Strong Towns, the nonprofit led by Charles Marohn, has built an influential body of work arguing that this pattern constitutes a fiscal Ponzi scheme: cities use revenues from new growth to service the maintenance obligations of previous growth, requiring ever-more growth to remain solvent. The “Ponzi” framing is contested — Market Urbanism and Better Cities Project note that the empirical evidence is uneven, and City Journal has found the analysis broadly credible while questioning the label. But the core insight, that municipalities routinely assume maintenance liabilities well in excess of the tax revenue new development generates, is well-grounded. The practical consequence: total lane miles grow; maintenance budgets don’t. Consider Tulare, California, which told the state legislature in 2017 that, forced to prioritize arterial and collector roads due to funding shortfalls, its residential street network had declined from a Pavement Condition Index of 61 in 2010 to 53 in 2016, and the cost to restore it was growing exponentially with each year of deferral.

Fragmentation compounds everything else. On any given urban road, responsibility for the pavement may be shared among city, county, state, and private utility companies. The Federal Highway Administration’s manual on pavement utility cuts documents how utility excavations, in Washington, D.C., alone more than 5,000 per year at peak, structurally weaken adjacent pavement and dramatically shorten road lifespan. Utility companies are typically required to patch their cuts temporarily, but permanent restoration is often delayed years due to funding gaps. When the resulting pothole appears, it is frequently unclear which agency is responsible, and each agency has an interest in pointing to the other. Cities like Cleveland explicitly disclaim responsibility for utility-cut repairs, referring drivers back to the contractor. The driver, meanwhile, does not care whose jurisdiction the hole is in. They want the hole filled.

Former New York City DOT deputy commissioner Lou Riccio, speaking to Crain’s New York Business, captured the structural problem with characteristic directness: “New York City streets, in particular, get cut so often it’s like continuous open-heart surgery.” Every utility repair, every underground pipe, every cable installation reopens the street and disrupts freshly laid asphalt. Riccio estimated that the city needs at least 1,000 lane miles of resurfacing per year just to maintain current quality, and more than 1,200 to actually improve conditions.

The result is a system where no one bears the cost of what they defer. Federal policymakers who set gas tax rates do not drive on the local roads that deteriorate when revenues fail. State legislators who cut transportation budgets during recessions are not accountable for the potholes that appear three winters later. City officials who defer crack-sealing this fiscal year have moved on by the time the road requires full reconstruction. Utility companies that cut pavements are not on the hook for the premature road failure that follows. The FHWA and the Pew Charitable Trusts are right that better data and asset management plans would help. But the deeper problem is not informational. It is incentive-structural. Until that changes, the potholes will persist.

So what does it look like when a city breaks this pattern? The answer has less to do with technology than you might expect, and more to do with closing the loop between knowing about a problem and doing something about it.

The Cities That Broke the Pattern

In Chicago (to most people’s surprise), the Department of Transportation filled approximately 143,000 potholes in the first two months of 2024. February alone: over 93,000 potholes, a 63 percent increase over February 2023 and a 100 percent increase over February 2022. But the volume is not what makes Chicago interesting. What makes Chicago interesting is the systems design behind the volume.

The city’s 311 portal feeds directly into the open data platform at data.cityofchicago.org, allowing both internal management tracking and public transparency. Service requests are generally completed within seven days. The design choice that matters most: when a crew arrives to repair a 311-reported pothole, they do not fill that one hole and leave. They fill every pothole on the block. This sounds obvious. It is not. Most municipal repair systems dispatch crews to specific complaints. Chicago’s system dispatches them to streets, which means each complaint triggers a sweep that catches unreported defects. It is a force-multiplier that prevents the whack-a-mole dynamic of returning repeatedly to the same location. And because progress is publicly visible on a real-time dashboard, elected officials have a political incentive to maintain performance, not merely to claim it. Transparency creates accountability.

Pittsburgh illustrates a different facet of the same principle: that data quality itself can be a form of governance. Through the Bloomberg Philanthropies What Works Cities initiative, the city’s Department of Innovation and Performance built “Dashburgh,” a public data dashboard presenting 311 data broken down by neighborhood, providing granular accountability the city had never had before. But the more consequential innovation was internal. Pittsburgh’s Department of Public Works built analytical tools that automatically link multiple requests for the same pothole into a single ticket, flag requests that lack precise location details, and, most importantly, identify street segments that have been patched three or more times in two months. That last flag is the key. A street segment patched three times in eight weeks is not a street that needs patching. It is a street whose underlying pavement needs rehabilitation. The data system recognizes the pattern that human decision-making, under the pressure of daily complaint volume, reliably misses. This is the shift from reactive to systemic maintenance in microcosm: using information to detect when a short-term fix is producing long-run waste.

In Memphis, the breakthrough came from an unlikely place: the city’s transit buses. Working with Google Cloud partner SpringML, Memphis equipped its buses, which were already running cameras for traffic monitoring, with an AI system that analyzes road footage to detect and classify potholes. The model was trained on existing images, refined with data from higher-quality cameras, and then integrated directly with the city’s 311 work-order system so that confirmed potholes automatically generate a repair ticket. No human triage step. No 311 call required. The results: a 75 percent increase in potholes detected compared to prior manual methods, an estimated cost saving of approximately $20,000 per year, and 63,000 potholes repaired in one year. The lesson from Memphis is simple: use what you already have. The city did not buy a specialized detection fleet or hire a team of data scientists. It leveraged buses already running existing routes, cameras already in place, and cloud tools developed for other purposes. The marginal cost of detection approached zero.

Tarrant County, Texas pushed the detection-to-dispatch connection even further. The county integrated reports from Waze, the navigation application with over 140 million users that already allows drivers to flag road hazards, directly into its work-order system. A Waze pothole report auto-generates a maintenance dispatch with no human triage step. No 311 operator, no supervisor review, no scheduling queue. The bottleneck that plagues most municipal repair systems, the chain of handoffs between someone knowing about a pothole and someone doing something about it, is eliminated entirely.

And in Kansas City, Missouri, a pilot program tried to go one step further: not just closing the loop between detection and repair, but getting ahead of the problem entirely. The program combines traffic camera data, weather data, traffic volume, and pavement condition assessments to predict where potholes will form before they appear, with the goal of applying preventive sealant while the road is still intact. Chief Innovation Officer Bob Bennett reported early successes, with fewer potholes reported the following spring, though the sample was small and the causal mechanism difficult to isolate from weather variation. The program comes closest to addressing the root cause: spending money today where data suggest it is needed, rather than where the public happened to complain yesterday.

Bennett also happens to have the best one-liner in the pothole policy literature. Telling Governing magazine: “If we fail to fill the potholes or pick up the trash, we’re going to hear about it. Potholes are one of those things people kvetch about.” He is right that potholes generate immediate, visceral political pressure. The problem is that the political energy they generate goes to reactive speed, not systemic prevention. People kvetch about the pothole in front of their house. They do not kvetch about the crack-sealing program that was cut from the budget eighteen months ago.

What connects Chicago, Pittsburgh, Memphis, Tarrant County, and Kansas City? It is not any particular technology. Chicago uses spray injection trucks. Memphis uses machine learning. Tarrant County uses Waze. Pittsburgh uses internal analytics. Kansas City uses predictive modeling. The technologies are different. The underlying design principle is the same: each city closed a feedback loop connecting detection to dispatch to performance measurement to public visibility. Each removed the discretion and the delay that normally sit between knowing there is a problem and acting on it.

The absence is equally telling. Pennsylvania DOT’s AI road survey program, which partnered with RoadBotics to survey over 2,500 miles using computer vision, found that standardized defect scoring improved regional coordination and reduced inspection costs. But translating condition data into repair schedules required sustained institutional commitment that not every participating municipality provided. Better cameras produced better-documented backlogs unless someone rewired the institution between the camera and the crew.

Technology transfers. Institutions do not.

When did New York start to do something right?

Considering how people feel about the city, this is a bit of a shock. Yet, no city proves the compounding power of institutional investment more completely than New York (in this case), and no city’s story makes clearer that the improvement belongs to the institution, not to any single occupant of the mayor’s office. What Mamdani’s crews did on that Saturday in March 2026 was possible because of decisions made in 2007, 2010, 2014, and 2022 by people who could not have known they were building a system together.

Start at the floor. A 2002 audit by the New York City Comptroller found that DOT lacked any useful operational standard for pothole repair. The agency’s informal target was merely to close 65 percent of repair orders within 30 days. The auditors noted that the 30-day threshold was set arbitrarily, with no operational rationale. DOT could not explain why 30 days rather than 15, the number that actually mattered, since NYC Administrative Code Section 7-201(c)(2)shields the city from civil liability only if potholes are repaired within 15 days of complaint. The tracking system was unreliable. Repair counts were inflated by duplicates and triplicates. There were no written policies or procedures governing the work. This was the institutional floor: roughly 100,000 potholes filled per year, by a count that could not be trusted, on a timeline the agency could not reliably measure.

Michael Bloomberg’s contribution to pothole management was primarily infrastructural rather than operational, and it is the kind of contribution that gets no credit at the time and turns out to be indispensable later. Three investments from his tenure shape everything that followed. First, the city had long operated one municipal asphalt plant at Hamilton Avenue in Brooklyn. Bloomberg opened a second plant in Queens in 2010, giving DOT the materials supply, and the independence from outside vendors, that makes large-scale blitz operations financially and logistically viable. NYC DOT is one of the rare urban agencies in the country that produces its own asphalt, and that structural asset remains central to every subsequent administration’s pothole story, including Mamdani’s. Second, in 2007 and 2008, Bloomberg launched the Street Conditions Observation Unit, or SCOUT, a team of inspectors deployed on three-wheeled scooters to traverse every one of the city’s 6,000 miles of streets at least once per month, reporting conditions via GPS-enabled devices linked directly to 311. As Gothamist reported at the time, Bloomberg’s framing was explicitly about shifting from reactive to proactive: “It’s government’s responsibility to find the problems and fix them, not to sit there and say ‘Duh we didn’t know.’” Third, Bloomberg’s DOT under Commissioner Janette Sadik-Khan launched “The Daily Pothole”, a public-facing blog tracking repair efforts in real time with maps and crew counts. Trivial by today’s standards. Significant at the time. It created a transparency norm around pothole performance that each subsequent administration has had to honor, escalate, or outrun.

And yet, for all of this institutional investment, the operational numbers barely moved during the Bloomberg years. A data science analysis by researchers at Lehman College examining 311 records found a mean repair time of approximately 4.7 days with a standard deviation of seven days, meaning the distribution had a very long right tail. The Adams administration’s own retrospective benchmarks Bloomberg at approximately 4.4 days average. By fiscal year 2015, a second Comptroller audit found the average at 5.6 days on local streets, with nearly 10 percent of complaints unresolved past the 15-day legal liability threshold. The infrastructure was better. The operations had not yet caught up.

Bill de Blasio came into office in a brutal pothole winter. By his own DOT’s count, 113,131 potholes had been patched by early 2014 before his comprehensive plan was even announced. But the move that mattered was not reactive. It was strategic. De Blasio shifted the city’s fundamental logic from patching potholes after they appeared to preventing them from forming in the first place. The centerpiece was a $1.6 billion commitment over ten years to resurface New York City’s streets. The theory of change was explicit: a freshly resurfaced street is less likely to develop potholes, meaning fewer complaints, fewer reactive repairs, and lower long-run costs. This is exactly the prevention-over-reaction economics that FHWA had documented for decades, applied at city scale for the first time.

It worked. Between 2014 and 2018, the de Blasio administration repaved 5,000 lane miles and drove pothole counts down by 44 percent. By the end of his tenure, DOT had resurfaced 8,356 lane miles total and filled more than 2 million potholes. He also invested in field operations technology: crews received tablets for one-touch, real-time tracking of work, replacing paper-based reporting with digital logistics that could route crews more efficiently. DOT introduced a warm-weather asphalt mix requiring less heat, reducing energy use and extending the paving season closer to year-round. Average response time fell from Bloomberg’s 4.4 days to approximately 3.4 days (though official 2021 releasesreport 3.83 days, suggesting the improvement concentrated in later years). But the 44 percent reduction in pothole formation arguably mattered more than the response-time improvement. Fewer holes means less demand on the repair system even at constant operational capacity.

Eric Adams inherited the prevention framework and operationalized it. By January 2025, his administration claimed an average response time of approximately 1.8 days, nearly a full day faster than de Blasio and more than twice as fast as Bloomberg. But the more revealing number was demand: 88,466 pothole complaints via 311 over the first three years of his administration, compared to 147,640 at the same point under de Blasio, a 40 percent reduction. The administration resurfaced an average of nearly 1,200 lane miles per year, right at the expert-estimated threshold Riccio identified, and consistently deployed 25 to 75 crews during pothole season. When Adams framed his 500,000th pothole milestone as filled “in half the time it used to take” because “proactive paving of 1,200 miles of lanes” cut pothole formation, that was the correct analytical framing. Improvement came from two compounding forces: faster dispatch and lower demand. Both were improving simultaneously.

Mamdani inherited a better system under harder conditions. Approximately two-day average response under 33 percent elevated demand. Over 66,000 potholes through mid-March. The blitz format itself, 80-plus crews in coordinated Saturday deployments, is not new; DOT’s own 2021 press releases from the de Blasio era describe the identical model. What Mamdani adds is not operational novelty. It is the political insight that maintenance, made visible and fast, can do the work that ribbon-cuttings do. Executive attention flows resources and accountability to operations that might otherwise drift. Whether that attention converts into structural improvement, specifically the 1,150 lane-miles resurfacing commitment for 2026 that represents the preventive investment rather than the reactive repair, is the unanswered question. And whether the response time can reach same-day is the unanswered dare.

Most of what drives these numbers is (again) institutional, not mayoral. Asphalt plants, crew systems, 311 integration, and resurfacing programs were built over decades and persist across administrations regardless of who occupies City Hall. The most important long-run metric is not response time but pothole formation rate, which is a function of resurfacing investment, utility excavation coordination, and pavement quality. Riccio’s description of “continuous open-heart surgery” captures a structural vulnerability that no blitz weekend can permanently fix. And all of this data is self-reported by agencies with strong incentives to report improvement. The one time an independent auditor looked carefully, in 2015, the numbers were inflated. We do not know if that problem has been corrected. The evidentiary gap we would most like to close is independent verification of DOT pothole counts, along with borough-level and complaint-source breakdowns that would let us assess the distribution of the response-time average, not just its mean.

What Works, What Is Coming, and the Gap That Is Not Technical

Every success story so far shares a principle: institutional design matters more than technology choice. But the technology is changing, some of it is promising, and understanding what is deployable now versus what remains speculative matters. The persistent question is whether any of it changes the institutional calculus or merely produces more polished documentation of the same dysfunction.

The most commercially mature technology is computer-vision road scanning. The basic model is straightforward: a smartphone or dash-mounted camera captures imagery at roughly 10-foot intervals as normal fleet vehicles run their routes. Images are GPS-tagged, uploaded to a cloud platform, and processed by neural networks that classify defects across a spectrum from hairline cracks to full-depth potholes, producing a color-coded condition map that feeds directly into maintenance management software. Vialytics, a German-American platform, now supports over 600 municipalities and recognizes 15 damage classes; case studies from municipalities including North Tonawanda and Metuchen document crews shifting from reactive patching to planned maintenance after a single survey drive. RoadBotics, now a Michelin company, partnered with the Pennsylvania Department of Transportation to survey more than 2,500 miles using AI-powered analysis, allowing 15-plus municipalities to adopt standardized defect scoring and compare conditions on a common scale. The program was expanded following strong results.

On the repair side, two methods significantly outperform the traditional throw-and-roll approach that remains standard in most cities. Infrared pothole repair uses infrared panels to heat existing asphalt to a workable state without burning it, allowing new hot-mix material to blend seamlessly with the old surface. The result is a seamless patch with no cold joints, eliminating the primary failure mode of conventional patching: water infiltration through seam edges. Repairs take under 20 minutes, and the recycling of existing asphalt reduces both material costs and environmental impact. Ohio DOT research comparing three patching methods found that infrared patches had significantly longer expected lifespans than throw-and-roll or spray injection, and proved more cost-effective for winter patching specifically. The limitation is not technical but organizational: the equipment requires upfront investment, the method demands trained operators, and it cannot address full-depth failures. It is most powerful as a preventive strategy, applied to developing cracks before they become potholes. Spray injection patching, which blasts debris with compressed air, injects asphalt emulsion, and covers with aggregate, is the workhorse for high-volume rapid response.

Better detection is valuable. Better repair methods are valuable. But both face the same institutional bottleneck. Does better detection actually produce faster repair, or does it produce better-documented backlogs? Memphis shows the connection working when detection is wired end-to-end into work-order dispatch. But Pennsylvania’s experience is the cautionary case: condition data improved coordination, but without sustained institutional commitment to translating data into schedules, the information sat unused in many participating municipalities. The technology is only as good as the institution it feeds into.

Further out, there is autonomous road repair. The ARRES PREVENT robot, developed by Robotiz3d in collaboration with the University of Liverpool and Hertfordshire County Council, passed its first live public road trial in Potters Bar, England, on March 6, 2024. The robot uses AI-powered imaging to detect cracks and road defects, then autonomously fills them with sealing material before they develop into potholes. Robotiz3d claims the technology could deliver a 90 percent cost reduction, a 70 percent increase in speed, and three times fewer CO2 emissions. These claims require heavy skepticism. They come from the developer, not from independent assessment. The trial was a single short demonstration, not a controlled evaluation. UK government funding amounted to just over 30,000 pounds. That said, the underlying concept, autonomous proactive crack sealing before pothole formation, directly addresses the root institutional failure we have been describing: the inability of reactive systems to intervene at the optimal moment in the pavement lifecycle. If the technology matures and costs fall, it could change the maintenance calculus. For planning purposes, it is not there yet.

A different approach comes from Professor Erik Schlangen’s laboratory at Delft University of Technology in the Netherlands: self-healing asphalt. The mix combines standard paving material with tiny steel wool fibers that make the asphalt conductive. When an induction machine passes over the road, the fibers heat up, melting the bitumen binder and allowing microscopic cracks to close and re-bond before they can propagate. The technology has been field-tested on a 400-meter stretch of the Dutch A58 motorway since 2010, and on 12 other Dutch roads by contractor Heijmans, including high-stress locations such as roundabouts and industrial estates. Laboratory research suggests road lifespan can be doubled if the treatment is applied approximately every four years. The material costs about 25 percent more upfront but is estimated to save the Netherlands up to 90 million euros per year if adopted nationwide. Delft’s team is also researching epoxy asphalt, which mixes epoxy resin with bitumen to create a surface less sensitive to temperature extremes, particularly relevant as climate change increases both peak summer temperatures and freeze-thaw frequency.

The limitations of self-healing asphalt matter, though. The process is not autonomous: the induction machine must be driven over the road on a schedule, which presupposes a systematic maintenance system capable of tracking when each segment was last treated. And the technology is most powerful on long-duration highway sections with infrequent disruption; urban roads that are excavated every few years for utility work gain little benefit from materials designed for 40-to-80-year lifespans. It has been in field trials for fifteen years and is still not standard practice even in the Netherlands. We would not bank on it for near-term planning.

Same Asphalt, Different Institutions

If American institutions are the problem, a natural question arises: do other countries actually do this better, or is road maintenance just inherently hard everywhere? Two countries offer useful answers.

Over 90 percent of Japanese road pavements are asphalt, the same material used in the United States. Japanese roads are notably smoother and better maintained, but not because of some exotic technology. Repair work is simply performed far more frequently, ensuring the road surface remains intact before deterioration can compound. Asphalt has a service life of roughly 10 years, but maintenance is applied on a rolling basis so that roads rarely reach the deteriorated state at which potholes form. Japan’s Ministry of Land, Infrastructure, Transport and Tourism mandates systematic periodic inspection, bridges and tunnels once every five years by close visual inspection, and applies the same preventive maintenance philosophy to pavement. Nighttime paving is common, allowing crews to work without traffic disruption and producing better compaction. Procurement standards enforce lifecycle cost thinking rather than lowest upfront bid. These practices are not secret. They are well-understood by American transportation engineers. What prevents their adoption is not knowledge but institutional structure: the fragmented governance of American local roads, the annual budget cycle, and the absence of performance-based procurement at the local level. MLIT documents that 30 percent of Japanese towns and 60 percent of villages have no civil engineering technicians in their workforce, and Japan still outperforms the United States on road maintenance, because the institutional system compensates for local capacity gaps in ways the American system does not.

The Netherlands tells a complementary story. Rijkswaterstaat, the national water and road authority, applies rigorous lifecycle cost analysis to pavement decisions and maintains strong data infrastructure for road condition monitoring. Dutch porous asphalt is designed to absorb both sound and water, reducing noise pollution and improving drainage, but its open structure makes it more vulnerable to raveling, which is why the Delft self-healing research is particularly relevant to Dutch conditions. And the Dutch case demonstrates the lesson most directly: even self-healing asphalt requires institutional infrastructure. The induction treatment every four years presupposes a systematic maintenance scheduling system capable of tracking when each road segment was last treated. Innovation without maintenance institutions behind it does not stick.

Neither country is doing anything technically exotic. They are just more institutionally disciplined: systematic preventive maintenance, funded predictably, implemented through performance-based procurement, and measured transparently. The United States has most of the technical tools needed to match their outcomes. What it lacks is the institutional structure to deploy those tools at scale and sustain them across election cycles.

The Feedback Loop Is the Fix

Which brings us back to Mamdani, and to what his administration actually proves, which is less than the press coverage suggests and more than his critics allow.

The Saturday blitzes are the reactive half of the equation; the half that matters less. Eighty crews filling 7,200 potholes in a day is operationally impressive and politically savvy, but reactive speed is not what separates good road systems from bad ones. Prevention is. The real test of the Mamdani administration is not whether it can fill potholes fast on camera. It is whether the 1,150 lane-miles resurfacing commitment for 2026 actually gets funded and executed; whether the preventive investment survives budget season, whether it compounds across the next administration the way de Blasio’s and Adams’s did. We do not know the answer yet. A man died from a Queens pothole during the blitz. A quarter of service requests were still open. The data has historically been inflated. The hypothesis that visible maintenance can generate political capital is interesting. We will see whenever Mamdani can prove it or not.

But if the famously dysfunctional government of New York City can build a two-day-average system over twenty years, the question for every other American city is a little uncomfortable and specific: what’s stopping you?

The honest answer, for most cities, is not that they lack the knowledge or the technology. That every incentive in the system (annual budgets, political time horizons, fragmented governance, frozen federal revenue) pushes against doing the thing that works. There are proven institutional models. The political economy is designed to prevent its adoption. Pretending otherwise is how you get another decade of cold-patching the same hole four times.

The cities that broke the pattern did not do it by wishing the incentives or the political economy away. They did it by building systems that made the right choice easier than the wrong one: automated dispatch that removes the discretion to delay, public dashboards that make inaction visible, data flags that catch repeat failures before they become structural collapse. They did not fix the politics. They routed around them.

That is the only honest prescription this article can offer. Not that your mayor should try harder (well, that mayor should; you still need political will at the end of the day). Not that the ribbon-cutting bias is a failure of imagination. It is a structural feature of American municipal governance, and it will outlast every mayor who tries to overcome it through sheer will. What does not have to outlast them is the institutional machinery (the asphalt plants, the 311 integration, the resurfacing commitments, the transparency norms) that makes the next mayor’s job easier whether they care about potholes or not.

The Congressional Budget Office had projected a deficit of $1.9 trillion for fiscal year 2026. The federal government was spending roughly a third more than it collected in revenue. Then, on February 20, the Supreme Court ruled 6–3 in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act does not authorize the president to impose tariffs, striking down the sweeping trade levies that had been a centerpiece of administration trade policy. The Tax Foundation estimated that the IEEPA tariffs, had they survived, would have raised $1.4 trillion over the coming decade. They did not survive.

One might expect, given the circumstances, that political leaders would pause before promising to return still more revenue. One would be wrong. At the state level, at least five states (Texas, Florida, Wyoming, Indiana, and North Dakota) were actively considering full or near-total abolition of the property tax. In California, Katie Porter, the progressive gubernatorial frontrunner, was campaigning on eliminating state income tax for anyone earning under $100,000. At the federal level, two Democratic senators, Cory Booker of New Jersey and Chris Van Hollen of Maryland, were rolling out major tax-cut proposals at the exact same moment. Booker’s “Keep Your Pay Act,” which would eliminate federal income taxes on the first $75,000 of household income, carries a price tag of $5.3 trillion over a decade, according to the Yale Budget Lab. Van Hollen’s “Working Americans’ Tax Cut Act” would exempt income below $46,000 from federal taxes entirely. Both parties looked at a $1.9 trillion deficit with its largest revenue tool just struck down by the courts, and decided the move was to promise more money back.

Eight days after the tariff ruling, the United States and Israel launched joint military strikes against Iran. Iran retaliated. Within days, the Strait of Hormuz, the narrow passage through which roughly 20 percent of global crude oil flows, was effectively closed to commercial shipping. Brent crude, trading around $71 per barrel the day before the strikes, surged past $94 within ten days, briefly touched $120, and settled above $100, where it remains. The IEA authorized the largest release of emergency oil stockpiles in fifty years. It was not enough. The fiscal floor was already cracking, and the commodity shock landed on it with both feet.

We want to be clear about the argument we are making. This is not a story about well-meaning politicians who couldn’t resist the easy play, the familiar framing of “short-term electoral math versus long-term fiscal solvency.” That framing is too generous. What we are watching, at both the state and federal level, is something more specific and more damaging: a politics of managed decay in which public services are defunded not by accident but by design, the resulting dysfunction is cited as proof that government doesn’t work, the revenue base is then cut further in response to that manufactured proof, and the savings are directed (through targeted tax exemptions, development subsidies, and contract arrangements) toward a specific political constituency.

Two floors, one country

The first floor is the property tax. It funds 90 percent of school budgets, provides 70 percent of local government revenue, and accounts for 25 percent of all aggregate state and local tax revenue. The Pew Charitable Trusts confirmsthat statewide property tax cuts already enacted in 2025 are straining local budgets in Indiana, Ohio, and Wyoming. For most local governments, the property tax is not one revenue source among many. It is the revenue source, the one that funds fire departments, public libraries, road maintenance, and, above all, schools.

The reason the property tax became that floor is not tradition or inertia. It is because the property tax is the most recession-resistant major revenue source in the American fiscal system, and we know this because it was tested. During the Great Recession, income tax collections collapsed by 17 percent and sales tax revenue fell 7 percent. Property tax receipts grew 5 percent in both 2008 and 2009. A Federal Reserve Board analysis concluded that property tax was “the sole source of strength in state and local tax revenue” during those years, and that without it, the overall decline in tax revenue would have been 30 percent worse. The sales tax, which is what Texas, Florida, and Wyoming now propose as a replacement, is the revenue source that cratered.

Texas knows this firsthand. The state’s housing market barely dipped during the crash: prices flattened for three years rather than contracting 21 percent like the national average, and Texas was the fastest state to recover to pre-recession price levels. The property tax base held. Meanwhile, Texas state tax revenue, which depends heavily on sales taxes, fell 17.5 percent once the broader recession hit. The floor that Governor Abbott now wants to demolish is the same floor that kept Texas school districts solvent in 2009.

The second floor is federal fiscal capacity, the ability of the national government to backstop states when revenues collapse. Historically, when recessions hit, federal transfers have filled part of the gap: stimulus payments, emergency education funding, Medicaid expansion, disaster relief. That backstop assumed a federal government with room to maneuver. The CBO’s projections show a government that has been systematically consuming that room for decades, with debt now on track to reach 120 percent of GDP by 2036.

Both floors are being dismantled at the same time, by different actors, for the same reason. And the Iran shock is the stress test that arrived before either demolition was complete.

The macroeconomic backdrop makes this worse. Revised Bureau of Labor Statistics data released in February 2026 showed that the economy added just 181,000 jobs in all of 2025, the weakest annual total outside of a recession since 2003, averaging a mere 15,000 jobs per month. The unemployment rate stands at 4.3 percent. Every significant oil-price shock in the modern era (the 1973 Arab embargo, the 1979 Iranian Revolution, the 2008 commodity spike) preceded or coincided with recession. Oxford Economics has modeled a scenario in which oil averages $140 per barrel for two months and concluded it would push the eurozone, the United Kingdom, and Japan into contraction, with an economic standstill in the United States. Goldman Sachs raised its recession probability to 25 percent even under their more moderate price assumptions.

Beyond oil, the commodity cascade is broad. The Strait of Hormuz carries crude but also liquefied natural gas, petrochemical feedstocks, and sulfur. Gulf countries supply a vast share of global sulfur, an input without which fertilizers cannot be made. Qatar’s LNG production was halted after Iranian drone strikes. Aluminum shipments from the UAE are disrupted. As Moody’s supply chain analysts have noted, inventories for many of these commodities cover only a few weeks, meaning shortages can materialize rapidly.

The states cut their floors assuming the federal ceiling would hold. The federal ceiling was already gone.

What’s being cut

We should begin by acknowledging that the populist case for property tax relief is rooted in a grievance (genuine or not depends on your point of view). Property values have risen almost 27 percent faster than inflation since 2020. In just two years, the average U.S. home sales price soared from $371,100 to $525,100, figures documented by the Tax Foundation’s review of property tax reform efforts across states. Americans feel squeezed, and some are squeezed (mostly younger homeowners). Gallup’s most recent polling finds that 50 percent of Americans now say their taxes are unfair, up from 39 percent in 2020, essentially matching the all-time low in perceived tax fairness first recorded in 1999.

Fair enough. But the proposed solutions are a windfall for the wrong people, and that is not an accident.

The homeowners who benefit most from property tax elimination are overwhelmingly Baby Boomers who already own high-value, fully paid-off properties. They are the largest property-owning cohort, the highest-turnout voting bloc, and (this is the point) many have already put their children through the public schools now being defunded. The political incentive is a near-perfect alignment: give the most powerful voting bloc the cut that benefits them most, let the next generation absorb the service loss, and let the local school board take the blame.

People would argue that this is just “populist” nonsense, I would like to point out that “centrists” have a rich history in doing the same thing. In Rahm Emanuel’s Chicago, the mayor closed 50 public schools, the largest single mass closure in American history, overwhelmingly in Black and Latino neighborhoods, citing budget necessity. Simultaneously, he proposed a $55 million TIF subsidy for a DePaul University basketball arena. The Tax Increment Financing program, which diverted roughly one-third of Chicago property taxes (a half-billion dollars annually) into what critics called a mayoral slush fund for favored developers, operated throughout.

Proceeds from the sold school buildings were used to build and expand schools that disproportionately served white, middle-class families in a district that was over 80 percent Black, Latino, and low-income. The pattern is: defund the services that poor (often times denser) communities use, redirect the savings to the constituency (in less dense and more costly areas) that votes, and frame the entire operation as “tough fiscal choices.”

Emanuel is not an outlier. He is the template. The same TIF abuse that funded his arena subsidies operates in cities across the country, and the single largest category of beneficiary is professional sports. Between 1970 and 2020, state and local governments spent $33 billion building stadiums and arenas, with taxpayers covering a median of 73 percent of construction costs. A 2017 survey found that 83 percent of economists said the public cost outweighs the economic benefit. The money comes from the same sources being starved: in Detroit, the Michigan legislature voted in 2012 to redirect school property taxes to subsidize Little Caesars Arena, a new home for the Red Wings and Pistons, while the city was in the largest municipal bankruptcy in American history. By 2051, $726 million in school property tax revenue will have been diverted to the project. The promised “District Detroit” development around the arena never materialized; HBO found nothing but parking lots and empty promises. Over the past decade, more than $347 million intended for Detroit’s public schools was diverted to development projects or wiped out by tax abatements. This is the thing that makes the “cut spending” crowd so toxic in practice: they are not cutting spending. They are moving it from schools to stadiums, from libraries to developer subsidies, from the public ledger to the private one, and calling the result fiscal discipline.

The state-level property tax abolition movement is this same pattern at scale. The proposed cuts are not marginal adjustments. In Texas, Governor Greg Abbott has made elimination of the school district property tax a centerpiece of his 2026 reelection campaign. In Florida, Governor Ron DeSantis has called for a constitutional amendment to eliminate homestead property taxes entirely, threatening a special legislative session if lawmakers do not put it before voters. Separate analyses by the Tax Foundation and the Florida Policy Institute concluded that replacing the lost revenue would require at least doubling the state’s general sales tax rate, which is to say, replacing an extremely stable tax (property taxes are stable even during recessions) with a deeply volatile one (sales tax revenues fall hardest during recessions). In Wyoming, the Legislative Service Office projects that eliminating property taxes would cost local governments and schools $644 million annually, while the proposed 2-percentage-point sales tax increase intended to fill the gap would raise only about $475 million, leaving a structural hole of roughly $169 million per year.

Several states that enacted property tax cuts in 2025 explicitly left it to local governments to make up the lost revenue, a fiscal shell game in which the popular announcement happens at the statehouse and the painful cuts happen at the school board. Indiana’s 2025 legislation gave homeowners $1.2 billion in tax relief over three years; the Pew Charitable Trusts reports that many localities now face budget shortfalls and are enacting cuts in response. In Ohio, new property tax restrictions, enacted over the governor’s veto, have school officials warning of teacher layoffs and cash-flow crises. The popular announcement happens in the capital. The pain happens in the neighborhood. That is the design.

What breaks

The damage from these cuts is not hypothetical. Things are breaking. In Wyoming, the revenue gap simply cannot be filled by the replacement mechanism on offer. The Association of Educational Service Agencies reports that property tax changes in Ohio have created complex new limits on local tax growth and added state-level veto points over school levies, squeezing districts’ revenue capacity from multiple directions at once. Across the country, ESAs warn that the most consequential changes are not the headline-grabbing elimination plans but the quieter caps, exemptions, and procedural barriers that steadily restrict how much local revenue can grow over time.

The structural problem deserves emphasis. Temporary surpluses, generated by the post-pandemic recovery and elevated asset prices, were used to fund permanent tax cuts. With budgets now strained, a commodity shock arriving, recession signals flashing, and a $1.9 trillion federal deficit growing, policymakers have no capacity to backfill the revenue they gave away. The fiscal cushion needed to absorb a crisis was spent performing fiscal-responsibility theater during the good years.

When state revenues slow (and they always eventually slow) school districts will be structurally exposed with no cushion and no backstop. That is not a prediction. It is arithmetic.

The Democratic turn

The Republican property tax playbook is by now familiar: cut visible taxes, leave invisible service cuts for local governments to absorb and take the blame for. The Democratic federal version is newer, and more alarming for what it signals about the state of the party’s political imagination.

Spooked by the cultural resonance of Donald Trump’s “no tax on tips” message, which, as Senator Van Hollen himself acknowledged, was the best-testing line in Trump’s State of the Union address, Democratic presidential hopefuls responded not with a defense of public investment but with their own tax-cut counterprogramming. Booker’s “Keep Your Pay Act” would make the first $75,000 of household income tax-free, reduce the median family’s federal income tax by an estimated 85 percent, and cost $5.3 trillion over a decade. Van Hollen’s “Working Americans’ Tax Cut Act” would eliminate federal income taxes for anyone earning below $46,000, or below $92,000 for married couples, paid for by a tiered surtax on income above $1 million. Both are branded as working-class relief.

The tells are everywhere. The Institute on Taxation and Economic Policy notes that the poorest 20 percent of households would receive nothing from Van Hollen’s plan; their federal tax liability is already zero. Booker’s working-class branding does not hold up under scrutiny either: a married couple earning a combined $300,000 with no children would save approximately $10,000 a year under his proposal, according to the tax calculator on his own website. And the cruelest irony: Booker himself was part of the coalition that championed the expanded Child Tax Credit in 2021, which cut child poverty in half. When Congress let it expire, 3.7 million more children fell below the poverty line in a single month. Booker’s own statement at the time: “We should have never allowed this critical program to lapse.” Now he is proposing a tax cut that costs fifty times as much per year and gives nothing to the families the CTC was reaching.

The deeper tell, though, is that neither proposal is designed to pass. When a prospective presidential candidate introduces a $5.3 trillion proposal in a Congress controlled by the opposing party, the goal is to advance a narrative, not enact a law. Booker is up for reelection in 2026 and widely rumored to be considering a 2028 presidential run. Van Hollen’s bill has nearly twenty Democratic co-sponsors, including Senator Mark Kelly of Arizona, another frequently mentioned presidential prospect. As CBS News noted, neither bill is likely to move forward with Republicans in control of both chambers. These are positioning documents dressed as fiscal policy.

The same performative logic governs Republican property tax cuts at the state level: announce the relief now, let the next school board deal with the funding gap. Both parties have converged on the same short-term move at the same moment. This Emanuelist formula (announce the benefit at the top, absorb the pain at the middle and the bottom via cut programs and services, let someone else take the blame) has become genuinely bipartisan.

A $1.9 trillion deficit before the first missile

The federal government’s fiscal position was dire before the crisis. CBO projected outlays of $7.4 trillion and revenues of $5.6 trillion for FY2026, a gap of $1.9 trillion, or roughly 6 percent of GDP. The Committee for a Responsible Federal Budget reports that the government had already borrowed $1 trillion in the first five months of the fiscal year. Interest payments on the national debt are on track to exceed $1 trillion annually and will surpass $2 trillion by 2036.

Then two shocks hit in rapid succession. The Supreme Court’s tariff ruling on February 20 eliminated a revenue stream that was generating well over $100 billion per year; the government had collected at least $133.5 billion in IEEPA tariff payments by mid-December 2025 alone, with total collections likely exceeding $160 billion by the time of the ruling. Eight days later, the Iran strikes triggered a commodity shock whose fiscal costs (reduced economic activity, increased military expenditures, potential recession) have not yet been fully priced into any budget model.

This matters because states have historically relied on federal capacity as an implicit safety net. When state revenues collapsed during the 2008 financial crisis and the 2020 pandemic, federal transfers filled a substantial share of the gap. That backstop assumed a federal government with some fiscal room to maneuver. Both parties are now competing to consume what remains of that room faster. The states cut their floors assuming the federal ceiling would hold. We keep returning to this formulation because it is the central fact of the current moment.

The doom loop, and the leaders who broke it

The anti-tax sentiment that dominates American politics was not born from selfishness or irrationality. Gallup first asked about federal income tax fairness during World War II, when 85 to 90 percent of Americans said what they paid was fair. That civic compact held for decades. Then the 1979 oil crisis triggered a decade of stagflation, rewired American politics permanently, and produced a legitimate grievance: government had stopped delivering. Reaganism and the anti-tax coalition it birthed were (in part) responses to a real experience of government failure.

This point is important and often lost in progressive commentary. To dismiss all anti-tax sentiment as mere greed or false consciousness is to misunderstand the problem and, worse, to guarantee that it persists.

But here is the trap, and it is one that both parties have fallen into: instead of rebuilding the case for public investment, instead of demonstrating that government can deliver, they competed to promise more money back. Each cycle of cuts erodes the services that justify the taxes, which erodes public trust further, which makes the next round of cuts more politically viable. It is a doom loop, and it has now run for nearly half a century.

The demographic engine keeps it spinning. Baby Boomers, the cohort most likely to say taxes are used inefficiently (and often were the ones who cut the most efficient parts of the government), with the highest voter turnout, the most to gain from property tax cuts, and many already through the schools now being defunded, are the perfect constituency for a political class that has adopted Emanuelism as its default mode. The short-termism ratchet locks it in: cyclical surpluses converted to permanent tax cuts by politicians who will be gone before the bill comes due. Put together, these forces form a self-reinforcing system that neither party has any incentive to disrupt.

Conservatives reading this should not assume the argument is only about what tax cuts do to services. The argument is also about what tax cuts do to the economy when the theory behind them is wrong. In 2012, Kansas Governor Sam Brownback slashed the top income tax rate by nearly a third and eliminated taxes on pass-through business income entirely, calling it “a shot of adrenaline into the heart of the Kansas economy” and “a real live experiment” in supply-side economics. The experiment ran for five years. It failed on its own terms. Kansas grew roughly 7.8 percent less than comparable states over the period, employment growth lagged, the state’s bond rating was downgraded three times, and revenue fell so far short that lawmakers gutted funding for roads, bridges, and schools. Businesses did not flood into the state; what flooded in were tax shelters, as earners restructured their income to exploit the pass-through loophole. In 2017, the Republican legislature overrode Brownback’s veto and repealed the cuts, raising taxes by $1.2 billion over two years. The lesson is not that tax cuts are always bad. The lesson is that a tax cut is a financial instrument, not an operating strategy. Cutting revenue does not make government more efficient, just as cutting a hospital’s budget does not make its doctors more skilled. If the goal is a government that performs better for less, the work is operational: procurement, staffing, systems, measurement. That is harder than signing a tax cut and far less photogenic. But it is the only version that actually works, and both La Guardia and Warren proved it.

But it has been disrupted before, and the two clearest examples are both Republicans.

La Guardia: how to build a government that earns trust

When Fiorello La Guardia took office as mayor of New York in January 1934, the city had recently been compelled to accept a bankers’ bailout to avoid default. Unemployment was roughly 25 percent. Tent cities sprawled through Central Park and Red Hook. The Tammany Hall machine that preceded him had converted the city’s administrative apparatus into a patronage operation: unclassified civil service positions, jobs handed out as political favors, numbered approximately 15,000.

La Guardia’s approach was the precise inverse of Emanuelism. He did not cut services to justify further cuts. He raised revenue and restructured government to deliver more, visibly better. In 1934, he secured enabling legislation from Albany to balance the city budget through structural reorganization and special taxes. As a congressman, when Herbert Hoover proposed a national sales tax, La Guardia’s response was “I am simply going to say soak the rich.” He preferred luxury goods taxes and graduated income taxes. As mayor, he was more pragmatic. He cut his own salary in half, slashed payrolls, levied business taxes, and, overcoming his personal opposition, passed a 2 percent city sales tax to fund relief. He raised revenue broadly, not selectively, and he did not pretend the city could balance its books by taxing only the wealthy. But his instinct about where the floor belonged was right: when the choice is between a graduated tax and a flat consumption tax, the consumption tax hits working families hardest. That is exactly the swap that Texas, Florida, and Wyoming are now proposing.

Then he did what no Emanuelist would ever do: he professionalized the government, not make some token noises. This is the distinction that the modern tax-cut debate almost entirely ignores. La Guardia did not improve New York by adjusting the revenue line on a spreadsheet. He improved it by changing how the organization ran. The number of unclassified civil service positions fell from 15,000 to 1,500 between 1933 and 1940. Civil service applications rose from 6,327 to over 250,000 by 1939. He replaced political loyalty with competence. The result was a city government that could actually execute, and then he gave it things to execute. His partnership with Roosevelt channeled enormous New Deal funding into parks, playgrounds, swimming pools, schools, bridges, highways, an airport, and 13 public housing projects by 1942. He completed the public takeover of the New York City Subway system. Every dollar was spent on things people could see and use and credit to government competence. The point is not that La Guardia raised taxes or cut taxes. The point is that he ran the government like someone who intended it to work.

La Guardia was reelected twice. A panel of 69 scholars in 1993 ranked him as the best big-city mayor in American history. When he left office, his estate was worth $8,000 in war bonds. The doom loop that now seems inescapable (”government doesn’t work, so cut taxes, so government works less, so cut taxes further”) did not run in La Guardia’s New York, because he broke the first link in the chain. He made government work. Trust followed. Revenue was sustained.

Warren: how to handle a surplus without destroying the future

Earl Warren served as governor of California from 1943 to 1953, the only governor in state history elected to three consecutive terms. He governed during the postwar boom, a period of extraordinary revenue growth. His approach to that surplus is the precise mirror image of what Republican (and now Democratic) governors are doing today.

In his first inaugural address, Warren acknowledged that California’s surplus had come “very largely from taxes upon war industry” and warned that it came “in trust, for it is the money of all the people of California.” Then he said something that every governor currently dismantling the property tax should be required to read: “This surplus, by its very existence, constitutes a constant temptation to everyone to spend it just because it is there. ... I hold to the conviction that this money must be lifted above the dissipating reach of grab-bag tactics.” He explicitly warned against converting cyclical windfalls into structural commitments, the exact error that every state currently eliminating property taxes is making.

Warren did not return the money. He invested it. He presided over massive expansions of California’s highway system, hospital network, and education infrastructure. He increased unemployment insurance, raised pensions for the elderly, subsidized child-care centers, reformed the prison system, and created the State Department of Mental Hygiene. And in his second inaugural address, he argued that any surplus beyond current requirements “should be conserved for two vital needs. One of these is to maintain adequate hospitals, educational and other institutional facilities. The other is to provide for the rainy day which sooner or later comes into the lives both of people and governments.”

The formulation that matters most, though, is this one: “It is not wise, under such circumstances, to blindly trade tax stability for temporary advantage.” That sentence, written seventy-five years ago, is the precise diagnosis of what Texas, Florida, Wyoming, and the rest are doing right now. They are trading the stability of a diversified revenue base for the temporary political advantage of announcing a tax cut. Warren saw this temptation and rejected it. California voters rewarded him three times.

Then California dismantled everything he built. In 1978, voters passed Proposition 13, which capped property taxes at 1 percent of assessed value, rolled assessments back to 1975 levels, and limited annual increases to 2 percent. Property tax revenue was halved overnight, from $10.3 billion to $5.04 billion in a single year. Before Prop 13, property tax accounted for 90 percent of all local government tax income. A year later, the same anti-tax movement passed the Gann Limit (Proposition 4), which capped per capita tax revenue spending at 1979 levels and required the excess be distributed to taxpayers in a rebate. Warren had said that surpluses must be “lifted above the dissipating reach of grab-bag tactics.” The Gann Limit legally mandates grab-bag tactics. When the state collects more than the cap allows, the constitution requires the excess be split between taxpayer rebates and school funding rather than invested in infrastructure, housing, or any of the other things Warren spent his surpluses on. In 2022, California redirected $48 billion in surplus funds and issued $9.5 billion in taxpayer refunds to stay under the ceiling. The rainy day fund that Warren insisted on? Constitutionally capped. The surplus investment he modeled? Legally prohibited above a threshold set in 1979. Two ballot measures, co-authored by the same anti-tax crusaders, converted Warren’s governance philosophy into a constitutional violation.

And now the irony has completed its arc. Katie Porter, the progressive frontrunner in the 2026 governor’s race, a former student of Senator Elizabeth Warren, is campaigning on eliminating California’s state income tax for anyone earning under $100,000. She has also opposed the billionaire tax ballot measure that would fund healthcare and education, arguing it could hurt the state’s ability to fund priorities. Earl Warren governed California for a decade on the principle that surpluses must be invested, not returned. His would-be progressive successor is running in his state, in the office he held, on a tax cut. The Washington Post noted today that the California governor’s race has become an experiment in how far tax cuts can take a Democrat in one of the bluest states in the country. Warren could have told them. He ran the opposite experiment seventy-five years ago. It worked.

The mutual reinforcement is what neither the state story nor the federal story captures alone. States cut their floors assuming federal capacity exists. The federal government cut its own capacity. Both assumptions failed simultaneously. The Iran shock did not create the vulnerability. It arrived at the exact moment both circuits closed, a stress test for an infrastructure that had been quietly failing for decades.

The price of civilization

The Iran commodity shock is not an interruption to the tax-cut story. It is its logical conclusion. The political class spent forty-five years dismantling the public investment infrastructure in the name of giving money back, and now faces a supply disruption that can only be absorbed by governments with strong revenue bases, working local services, and the fiscal capacity to respond. Instead: school districts that just lost their funding floor. Local governments told to figure it out. A federal government running a $1.9 trillion deficit before the first missile was fired. And the people most likely to be hurt are not the Boomers who voted for the cuts but the younger workers whose schools lost funding, whose libraries closed, whose local governments can no longer respond.

The “taxes are for suckers” feeling is not irrational. It emerged from a real failure of government to deliver. But both parties have now chosen to treat the symptom, the felt sense of being overcharged for underperformance, by cutting the revenue that funds the performance. It is the political equivalent of a hospital cutting its budget by eliminating doctors.

La Guardia and Warren already demonstrated the alternative, and the through-line in everything they did was operational, not financial. They did not govern from a spreadsheet. La Guardia replaced 15,000 patronage jobs with merit hires. Warren treated surpluses as a fiduciary obligation rather than a political opportunity. Both invested in visible infrastructure, funded it progressively, and refused to swap stable revenue for volatile alternatives. The contemporary political class treats government as a balance sheet to be optimized through cuts. La Guardia and Warren treated it as an organization to be run well. The difference is not ideological. It is the difference between a CFO who cuts headcount to hit a quarterly number and a COO who fixes the production line. One makes the next quarter look better. The other makes the next decade work. Both were WW2 era Republicans. Both won repeatedly.

The only novel element available now is cheap energy: for the progressives is that solar auction prices have fallen below two cents per kilowatt-hour, and driving energy costs down far enough would make the Strait of Hormuz less relevant and Americans wealthier without cutting a single tax.

For the conservatives, it’s just a matter of finding the willpower to finance the Wildcatters so that they can do what they love to do in times of high oil prices, drill baby drill. That would require pissing off Scott Sheffield, who conspired with OPEC before to keep oil prices high, and Wall Street though.

That both parties looked at this menu and chose the tax cut instead tells you everything about where we are.

The anti-tax feeling that has dominated American politics for nearly half a century was a legitimate response to a government that stopped delivering. The answer is not to cut taxes. The answer is to start delivering again.

The political class chose a different answer.

They chose the buyback.

On January 25, 2026, three and a half weeks into his mayoralty, Zohran Mamdani got his first snowstorm. Winter Storm Fern dropped about a foot of snow on New York City. The streets were plowed fast. But the plows pushed snow into bus stops, because bus stops are the nearest open space, and nobody had a system for tracking which stops had been cleared. Extended sub-freezing cold turned the banks to ice. Bus riders posted photos of three-foot walls of frozen snow where their stops used to be. Crosswalks vanished. At least 20 people died from cold exposure in the weeks that followed, some of them inside their own apartments. City Council Speaker Julie Menin said the deaths “were not inevitable.”

Four weeks later, the city’s first blizzard since 2016 buried all five boroughs under nearly two feet of snow. A worse storm by every measure. And a markedly better response. Between the two storms, the administration had geotagged every unsheltered bus stop and crosswalk in the city so that DSNY could track each location and when it was last cleared. Emergency shovelers expanded from 550 to 1,300. Their pay went from $19 to $30 an hour. Warming centers more than doubled. A travel ban kept private cars off the roads overnight. By Monday morning, 2,200 bus stops were clear. No one died on the streets.

That sequence matters for everything that follows. The first storm exposed a system with no feedback loop, no way to know its own state. The fix was not bigger budgets or more press conferences. It was engineering: geotagging gave DSNY real-time visibility into its own operations, turning an opaque process into one that could be measured and corrected. The question hanging over the rest of Mamdani’s mayoralty is whether that instinct scales to a $114 billion budget.

Ketcham’s critique and what the budget actually is

In between the two storms, the Manhattan Institute’s published his verdict on Mamdani’s preliminary budget: “betrayal.” The Chief Savings Officers Mamdani had appointed to every city agency hadn’t yet filed their first reports. The deadline was still a month away; each department had 5 days to designate a CSO and 45 days to prepare a report, starting from January 29. The budget itself was, by design and long precedent, a negotiating document, an opening bid in the annual negotiation between City Hall, the City Council, and Albany. Every mayor in modern memory has used it this way.

I want to take that charge seriously, because Ketcham raises legitimate fiscal concerns. But consider what we’ve already seen. Mamdani’s first snowstorm exposed a system with no feedback loop. His second, a worse storm by every measure, produced a markedly better response, because the administration treated failure as an engineering problem rather than a communications one. In the limited time he’s been mayor, Mamdani is doing something most mayors almost everywhere fail at: adapting based on experience. That record deserves weight before we about budgets.

I also want to ask a question Ketcham’s critique never engages: is the fiscal framework Mamdani is operating within (property and income taxation as the structural backbone of municipal finance) sound, and is the alternative now being pursued across red-state America, wholesale abolition of the property tax, better? I think the answer to the first question is yes and the answer to the second is emphatically no.

What Mamdani actually did

On January 23, Mamdani signed Executive Order 12 requiring every city agency to designate a Chief Savings Officer. The mandate is specific: 1.5 percent savings in fiscal year 2026, 2.5 percent in fiscal year 2027. Public reports are due March 20, with updated assessments every six months. The CSOs are charged with finding recurring savings and sustainable efficiencies, consolidating redundancies and insourcing programs outsourced to what the executive order describes as “bloated consultant contracts.” Budget Director Sherif Soliman described the approach as going in “with a scalpel rather than a blunt instrument of across-the-board cuts.” Projected savings: $1.77 billion across two fiscal years.

Beyond the CSO program, the administration is hiring 50 new auditors at the Department of Finance (expected to generate $100 million per year in additional revenue). Auditors generate more revenue than they cost.

Organizations, public or private, focused on cutting costs almost always and automatically reduce quality, which increases costs in the long term. Organizations focused on improving the system find that costs fall as a consequence of better processes. The CSO program, while flawed, is at least trying to study agency operations before cutting or expanding them. Whether it delivers is Mamdani’s problem. The March 20 reports will tell us whether the method produced substance or theater.

Two cities offer evidence that this approach works across ideological lines.

Carmel, Indiana, under Republican Mayor Jim Brainard (1996–2024), transformed from a bedroom community of 25,000 into an internationally recognized city of over 100,000. The taxable property base grew sixfold. Parks expanded from 41 acres to over 1,000. Brainard built more than 155 roundabouts (reducing intersection injury crashes roughly 80 percent), a walkable downtown, and a greenway connecting Carmel to Indianapolis. He kept public ownership of water utilities rather than privatizing them. Through all of this, Carmel’s tax rates remained among the lowest in Indiana, because the investment itself generated the revenue base that sustained it. The Manhattan Institute’s own City Journal published a glowing profile under the headline “Carmeltopia”. S&P downgraded Carmel’s bond rating in 2017 over $300 million in new debt, so the model carried fiscal risks. But the overall record of a city that quadrupled in population and maintained low taxes through strategic public spending is hard to argue with.

Greater Manchester, under Labour Mayor Andy Burnham (2017–present), tells a parallel story from the other side of the Atlantic. Since signing its devolution deal, Greater Manchester has been the UK’s fastest-growing city-region economy, with average annual growth of 3.1 percent and the highest productivity growth in the country. Burnham, who calls his approach “business-friendly socialism,” brought the bus network into public ownership, pioneered a place-first governance model integrating transport, housing, education, and health, and built a combined authority that operates with the coherence of a single government rather than a collection of silos.

One a Republican in Indiana. The other New Labour in Manchester. Both invested in public goods rather than strip-mining them. Both maintained or expanded public ownership of key assets. Both produced revenue growth that exceeded the cost of investment. A recommendation that Ketcham may or may not agree with: the CSO program should seek heterodox expertise from organizations like the Foundation for American Innovation’s Governance Program, which is designed around improving government efficiency through stronger execution and institutional design, not simply budget cuts or headcount reduction.

Where the critics are right

New York City spends $42 billion on an education system that has lost 118,000 students since 2019. Municipal health benefit costs are among the highest in the country. Mamdani reversed the Adams administration’s shelter caps, adding roughly $1 billion in costs. Bloomberg hiked property taxes 18.5 percent after September 11; Mamdani is threatening 9.5 percent during a period when Wall Street bonuses are at their highest levels since 1987.

These are real numbers. Ketcham and the Citizens Budget Commission are right to press them. But the standard austerity response treats each number as evidence that spending is too high and must be cut: cap the shelter costs, freeze education spending, make employees pay for health insurance. That sounds disciplined. But it skips the essential prior question: what system produces these costs, and what are the causes?

The education budget didn’t grow to $42 billion because someone chose an extravagant number. It grew through mandates (from local, state, or national politics in all sort of ways) layered on mandates and administrative structures sized for an enrollment that no longer exists. The answer might involve consolidation, redeployment, or something no one has considered yet, but it has to come from people who understand the system, not from a column prescribing cuts from the outside. After all, how many McKinsey style cost cutting end in complete failure? I would like to think that Ketcham is more cautious than that. The same applies to health benefits: the question isn’t simply “should employees contribute?” (which is cost-shifting, not cost reduction) but what plan designs, procurement structures, and delivery models produce the total cost, and whether the system can be redesigned to produce better outcomes at lower expense.

But notice the structural point that Ketcham’s critique takes for granted: every one of these spending-side debates is possible precisely because the fiscal architecture exists to argue about. A stable revenue base allows for adjustment, negotiation, and course correction. That stability is not a theory. It is an empirical fact about the property tax.

During the Great Recession, state income tax revenue fell 17 percent. Sales tax revenue fell 7 percent. Property tax revenue grew approximately 5 percent. James Alm documented this in a 2013 paper titled “A Convenient Truth: Property Taxes and Revenue Stability.” Federal Reserve researchers attributed the resilience to assessment lags, statutory smoothing mechanisms, and local policymakers’ ability to adjust millage rates: built-in institutional shock absorbers that sales and income taxes simply lack.

Multiple independent studies confirm the finding. A 40-year panel of Texas municipalities found that cities with stronger property tax authority had a significantly reduced probability of revenue decline. Hou and Seligman’s Georgia study demonstrated that displacing property taxes with sales taxes increased long-run revenue volatility. The American Institute for Economic Research, a free-market think tank, confirmed that property tax receipts remained “nearly constant” through the Great Recession. The IMF (in one of the very few times I agree with them) ranks recurrent property taxes as the least distortive tax instrument for long-run GDP growth, ahead of consumption, income, and corporate taxes.

The Economic Policy Institute found that if state and local spending after the Great Recession had grown at pre-recession rates, unemployment would have reached pre-recession levels by 2013 instead of 2017. Four years of needless suffering, attributable to sub-national austerity enabled by revenue collapse. The property tax is what prevents that collapse at the municipal level.

This is the architecture Mamdani is working within, and it is exactly what several states are now trying to destroy. Florida’s proposed constitutional amendment would eliminate property taxes and replace the lost revenue with a sales tax. The required rate, assuming no behavioral change, would be 15.34 percent. In Georgia, more than 300 local governments opted out of prior property tax relief measures, and some localities raised taxes by as much as 158 percent in a single year. These states are not reforming the property tax. They are replacing the most stable revenue instrument in municipal finance with the most volatile one.

And who actually benefits? Research by Abdoulaye Ndiaye models the property tax as a “forced mortgage” that, while painful, constrains housing prices and facilitates intergenerational access to homeownership. His simulations suggest that raising California’s property taxes to Texas levels would increase homeownership among 25-to-44-year-olds by 7.4 percentage points. The implication runs in reverse: eliminating property taxes produces an immediate capitalization windfall of 7 to 9 percent in home values, representing $200 to $250 billion in unearned equity for existing Florida homeowners alone. Reduce the carrying cost of an asset, and its price rises to absorb the savings. The beneficiaries are those who already own. The losers are those trying to buy.

The effects compound. When holding costs approach zero, empty nesters and investors face negligible incentive to sell or downsize. Housing supply that would otherwise enter the market stays locked up. Renters fare worst: rents remain sticky (landlords do not pass through property tax savings), sales taxes pile on every purchase, and circuit-breaker programs that might offer relief are riddled with gaps. Only 21 of 30 states with circuit breakers extend them to renters; 17 restrict eligibility to seniors. Eliminating property taxes altogether doesn’t just set back generational wealth. It abolishes the mechanism by which the next generation builds any.

A constitutional amendment abolishing property taxes has no feedback loop. It cannot be geotagged and revisited after the first storm. The Mamdani administration has proposed no such thing. It has threatened a 9.5 percent property tax increase it explicitly does not want, as leverage for its preferred alternative: raising income taxes on the 33,000 New Yorkers earning more than $1 million annually and recalibrating the city-state fiscal relationship. One can disagree with that strategy. One can call it heavy-handed or politically naive. But it operates within the architecture of stable, progressive taxation. It can be adjusted, negotiated, and reversed by future mayors and councils.

NYC’s property tax is sound in theory and broken in practice

We should be honest about something the red-state abolitionists get right, even if they draw the wrong conclusion: New York City’s property tax system, as actually administered, is one of the most regressive in the country. The problem is not the instrument. The problem is a 1981 assessment framework that has calcified into a machine for undertaxing the wealthy and overtaxing everyone else.

State law caps the growth of assessed values for small homes at 6 percent per year and 20 percent over five years. In neighborhoods where values are rising quickly, assessed values fall further and further behind market reality. The Citizens Budget Commission found that Manhattan’s median assessment ratio for Class 1 homes is 2.1 percent (taxing properties on roughly a thirtieth of their market value), while Staten Island’s is 5.2 percent and the Bronx’s is 5.0 percent. The boroughs with the least expensive housing bear the highest effective rates; the boroughs with the most expensive housing enjoy the lowest.

The co-op and condo valuation method compounds the distortion. Luxury co-ops and condos are assessed not at market value but as if they were comparable rental buildings, often rent-stabilized buildings whose rents bear no relationship to unit sale prices. Bloomberg’s investigation found a $2 million luxury Brooklyn condo carrying an annual property tax bill of $157. Meanwhile, a retired homeowner in Southeast Queens or Canarsie pays an effective rate two or three times higher on a property worth a fraction as much.

The State Comptroller, the Citizens Budget Commission, and the TENNY coalition (spanning civil rights organizations, tenant advocates, and real estate developers) have all documented these disparities. Comptroller Mark Levine called the proposed 9.5 percent blanket property tax increase “regressive,” because layering a flat increase onto a regressive base makes the regressivity worse.

The roadmap to fix it exists. The 2021 Advisory Commission on Property Tax Reform produced a comprehensive framework: combine the fractional assessment classes, value all residential properties at sales-based market value, apply a single transparent rate (estimated at 0.814 percent for revenue neutrality), provide a homestead exemption for primary residents, institute circuit breakers for low-income homeowners, and phase the changes over five years. Economist James Parrott, who served on the commission, has said most outer-borough homeowners would likely come out ahead. The losers would be owners of rapidly appreciated Manhattan and brownstone Brooklyn properties whose assessed values have been artificially suppressed for decades. The legal pathway is opening: in 2024, the Court of Appeals ruled 4-3 that TENNY’s claims could proceed, finding the city has authority to adjust its assessment practices. Budget Director Soliman said in mid-February that the city plans to introduce property tax reform legislation “in a matter of weeks.”

The tension is real. Assessment reform that shifts the burden from overtaxed outer-borough homeowners to undertaxed Manhattan co-ops is revenue-neutral by design. It does not close a $5.4 billion budget gap. The blanket 9.5 percent increase generates revenue but worsens the regressivity that reform is meant to cure. Whether the administration can reconcile these objectives is a question only the coming months can answer. But the distinction that matters is clear: assessment dysfunction is an argument for fixing the property tax, not abolishing it.

The market already voted

Before we turn to the austerity experiments, a word about the panic that wasn’t.

In the weeks surrounding Mamdani’s November 2025 election, Fox Business ran headlines about $100 million in signed contracts from New York buyers flooding South Florida. The wealthy would flee, capital would dry up, Manhattan real estate would crater.

Then came the data. Signed contracts for Manhattan homes priced above $4 million rose 25 percent from October to November 2025, more than twice the rate of the overall market. Olshan Realty tracked 41 high-end contracts in the five days following Mamdani’s victory, beating its ten-year Thanksgiving week average. Jonathan Miller of Miller Samuel was blunt: “Throughout 2025 on a year-over-year basis, overall sales have risen, prices have risen, sales have risen faster than inventory.” The idea of a millionaire migration, he said, was “a classic misinformation scenario, where no one’s looking at actual data.”

One month of luxury sales data does not settle the question; capital flight, if it occurs at all, plays out over years, not news cycles. And increasing demand for NYC real estate means upward pressure on asset prices, which means worsening affordability, the central problem Mamdani was elected to solve. But the real estate surge contains a fiscal lesson: every new luxury purchase expands the city’s property tax base. If Albany blocks Mamdani’s preferred revenue path (income tax increases on millionaires), the growing property tax base provides an alternative instrument to capture the wealth flowing into the city. The revealed preference of capital is that New York City remains valuable. The governance challenge is ensuring that value translates into a functional city for the people who live there full-time, not just those who collect addresses.

Three experiments in “cut first”

The austerity playbook, and even the more modest cuts proposed by its defenders, has a seductive logic: government is bloated, waste is rampant, and a sufficiently determined executive can slash spending to produce dramatic savings. Three case studies test this premise against reality.

The federal experiment. The Department of Government Efficiency promised $2 trillion in federal savings. The Cato Institute found that DOGE produced “no noticeable effect on the trajectory of spending.” As of mid-2025, it claimed roughly $214 billion (a figure disputed by independent analysts), while total federal spending rose approximately 6 percent. Elon Musk himself acknowledged the effort was only “a little bit successful” and said he would not do it again.

The damage to institutional capacity was real. The federal workforce shrank by roughly 9 percent, some 317,000 positions, through buyouts, firings, and attrition. At the Social Security Administration, disability claim backlogs were projected to double from one million to two million cases. Retirement claim backlogs hit 600,000 by May 2025. The website crashed ten times in three weeks. Field offices closed in some of the nation’s poorest states, and research cited by the EPI documents a 13 percent drop in disability benefit receipt in affected areas. Meanwhile, 2,000 headquarters staff were reassigned to process claims after a six-week training program, performing work that ordinarily requires two years to learn.

The local experiment. In England, Reform UK took control of Kent County Council and created the Department of Local Government Efficiency. They spent nine months searching for the waste their national leadership had insisted was everywhere. Paul Chamberlain, the cabinet member responsible, told the Financial Times: “We made some assumptions that we would come in here and find some of the craziness that Doge found in America and that was wrong, we didn’t find any of that.” No frontline service cuts were made. Council tax rose 3.99 percent.

The historical record. Chicago cycled through three consecutive mayors, each elected as the negation of the last one’s failures, each reproducing a new variety of failure. Rahm Emanuel (2011–2019) pursued austerity and privatization, closed 50 Chicago Public Schools overwhelmingly in Black and Brown neighborhoods, doubled the property tax levy to shore up the pension crisis, and fought the courts to cut pensions. He did everything the fiscal hawks prescribed and still gutted neighborhood institutions so the spreadsheets could balance. The backlash produced Lori Lightfoot, who won in 2019 on a landslide reform mandate, then squandered it through managerial dysfunction and became the first sitting Chicago mayor in forty years to lose reelection. Then came Brandon Johnson, a former CTU organizer who got his start protesting Emanuel’s closings, elected in 2023 on an explicitly anti-austerity platform, now facing a $1.2 billion budget gap. Negation is not a governing philosophy, and the cycle produced nothing but wreckage.

New York City just lived its own compressed version. Andrew Cuomo systematically drained city funding during his decade as governor, redirecting revenue upward while New York City’s contribution to state coffers (54.5 percent) far exceeded what it received back (40.5 percent). Then came Eric Adams: the centrist, the former cop, the pragmatic deal-maker. Adams talked fiscal discipline while presiding over what Mamdani’s administration now calls “staggering mismanagement.” He chronically underbudgeted essential services ($860 million for cash assistance programs projected to cost $1.7 billion) while maintaining the appearance of balance through aggressive reserve drawdowns and staffing vacancies. He was indicted on federal bribery and campaign finance charges. If Mamdani governs only as the negation of Adams, he is simply the latest turn of the same wheel.

The system, not the mayor

The instinct in electoral politics is to treat failure as a communications problem: hold a press conference, fire someone, promise to do better. The instinct Mamdani showed between the two snowstorms was to treat failure as an engineering problem. That is what state capacity actually means: not bigger budgets or more workers (though both may help), but institutions that can see what they are doing and adjust.

The CSO reports land March 20. The executive budget follows in April. The City Council negotiation runs through June. These documents will reveal whether the administration understands the difference between cutting costs and eliminating the causes of costs, or whether it merely borrowed the vocabulary. Adams also promised transparency. He also had institutional tools. He used them to maintain appearances while the structural problems compounded. If Mamdani’s CSO program produces cosmetic savings while the real questions go unasked, the comparison to Adams will stop being a cautionary tale and start being a prediction.

The states dismantling their property tax architecture have no such tools and no capacity to learn from their own mistakes. A constitutional amendment is not a system. It cannot be studied, adjusted, or corrected when the next recession arrives and the sales tax revenue collapses. New York’s property tax base provides something those states are about to lose: a stable foundation to govern from, and the institutional room to get better at it.

Key Facts

• Procrastination does not meaningfully predict saving regret. Across 12 psychometric measures tested in both countries, the relationship is weak to nonexistent, and where statistically significant, it frequently runs in the opposite direction from what the behavioral economics literature predicts.

• Economic shocks do. Exposure to negative financial shocks is the dominant predictor of wishing you’d saved more.

About half of Americans between 60 and 74 wish they had saved more. That’s a familiar finding, and it comes with a familiar explanation: people procrastinate. They know they should save, they intend to save, and then they don’t, because the present is vivid and retirement is abstract, because inertia is powerful, because human beings are not the rational optimizers of the textbook. A generation of behavioral economics has crystallized around this idea. We get nudges, automatic enrollment in 401(k) plans, default escalation schedules. The policy apparatus assumes, at bottom, that under-saving is a self-control problem.

A new working paper from Rohwedder, Hurd, and Börsch-Supan suggests we’ve been looking in the wrong place. The authors surveyed thousands of people aged 60–74 in the United States and Singapore, two countries that both emphasize individual responsibility for retirement but differ sharply in institutional design. They asked a simple question: if you could do it over, would you have saved more? Then they tested what actually predicts the answer. Is it procrastination? Or is it something else?

The something else turns out to be economic shocks. And the difference is not subtle. Which is (depends on you, darkly or not so) funny, considering what a lot of people are saying about LLMs/AI/etc and the job market.

Share

What do you mean by “tested.”

The authors didn’t just ask people whether they procrastinate and whether they regret their saving. They fielded 12 separate psychometric measures: questions about putting off tasks, giving up when things get difficult, settling for mediocre results, losing motivation, preferring immediate gratification. These are the kinds of instruments the behavioral literature treats as markers of present bias and poor self-control. The prediction, grounded in decades of work from Laibson, Thaler, O’Donoghue, Rabin, and others, is straightforward: people who score high on procrastination should be more likely to wish they’d saved more.

They aren’t. Across both countries, across 21 separate statistical comparisons per dataset, the relationship between procrastination and saving regret is, to a first approximation, nonexistent. Where significant associations do appear, they frequently run in the wrong direction. In Singapore, people who report never putting off difficult things are more likely to express saving regret than those who sometimes do. The authors later confirmed these null results using a different, widely validated procrastination scale. The finding held.

Now consider the alternative explanation. The surveys also asked respondents whether they had experienced negative financial shocks over their lifetimes: unemployment spells, large health expenses, earnings shortfalls, divorces, early forced retirement. Here the pattern is immediate and powerful. In the U.S., 69 percent of respondents reported at least one negative shock, compared with 46 percent in Singapore. And among Americans who experienced such shocks, 61 percent expressed saving regret, compared with 42 percent among those who didn’t.

Four of the five most common negative shocks are labor-market related, and the U.S. leads on every one. Some 18 percent of American respondents reported an unemployment spell serious enough to damage their finances, compared with 11 percent in Singapore. Among those who experienced that shock, 62 percent of Americans expressed saving regret versus 54 percent of Singaporeans. The pattern repeats across the board: health limiting work (20 percent of Americans, 14 percent of Singaporeans), earnings falling short of expectations (16 percent versus 12 percent), being pushed into early retirement (13 percent versus 8 percent). In each case, the shock is both more common in the U.S. and more financially scarring.

It’s not just that more Americans lose their jobs. It’s that losing a job in America does more lasting damage to a household’s financial trajectory. An unemployment spell in the U.S. leaves people staring at their retirement accounts with a 62 percent chance of wishing they’d saved more. The same event in Singapore produces regret at 54 percent, still painful, but meaningfully less so. Multiply that differential across every category of labor market disruption, across decades of working life, and you begin to see why the two countries diverge so sharply on saving regret despite similar levels of individual responsibility.

As the number of negative shocks accumulates, regret in the U.S. climbs steadily, reaching 76 percent among those who experienced five or more. In Singapore, regret barely budges: it hovers around 50 percent regardless of how many shocks a person reports. And among respondents in both countries who experienced no negative shocks, the rate of saving regret is nearly identical: 42 percent in the U.S. versus 40 percent in Singapore. The cross-national gap in regret is almost entirely a gap in shock exposure and shock consequences.

Why does the same job loss hurt more in America?

This is where institutional design enters the story, and where the comparison gets interesting, because Singapore’s advantage isn’t just about retirement accounts. (What follows draws on the paper’s detailed institutional background as well as more recent developments.)

Singapore’s Central Provident Fund mandates that roughly 37 percent of earnings flow into individual accounts earmarked for retirement, housing, and health care. These aren’t optional. They aren’t nudges. They’re compulsory contributions, split across three accounts: an Ordinary Account for housing and eventually retirement, a Special Account locked until age 55 for retirement only, and a MediSave Account for health insurance and medical expenses. The system doesn’t pool risk the way Social Security does, but it creates a buffer. When a health shock hits, there’s a dedicated account to absorb it. When housing costs are high, there’s a dedicated account for that, too. And critically, these accounts exist before the shock arrives. They aren’t savings that a job loss can redirect toward rent.

On the labor market side, Singapore takes a different approach, though not always a generous one. For most of its modern history, there was no government-provided unemployment insurance at all. The stated policy aim was re-employment, not income replacement. The Retirement and Re-employment Act, introduced in 2007 and enacted in 2012, requires employers to offer contract extensions to workers reaching the retirement age (initially 62, now 63), with penalties for unjustified refusals. The re-employment age has been raised repeatedly, to 67 in 2017, to 68 in 2022. The results are visible in the data: labor force participation among Singaporean men aged 60–64 rose from 53 percent in 2005 to 77 percent in 2019. For women in that age range, it jumped from 21 percent to 51 percent. Singapore doesn’t primarily cushion job loss with cash benefits. It tries to prevent job loss from happening in the first place, or at least to shorten the gap.

That said (and this postdates the paper’s data collection), Singapore has recently acknowledged the limits of this approach. In April 2025, the government launched the SkillsFuture Jobseeker Support scheme, which provides up to S$6,000 over six months to involuntarily unemployed citizens earning S$5,000 or less per month. The payments taper over time and are tied to active participation in job search activities, career coaching, and training. The government set aside more than S$200 million for the program, expecting roughly 60,000 eligible individuals per year. It’s modest by international standards, but it represents a significant shift in a country that had long resisted anything resembling unemployment benefits, and it’s paired with structured re-employment support rather than offered as a standalone cash transfer.

Now consider the American alternative. The U.S. unemployment insurance system is, to put it plainly, a mess. And the mess is measurable. In 2024, only 27 percent of jobless workers nationwide received UI benefits. That’s not a typo. Roughly three out of four unemployed Americans get nothing. State-level variation is staggering: Minnesota led the nation at 55 percent; Kentucky managed 10 percent. The duration of benefits ranges from as few as 12 weeks in North Carolina, Florida, and Tennessee to 26 weeks in most states, and the maximum weekly benefit varies from $235 in Mississippi to $823 in Massachusetts.

A 55-year-old American worker who loses her job faces a gauntlet of compounding risks that her Singaporean counterpart largely does not. She may or may not qualify for unemployment benefits depending on which state she lives in, how she lost her job, and whether she can navigate the application process. If she does qualify, the benefits may last as few as 12 weeks. If her employer provided her health insurance, as is the case for the majority of covered workers, she loses that too, precisely when stress and disruption make health problems more likely. Employer-provided health insurance tied to employment means that a job loss can simultaneously eliminate income and health coverage, a compounding shock that Singapore’s system avoids by design. Roughly 42% of American workers lack access to employer-sponsored retirement plans in the first place. And when shocks arrive, a layoff at 55, a medical crisis, a divorce, they erode whatever savings a household has managed to accumulate.

The health care comparison is particularly stark. Health spending shocks occur at roughly equal rates in both countries, around 10 to 11 percent of respondents in each sample reported a large medical expense. But the consequences diverge dramatically. In the U.S., experiencing a health spending shock is associated with a 24-percentage-point increase in saving regret relative to those with no negative shocks at all. In Singapore, the corresponding increase is just 10 points. Same shock, radically different financial scar, because in Singapore, MediSave and subsidized public insurance absorb much of the blow. It helps that Singapore spends roughly 4 percent of GDP on health care; the U.S. spends 17 percent.

Does this mean nudges are useless?

No? Automatic enrollment works. Default escalation schedules increase contributions. The behavioral economics toolkit has real value, but these are tools at the end of the day, not a cure all. If the reason people end up with less savings than they’d like is primarily that life happened to them, job losses, health crises, family disruptions, stagnant wages, then making it marginally easier to contribute to a 401(k) treats a symptom rather than the disease.

And the disease is uninsured risk. The paper reframes under-saving not as a failure of willpower but as a failure of risk management, or more precisely, as a failure to provide the institutional infrastructure that lets households manage risk. Singapore’s system is far from perfect. It concentrates wealth heavily in housing (median housing wealth of about $377,000 against median total wealth of $575,000 for older Singaporeans), leaving less available for non-housing consumption. It lacks the redistributive features that make Social Security critical for lower-income Americans. And even with all that forced saving, 45 percent of older Singaporeans still wish they’d saved more. Mandatory contributions are not a complete answer.

But they are a better starting point than assuming the problem is procrastination. The evidence here is fairly clear: when you compare people who weren’t hit by shocks, Americans and Singaporeans look almost identical in their saving satisfaction. The gap opens up because Americans face more shocks, more severe shocks, and weaker institutional buffers against those shocks. College costs in the U.S. doubled in real terms between 1989 and 2016 while median wages stagnated. Divorce rates are higher. Labor market disruptions are more common and more financially devastating. Each of these is a rock thrown at the household balance sheet, and no amount of commitment-device wizardry prevents the damage.

There’s one more finding worth highlighting.

The authors discovered that probability numeracy, the ability to reason about uncertainty and likelihood, was strongly associated with lower saving regret in both countries. Individuals who answered all probability questions correctly had saving regret rates 14 percentage points lower in the U.S. and 19 points lower in Singapore. Financial literacy, by contrast, showed no consistent relationship.

That distinction matters. Financial literacy is about understanding compound interest and inflation. Probability numeracy is about understanding risk, that bad things happen with some frequency, that the future is uncertain, that planning means preparing for contingencies. If the core problem is shock exposure rather than procrastination, it makes sense that the skill most protective against regret is the one that helps people think clearly about an uncertain world.

Share

The policy implications follow naturally, and the paper is explicit about them. Strengthening social insurance against catastrophic risks, health expenses, long-term care costs, labor market disruptions, would do more to reduce saving regret than yet another tweak to choice architecture. Expanding access to retirement savings vehicles matters, certainly, but so does ensuring that a single medical bill or job loss doesn’t wipe out decades of careful accumulation. The authors point to buffer-stock saving programs, emergency savings accounts, and integrated health-and-retirement saving frameworks as directions worth pursuing, while noting that self-insurance alone is “inefficient protection against large shocks because of the lack of risk-pooling” and “insufficient because many persons cannot save enough to meet all contingencies.”

We’ve spent a generation treating under-saving as a problem of human psychology. The better framing might be simpler and, in its way, harder: people aren’t failing to save because they’re weak. They’re failing to save because the world is rough, and their institutions don’t do enough to help them weather it.

FAQs

What else predicts lower regret (besides avoiding shocks)

Probability numeracy stands out. Respondents who answered all probability questions correctly had saving regret 14 percentage points lower in the U.S. and 19 points lower in Singapore. Financial literacy, the “Big Three” questions on compound interest, inflation, and diversification, showed no consistent relationship. In Singapore, lower financial literacy was actually associated with lower regret. The distinction: financial literacy measures whether you understand how money grows; probability numeracy measures whether you understand that bad things happen and can reason about how likely they are.

A long financial planning horizon (10+ years) was associated with roughly 10 points lower regret in the U.S. and 6 points in Singapore. Higher wealth also reduces regret, particularly in the U.S., where the gap between the highest and lowest wealth quartiles is about 24 percentage points (36% vs. 60% regret). In Singapore, the gradient is flatter (40% vs. 46%).

Shock accumulation: the numbers behind the dose-response pattern

Some 23 percent of Americans reported three or more shocks; only 10 percent of Singaporeans did. U.S. regret climbs steeply with accumulation: 42 percent with zero shocks, 54 percent with one, 61 percent with two, 76 percent with five or more. In Singapore, regret rises to about 50 percent after one shock and then barely moves, hovering between 48 and 55 percent regardless of additional shocks.

Divorce and college costs

Divorce: 19 percent of U.S. respondents experienced divorce or separation (63% regret); only 1.5 percent of Singaporeans did (40% regret).

College costs: 9 percent of Americans reported higher-than-expected college expenses (67% regret) versus 4 percent of Singaporeans (46% regret). Context from the paper: U.S. college costs doubled in real terms between 1989 and 2016 while median wages stagnated; Singapore university tuition rose only 14 percent between 2007 and 2016 while median wages rose 23 percent.

“Positive” shocks are messier than they look

Several ostensibly positive shocks (working longer than expected, receiving financial help from family, spending less than expected) turn out to correlate with negative shocks. In Singapore, 61 percent of those who worked longer than expected had also experienced a negative shock, compared with 43 percent of those who hadn't. In the U.S. the pattern is similar if less stark: 80 percent versus 67 percent.

These "positive" events may reflect coping with adversity rather than genuine windfalls: working longer because you had to, receiving family help because a health crisis demanded it. The authors exclude them from their summary positive-shock variable, and are candid about why: "defining unambiguous positive shocks is challenging." Even after that exclusion, the cleaned-up variable behaves oddly. In the U.S., experiencing a positive shock is associated with about 9 percentage points lower regret. In Singapore, it has virtually no effect.

Measuring regret: framing and correction

About 54 percent of Americans aged 60–74 wish they’d saved more, compared with 45 percent of Singaporeans. Very few in either country wish they’d saved less (1.5 percent and 4.3 percent respectively). These figures are after a built-in correction: respondents were reminded that saving more means spending less, then asked which categories of spending they could have cut. Those who said “no way we could have cut spending” were recoded as not expressing regret. Before that correction, regret was 66 percent in the U.S. and 53 percent in Singapore. The survey also ran a framing experiment: asking “spend less and save more” versus just “save more” reduced regret by about 7 percentage points.

How the study was designed

The U.S. data come from the RAND American Life Panel (ALP), an Internet-based panel of about 6,000 individuals, surveyed in two waves (2016 and 2017–18; 2,618 respondents aged 60–74, with 2,111 overlapping both waves). The Singapore data come from the Singapore Life Panel (SLP), a monthly Internet-based survey representative of the Singapore population aged 50–70 at recruitment, fielded in May 2018 (4,309 respondents aged 60–74). The SLP questionnaire was designed to match the second ALP wave as closely as possible. Descriptive statistics are weighted; regressions are unweighted. Standard errors in ALP regressions are adjusted for repeated observations from overlap cases.

Share

Mario Draghi now calls Europe’s fiscal framework a failure. “A procyclical fiscal policy,” he admitted in an April 2024 speech, combined with wage suppression to produce one result: “only to weaken our own domestic demand and undermine our social model.”

As ECB president from 2011 to 2019, Draghi conditioned bond purchases on austerity commitments even during the depths of the eurozone crisis. He is not a neutral observer of the system he now criticizes.

Share

A study confirms what that approach actually produced. In “Does Politics Matter? A Comparative Assessment of Discretionary Fiscal Policies in the Euro Area,” published in the European Journal of Political Economy this month, economists Giovanni Carnazza (University of Pisa), Paolo Liberati (Roma Tre), and Agnese Sacchi (University of Urbino Carlo Bo) document 25 years of fiscal policy across 19 eurozone countries.

What the Research Found

Carnazza, Liberati, and Sacchi report three findings.

Fiscal policy was systematically procyclical. Across the eurozone from 1995 to 2019, when economies contracted, governments tightened. When economies expanded, governments loosened. The authors find a coefficient of -0.22 to -0.25 on the output gap: a one-percentage-point decline in economic output was associated with a quarter-point fiscal contraction.

Political variables did not affect fiscal direction. The authors examined cabinet composition, electoral cycles, legislative fractionalization, government type, federalist structure, and checks and balances. None altered the procyclical pattern. Their conclusion: “the pro-cyclicality of the fiscal policy is not significantly affected neither by the behaviour of macroeconomic fundamentals nor by institutional and political variables.”

Fiscal rules dominated all other factors. The interaction of rule stringency and debt levels drove outcomes. The authors write: “it seems that the mechanisms introduced to guarantee fiscal sustainability in the euro area can overcome all possible political influences on both the size and the sign of implementable fiscal policies.”

What Draghi Now Admits

Draghi’s April 2024 speech, previewing his competitiveness report, offers the retrospective judgment of someone who enforced these policies.

He concedes that Europe “pursued a deliberate strategy of trying to lower wage costs relative to each other – and, combine this with a procyclical fiscal policy, the net effect was only to weaken our own domestic demand and undermine our social model.”

He acknowledges that Europe invests less in digital and advanced technologies than the US and China, that only four European tech firms rank among the global top 50, and that almost 80% of defense procurement over the last two years came from outside the EU.

He states that European institutions are “designed for ‘the world of yesterday’: pre-Covid, pre-Ukraine, pre-conflagration in the Middle East, pre-return of great power rivalry.”

He calls for “a re-defining of our Union that is no less ambitious than what the Founding Fathers did 70 years ago with the creation of the European Coal and Steel Community.”

Key Data

From the Carnazza, Liberati, and Sacchi paper:

• Procyclicality coefficient: -0.22 to -0.25 (governments tightened during downturns)

• Sample: 19 eurozone countries, 1995 to 2019

• Political variables with no significant effect: government ideology, electoral cycles, legislative fractionalization, cabinet type, federalist structure, bicameralism

• Driving factor: fiscal rules interacted with debt levels

From Draghi’s speech:

• Mobile network groups: 34 in Europe versus 3 in the US

• Global tech players in top 50: 4 European firms

• Defense procurement from outside EU: nearly 80% over last two years

• Telecommunications investment per capita: half the US level

• Collaborative defense procurement: less than 20% of spending

The Promises vs. The Reality

The architects of fiscal discipline claimed that sound public finances would restore confidence, that private investment would replace public spending, that interest rates would fall, and that structural reforms would unleash productivity growth.

The Carnazza paper documents systematic procyclicality that amplified downturns rather than cushioning them. Draghi’s speech acknowledges that Europe fell behind in the sectors that required sustained public investment. The eurozone experienced a double-dip recession that the United States (partly) avoided.

The Accountability Gap

Draghi’s speech uses passive constructions: “We have turned inwards, seeing our competitors among ourselves.”

The Carnazza paper identifies the mechanism more precisely: “discretionary fiscal policies, being mainly driven by the need to comply with fiscal rules, might be scarcely affected by politics and the political characteristics of a country.”

The European Commission pursued excessive deficit procedures. The Eurogroup extracted austerity commitments as the price of crisis support. Draghi’s ECB conditioned market interventions on consolidation. These were choices made by specific institutions.

Draghi now laments insufficient investment in technology, after years of demanding spending cuts. He calls for joint defense procurement, after an era when public investment was treated as a cost to minimize. He identifies energy interconnections as essential, while the fiscal framework he championed made financing such infrastructure politically difficult.

The Democratic Deficit

The Carnazza paper tested every plausible channel through which voters might influence fiscal policy. None worked. The authors talked about the political failures might consist in its irrelevance, including the role of cabinet composition, in shaping the behavior of fiscal policies.

Proponents of fiscal rules framed democratic insulation as desirable. Removing fiscal policy from political contestation would enhance “credibility” with financial markets. The Carnazza findings confirm that insulation occurred. Whether this represents sound policy depends on whose preferences one believes should matter, but the results have been nothing more than subpar (at best).

Two Diagnoses

The Carnazza paper and Draghi’s speech approach the question from opposite directions. The paper offers econometric analysis of what fiscal policy did. Draghi offers the judgment of a policymaker assessing competitive outcomes.

They converge: the fiscal framework failed.

The paper documents rules that enforced procyclicality regardless of economic conditions. Draghi admits to both competitive decline and strategic vulnerability.

Share

In “Invest One, Get Two Extra: Public Investment Crowds in Private Investment,” economists Olegs Matvejevs and Olegs Tkacevs of Latvia’s central bank report a finding that should reshape how policymakers think about government spending. Examining 34 industrialized OECD economies from 1995 to 2019, they conclude that public investment crowds in private investment rather than displacing it. For every dollar governments invest in public capital, approximately two additional dollars of private investment eventually follow.

Conventional Wisdom

For decades, policymakers have assumed that when governments spend more, they compete with private actors for limited savings and labor. Interest rates rise. Private consumption and investment fall. This “crowding out” story has anchored fiscal conservatism and provided a persistent argument against ambitious public spending programs.

The big idea of “crowding out” is that there is only so much savings in an economy. When governments borrow to fund investment, they absorb savings that would otherwise flow to private projects. Increased demand for loanable funds pushes up borrowing costs. Marginal private investments that would have been profitable at lower interest rates become uneconomical. The government builds a bridge; a factory doesn’t get built.

This story isn’t wrong about (very) short-term dynamics. When governments ramp up investment spending, they do initially compete for resources. Interest rates can tick upward. Some private projects get delayed or cancelled. But what happens over the following years matters far more.

What The Research Shows

Matvejevs and Tkacevs employed a “stock-flow” approach that distinguishes their work from studies finding crowding-out effects. Rather than examining only year-to-year changes in investment, they modeled the long-run equilibrium relationship between public and private capital stocks.

Their central finding: public and private capital move together over time. When public capital rises by 1 percent, private capital eventually rises by roughly 0.8 percent. The two stay in rough proportion because public capital makes private capital more productive, which draws in more private investment.

When the ratio gets out of balance, private investment adjusts. If public investment falls short, private investment follows it down. If public investment surges ahead, private investment rises to catch up. A 1 percent gap between the two produces a 1.9 percent correction in private investment the following year.

Consider a logistics company evaluating a new distribution center. The expected return is substantially higher when the center sits near a well-maintained interstate than when it depends on potholed secondary roads. A tech startup benefits from a workforce educated in public universities. A manufacturer’s equipment becomes more valuable when reliable electrical grid infrastructure eliminates costly outages.

Private investment doesn’t simply spike and retreat after a public investment shock. It remains elevated for years as the adjustment process unfolds.

Key Data

The multiplier: Each dollar of public investment generates approximately two dollars of additional private investment over five to seven years.

The cointegration coefficient: A 1 percent increase in public capital stock is associated with a 0.79 percent increase in private capital stock in the long run.

The country range: Multipliers vary from approximately 1.3 in Japan to 4.7 in Latvia.

The decline in public investment: In advanced economies, public investment fell from an average of 2.4 percent of GDP in the 1990s to less than 2 percent after 2010.

Peak timing: The crowding-in effect reaches its maximum around year two after a public investment shock.

The Objections, and Why The Finding Holds

Studies focusing on short-term dynamics, using fixed-effects regressions that don’t account for long-run equilibrium relationships, tend to find crowding out. Studies that model the cointegration between capital stocks find crowding in.

A second objection: perhaps governments invest more when they anticipate private investment will rise anyway, creating a spurious correlation. The researchers argue this reverse causality concern is less severe for public investment than for taxes or transfers. Tax receipts mechanically respond to economic conditions; unemployment benefits automatically rise during downturns. No comparable automatic link exists between private investment plans and public capital spending, which reflects budgetary decisions made through political processes with long lead times.

To address remaining concerns, the authors used public investment forecast errors from OECD Economic Outlook projections. The private sector cannot anticipate public investment more precisely than professional forecasters, so deviations between actual and forecasted investment represent unanticipated shocks. This approach produces positive and significant effects on private investment four to five years out, with modest short-term crowding out in the immediate aftermath.

The findings hold across multiple robustness tests: splitting the sample into pre-2008 and post-2008 periods, restricting analysis to euro area countries alone, substituting IMF data for OECD data, dropping individual control variables, adding lagged controls, including time fixed effects to absorb global shocks.

Several limitations remain. The paper doesn’t address how public investment is financed. Debt-financed investment might eventually raise interest rates enough to offset productivity gains; tax-financed investment might reduce private consumption through other channels.

The research cannot speak to investment quality either. Abiad found crowding-out effects when public investment is inefficient. The multiplier shouldn’t be applied to contexts where waste and corruption dominate.

The sample ends in 2019, before COVID reshaped fiscal policy globally. Whether these relationships hold with higher sovereign debt levels and changed interest rate environments remains untested.

Atukeren, using 25 developing countries, showed that crowding-out likelihood rises with government sector size and capital controls but declines with trade openness. The advanced OECD economies studied here may represent favorable conditions.

Where It Works Best

Not all public investment generates equal crowding-in effects. The study disaggregated spending using the Classification of Functions of Government.

Economic affairs (roads, bridges, transport infrastructure) generates the strongest private sector response. A trucking company’s fleet becomes more productive when highways are maintained. A port expansion makes adjacent warehousing more valuable. Broadband buildouts enable businesses that couldn’t previously exist. Economic affairs account for roughly 35 percent of total public investment across OECD countries.

Education shows similarly strong effects. Public investment in schools and universities produces a more skilled workforce, raising returns to private capital that employs those workers. Education represents about 13 percent of public investment.

Recreation, culture, and religion follows, likely reflecting tourism-related private investment: hotels, restaurants, amenities that cluster around museums, concert halls, and national parks.

Housing and community amenities and social protection show weaker or uncertain relationships. The cointegration evidence for these categories is mixed. Defense spending generates modest effects, perhaps because military capital doesn’t directly raise private factory or office productivity.

The Bottom Line

Many economists (in addition to politicians and fans of industrial policy) have proposed “golden rules” exempting capital spending from deficit targets, reasoning that investments generate future returns while consumption does not.

The multiplier isn’t automatic. It depends on investment type (economic affairs and education outperform housing), execution quality, and whether economies have room to absorb additional spending without bidding up prices. But for governments that invest wisely: one in, two back.

You won decisively. You have a mandate. Your party controls the legislature. You’re ready to govern.

So you sit down with your budget director to talk about investments in state capacity. You want to:

• Hire more transportation engineers so your DOT can plan projects in-house instead of paying consultants triple the cost

• Modernize the unemployment insurance computer system that’s been failing for a decade

• Increase starting teacher salaries to compete with surrounding states

• Add staff to the permitting office so development applications don’t sit for eighteen months

• Create a rainy day fund so you’re not forced to slash services during the next recession

Your budget director looks at you sadly.

“Governor,” she says, “we can’t afford any of that.”

“But we have a budget surplus!” you protest.

“We have to spend the surplus on Medicaid. Enrollment is up and the federal match is down. Also, the pension fund is $2 billion underfunded and the teachers’ union is demanding we catch up on payments. Also, we’re constitutionally required to balance the budget, our bond rating will tank if we borrow for operations, and we still haven’t recovered the revenue we lost in the last recession. Also, if we raise taxes, businesses and high earners will move to the next state over.”

“Okay,” you say, “what if we just try to make existing agencies work better?”

“Well,” the budget director says, “every rule change requires a public hearing. If 25 people ask, you have to hold additional hearings. Environmental review takes two years. Any citizen can sue, and judges look at everything with a microscope. Oh, and if you try to build any infrastructure, you’ll need to satisfy both federal NEPA and our state’s Mini NEPA, each with its own procedures. Did I mention we only have twelve people in our Office of Administrative Law?”

You slump in your chair. “How does anything get done?”

“Slowly,” she says. “Very, very slowly.”

This is not a hypothetical. With variations, this is the reality facing every state and local official who wants to govern effectively. State and local governments don’t just face different political problems than the federal government; they face fundamentally different structural constraints. These constraints fall into two categories: fiscal and procedural. The fiscal constraints mean states and cities can’t afford to invest in capacity even when they want to. The procedural constraints mean that even when they have the money, bureaucratic and legal requirements make government action slow, expensive, and vulnerable to obstruction.

Together, these constraints create a trap. It’s harder for states and localities to build the operational capacity they need to govern effectively. And the more they struggle, the more citizens and interest groups demand additional restrictions, making the problem worse.

Understanding these constraints is essential to understanding America’s state capacity crisis. Unlike many federal problems (polarization, the filibuster, interest group influence), these aren’t primarily about politics. They’re about structure.

Part I: The Fiscal Straightjacket

Why States Can’t Manage Money Like the Federal Government

Here is a basic truth that shapes everything about state and local governance: States and cities must balance their budgets. This seems reasonable. Households balance their budgets. Businesses balance their budgets (eventually). Why shouldn’t governments?

The requirement has profound consequences that limit state capacity in ways that don’t apply to the federal government. What’s worse, this common sense idea of households, businesses, and balanced budgets may not be an accurate idea.

Every state except Vermont has some form of constitutional or statutory balanced budget requirement. The details vary: some restrict governors, some restrict legislatures, some apply to proposed budgets, some to final budgets. But the basic principle is universal. States cannot spend significantly more than they take in.

Why does this matter? Two related reasons. First, states can’t print money. The federal government both borrows in dollars and prints dollars. Unless it chooses to, it can’t default. Warren Buffett once said there’s “zero probability” of U.S. default, and he’s right: the government can always print more money to pay its debts. This might cause inflation, but that’s a different problem. States have no such option. They borrow in dollars but can’t print dollars. If a state can’t pay its debts, it defaults. There’s no monetary policy escape hatch.

Second, states face real constraints on borrowing. The federal government can run enormous deficits and markets will keep lending (because, again, it can always print money to pay back debt). States face much tighter constraints. State constitutions often limit how much debt can be issued or require voter approval. And even without legal limits, markets discipline state borrowing much more aggressively than federal borrowing. A state that borrows to cover operating deficits will see its credit rating collapse and borrowing costs spike.

Households and families do not always “balance” their budgets in the strict annual sense proposed for the government. They regularly borrow money for major, long-term investments like homes (mortgages), cars, or education, and draw on savings in lean times to cover expenses. Economic shocks and crashes’ favorite food is often responsible families, as many way caught in the crossfire of COVID and the Great Recession.

Businesses also borrow to finance capital projects and can operate at a deficit for periods to invest in future growth, something that has been done multiple times over in Silicon Valley. We expect states and local governments to hold themselves to idealize constraints.

On that practical note, these constraints don’t exist because states and local governments are inherently more virtuous than the federal government. In addition to common sense, a more practical reason is that they exist because states lack the monetary sovereignty that gives the federal government unique fiscal powers.

The Cyclicality Death Spiral

The balanced budget requirement creates a devastating dynamic: State budgets are pro-cyclical when they should be counter-cyclical.

What does this mean? When the economy is growing, tax revenues increase, and states can spend more, cut taxes, or save for later. When the economy contracts, tax revenues fall, and states must cut spending, raise taxes, or draw down savings. From a macroeconomic perspective, this is exactly backward. During recessions, government should spend more, not less, both to provide services when people need them most and to stimulate the economy. During booms, government should spend less and save, building up reserves for the next downturn.

The federal government can do this. It ran massive deficits during the 2008 financial crisis and the COVID-19 pandemic, pumping money into the economy precisely when private spending collapsed. This helped prevent both recessions from becoming depressions. States can’t do this. When recession hits, their revenues crater and their expenditures surge (more people need Medicaid, unemployment insurance, food assistance). But instead of borrowing to cover the gap, they must either raise taxes or cut spending.

The consequences are visible in the data. After the 2008 financial crisis, state and local governments laid off approximately 750,000 workers. These weren’t just numbers on a spreadsheet. They were teachers, firefighters, police officers, social workers, health inspectors, and other public employees providing services that communities needed. Meanwhile, the federal government was expanding unemployment insurance to respond to the crisis. The same pattern repeated with COVID-19. Many states faced dire fiscal projections and prepared for massive cuts. Only unprecedented federal aid prevented a catastrophe. When that aid expired, states again faced difficult choices despite ongoing needs.

This cyclicality destroys state capacity in multiple ways. It prevents long-term planning: one cannot build administrative capacity while constantly hiring during booms and firing during busts. Institutional knowledge disappears. Talented people leave for more stable careers. Training investments are wasted. Beyond that, the cuts come exactly when needs are greatest. During recessions, people need more help from government, but that’s when state services get cut. Unemployment offices can’t handle the surge in claims because they’ve been downsized. Schools have larger class sizes because teachers were laid off.

Further, pro-cyclical budgeting makes recessions worse. When states cut spending and raise taxes during downturns, they amplify the economic contraction. This is basic Keynesian economics: in a recession, you want fiscal expansion, not contraction. State budget cuts are a major reason why recovery from the 2008 crisis was so slow.

And it creates political pressure for gimmicks. Politicians don’t want to cut services or raise taxes during recessions; that’s electoral poison. So they look for ways around the constraints. This brings us to pensions.

The Pension Crisis: Underfunding and Fee Extraction

If states can’t borrow for operations and they must balance budgets, how do politicians cope during fiscal stress? Simple: They underfund pensions.

This is, in a perverse way, ingenious. When a government underfunds a pension, it doesn’t cut services today. It doesn’t lay off workers. It doesn’t visibly raise taxes. It just doesn’t put as much money into the pension fund as actuaries say it should. The problem shows up later, sometimes decades later, when different politicians are in office. Eventually, pension obligations come due. But that’s Future Governor’s problem.

The scale of this problem is staggering. State and local governments have between $1 trillion and $1.5 trillion in unfunded pension liabilities. As of June 2025, aggregate state and local public pension assets totaled $6.51 trillion, an enormous sum, but still insufficient to cover promised benefits. The NASRA Public Fund Survey reports that the aggregate funding level in fiscal year 2023 was just 76.4 percent, meaning roughly one-quarter of promised benefits lack dedicated funding. To put that in perspective, it’s as if every state and local government in America borrowed an additional 25 percent without issuing any bonds, just by promising to pay retired workers without setting aside the money to do so.

Why does this happen? The answer lies in political incentives that systematically favor short-term expediency over long-term solvency. Joshua Rauh at Stanford explains the core mechanism. Governments pay employees a salary but also accrue new pension obligations each year, which is essentially deferred compensation. Aggressive discounting makes that deferred amount look smaller. By assuming high investment returns, governments can report smaller pension liabilities, justify smaller contributions, and free up money for current spending. As Rauh puts it, this has enabled politicians to defer the problem for a long time, and that tab will ultimately have to be paid by future generations.

The Manhattan Institute’s analysis of pension board governance identifies the structural problem: both types of public pension board members have incentives to neglect the fiscal health of the pension fund. Political appointees are responsive to constituencies (such as local industry or the governor’s budget) that steer them away from acting in the long-term interest of pension fund fiscal integrity. But union representatives are also tempted to trade pension savings tomorrow for higher salaries today. The result is that boards make decisions about assumed rates of return that artificially reduce the appearance of underfunding.

Academic research confirms this pattern. A peer-reviewed study in Financial Management using data from over 2,000 Pennsylvania local pension plans found that in politically competitive jurisdictions, there are strong electoral incentives to underfund public pensions in order to keep current taxes low. Another study from Villanova found that political pressure creates incentives for elected officials to choose higher discount rates to value defined benefit pension promises, thus artificially reducing the short-term reported cost of these benefits.

Underfunding is only half the pension disaster. The other half is what happens to the money that is set aside: a significant portion gets extracted by Wall Street through fees for underperforming investments.

Over the past two decades, public pension funds have dramatically increased their allocation to “alternative investments” such as hedge funds, private equity, real estate, and private credit. According to the Pew Charitable Trusts, from 2019 to 2022, the share of investments directed to equities dropped from 47 percent to 42 percent while the share in alternative assets grew from 27 percent to 35 percent. The rationale was that alternatives would deliver higher returns. The reality has been different.

Richard Ennis, a prominent pension consultant, analyzed 54 public pension funds from 2008 to 2023 and found that alternatives dragged down annual returns by about 1 percent for portfolios with a 28 percent average allocation to alternatives, and up to 1.5 percent for those with 40 percent allocated. The Center for Retirement Research at Boston College corroborates this finding: the long-term annualized return for pension funds is almost the same as that of a simple 60/40 index portfolio, about 6.1 percent for both. All the complexity, all the consultants, all the fees, and the result is no better than what a retiree could achieve with two Vanguard index funds.

The fee extraction is staggering. According to NBC News, the Ohio State Teachers Retirement System paid over $4.1 billion in fees to private equity and hedge funds over the past decade while those investments returned an average of 6.7 percent, well below the almost 10 percent goal. Analysis by Hedge Clippers found that on average, Ohio’s three major pension funds paid 63 cents in fees for every dollar of net return to the fund. CalPERS, the nation’s largest public pension with over $530 billion in assets, shows similar patterns. According to NBC News, CalPERS paid private equity managers $569 million in investment fees in its most recent fiscal year, and its private equity has underperformed its benchmark in three of four time frames measured.

Pension dysfunction destroys state capacity in multiple ways. Pension costs crowd out investment in capacity: if a state is spending 15 percent of its budget on pension obligations and another several percent on fees to Wall Street, that’s money not going to hiring competent staff, modernizing systems, maintaining infrastructure, or building reserves. Pension crises lock in fiscal stress: unlike other debts that get paid off, pension obligations are ongoing. One can’t refinance them away or sell assets to cover them. The state just has to keep paying, year after year, reducing fiscal flexibility. And the market punishes pension debt: credit rating agencies look at pension funding levels when rating state and local bonds. Poor pension funding leads to higher borrowing costs for everything else, making infrastructure and other capital investments more expensive.

The Medicaid Squeeze

Even without recessions or pension crises, state and local governments face a structural fiscal problem: Government services get more expensive over time, faster than inflation.

The evidence is clear. A 2015 study by Laurie Bates and Rexford Santerre found that Baumol’s cost disease accounts for a significant portion of non-federal public sector cost growth in the United States. State and local government prices have grown faster than the general price level for decades. Between 1993 and 2017, state and local government consumption expenditures per capita grew by 80 percent in real terms. But output (measured by things like students educated, roads maintained, public safety provided) didn’t grow proportionally.

Healthcare makes it worse. Healthcare costs are growing even faster than other government costs, driven by technology, aging populations, and the structure of healthcare markets. Since state governments are major healthcare providers (public hospitals, Medicaid), they’re hit especially hard.

Occupational licensing makes it worse still. States control who can work in various professions through licensing requirements. These requirements have proliferated dramatically: roughly 30 percent of American workers now need government permission to do their jobs, up from less than 5 percent in the 1950s. Some licensing serves legitimate purposes (one probably wants one’s surgeon to be licensed). But much of it is occupational rent-seeking, with existing practitioners using government power to limit competition and raise their wages. When states require years of training to braid hair or excessive credentials to teach elementary school, they’re making their own services more expensive without improving quality.

Medicaid deserves special attention because it’s simultaneously the largest and fastest-growing component of state budgets. Medicaid went from 6.9 percent of state budgets in 1990 to roughly 16 percent today. In some states, it’s over 20 percent. The federal government pays for the majority of Medicaid (the “federal match” ranges from 50 percent to about 80 percent depending on the state’s per capita income), but states still pay a lot. And more importantly, Medicaid spending is highly cyclical and mostly outside state control. When recession hits, Medicaid enrollment surges as people lose jobs, lose employer coverage, and become eligible for Medicaid. Exactly when state revenues are falling, Medicaid costs are rising.

States have limited ability to control these costs. Federal law sets baseline requirements for who must be covered and what benefits must be provided. States can seek waivers to try different approaches, but the federal government must approve them. States can cut provider payment rates, but only so much before access suffers. The result is that Medicaid spending crowds out everything else. When states face budget shortfalls, they can’t easily cut Medicaid (it’s legally protected, politically popular, and serves vulnerable populations). So they cut other things: higher education, infrastructure, parks, environmental protection, economic development.

The dynamics are getting worse. Recent congressional proposals would significantly reduce federal Medicaid funding through block grants, per capita caps, or enhanced work requirements. If enacted, states would face hundreds of billions in lost federal funding while still being required to serve enrolled populations. The gap would have to be filled by either massive state tax increases or devastating service cuts.

The Inequality Multiplier

Here is another structural fiscal problem that gets too little attention: Federalism and localism concentrate both resources and needs geographically, making fiscal disparities between jurisdictions extreme.

Rich jurisdictions with valuable property tax bases can provide good services with relatively low tax rates. Poor jurisdictions must tax heavily just to provide basic services, and still often come up short. This matters because local governments, in particular, fund services through local tax bases. School quality depends largely on local property values. City services depend on the city’s tax base.

The scale of disparity is striking. Consider Connecticut. Wealthy Westport has a property tax mill rate of about 18 while funding excellent schools and ample services. Nearby Bridgeport has a mill rate of 43 (taxing more than twice as heavily) while struggling to fund adequate schools and basic services. Why? Property values. Westport has a much larger tax base per resident. This pattern repeats across America. Wealthy suburbs surround struggling cities. Affluent neighborhoods coexist with poor neighborhoods, often separated by municipal boundaries specifically drawn to hoard resources and exclude the poor.

The historical context matters. Local government fragmentation wasn’t accidental. As Jessica Trounstine documents in Segregation by Design, the proliferation of small, exclusive municipalities was often driven by white residents’ desire to concentrate public spending on white areas while excluding Black residents and other minorities.

The result is that the people who most need effective government services live in the jurisdictions least able to provide them. Poor communities have higher crime, worse health, more unemployed residents, older infrastructure, and more children in poverty. But they have lower property values, fewer high-income taxpayers, more residents who need services rather than pay taxes, weaker credit ratings, and less political influence. States do some redistribution through school funding formulas and other mechanisms. But it’s often inadequate. Disparities remain enormous. This destroys state capacity geographically. Effective government requires resources. The jurisdictions that most need to build administrative capacity are the ones that can least afford it. And because poor communities disproportionately serve people of color, the incapacity falls hardest on them, perpetuating racial inequality through government dysfunction.

The Fiscal Trap

Put all of this together, and the picture is grim. States and cities must balance budgets but can’t print money, so they can’t engage in counter-cyclical fiscal policy. When recession hits, they must cut spending exactly when needs surge, destroying capacity and making recessions worse. To avoid visible cuts, they underfund pensions, creating massive long-term obligations that crowd out capacity investments.

Even without recession, cost disease means services get more expensive over time, squeezing budgets. Medicaid spending is growing faster than revenues, crowding out other priorities. Fiscal capacity is unequally distributed, with poor communities least able to invest in the capacity they most need.

The result is a fiscal environment where state and local governments struggle to invest in administrative capacity even when they want to. They’re too busy managing crises, plugging holes, and robbing tomorrow to pay for today.

Part II: Death by Procedure

Now imagine a state agency head. Through some miracle, she has budget to hire more staff and upgrade her systems. She wants to make her agency more effective.

But to do almost anything, she needs to go through procedures: notice and comment rulemaking, public hearings, environmental review, legislative approval, judicial review. Each procedure, viewed individually, seems reasonable. Public participation is democratic. Judicial review prevents abuse. Environmental protection matters.

But collectively, these procedures act as a tax on government action. And for state and local agencies (smaller, less well-resourced than federal agencies), the effective tax rate is crushing.

State Administrative Law: More Restrictive Than Federal

Here’s something that surprises people: State administrative law is often stricter than federal administrative law.

Every state has its own Administrative Procedure Act. Every state has its own Freedom of Information Act. Many states have procedural requirements that don’t exist at the federal level.

Legislative vetoes are an example. At the federal level, legislative vetoes (where one or both houses of Congress can override agency actions) are unconstitutional after the Supreme Court’s 1983 decision in INS v. Chadha. But at the state level, they’re common. Twenty-four states give legislatures the right to veto or suspend agency rules. Eleven more give legislatures other tools to push back on agency actions. Imagine trying to run a regulatory agency knowing the legislature can undo your work without passing a new law, just by voting to reject your rule.

Non-delegation is stricter too. The federal non-delegation doctrine (limiting how much power Congress can give to agencies) is mostly toothless. The Supreme Court hasn’t struck down a federal statute on non-delegation grounds since the 1930s. State courts are more aggressive. They more frequently invalidate delegations to agencies as too broad, forcing legislators to write more detailed statutes or forcing agencies to seek specific legislative authorization for actions.

This matters because effective administration often requires flexibility. If agencies can’t adapt rules to changing circumstances without going back to the legislature, government becomes rigid and slow.

The Hearing Requirement

At the federal level, agencies adopting rules must provide notice and an opportunity for written comment. But they don’t have to hold in-person public hearings.

States are different. Many states require public hearings for any rulemaking, either automatically or if enough people request it. California, Florida, North Carolina, Michigan, Washington, and Massachusetts require public hearings for all rules. Illinois, Georgia, Texas, and Virginia require public hearings if 25 people request it.

Public hearings take time and resources. Agencies must schedule the hearing, publicize it, staff it, attend and conduct it, and review and respond to testimony. For a large federal agency with hundreds of staff, this is manageable. For a state agency with dozens of staff, or a local agency with a handful, it’s a significant burden.

California takes it further. In California, even guidance documents (not just legislative rules) must go through notice and comment. This means informal agency interpretations that in other states or at the federal level would just be posted on a website must instead go through full procedural requirements. Florida requires workshops before proposing rules. Agencies must hold public workshops to discuss potential rules before even issuing a notice of proposed rulemaking. This adds another layer of process before the process. Some states require detailed impact analyses. Texas requires cost-benefit analysis and additional analysis of the economic effects of new rules. New York requires extensive regulatory impact analyses describing fiscal impacts, effects on small businesses, and alternatives considered.

Each requirement is defensible individually. But collectively, they make state rulemaking slower and more expensive than federal rulemaking.

It’s Raining NEPAs

The National Environmental Policy Act (NEPA) has become a poster child for procedural excess in federal government. Environmental review of major projects can take years or decades. Litigation over NEPA compliance delays projects further.

But here’s what the federal-focused state capacity literature misses: At least sixteen states plus D.C., New York City, and Puerto Rico have their own “mini NEPAs,” and they’re often stricter than federal NEPA.

California’s version is particularly demanding. The California Environmental Quality Act (CEQA) requires environmental review of projects, plans, and policies; analysis of environmental impacts; “feasible mitigation measures” to address harms (stricter than NEPA’s language); public comment periods; responses to comments; and findings and statement of overriding considerations. CEQA applies not just to government projects but to private projects requiring government permits. Want to build housing? If you need permits from the city, CEQA applies. The result is that virtually all development in California triggers environmental review, adding cost and delay.

Massachusetts and Minnesota require “all practicable means and measures” to address environmental concerns, even stricter than California’s “feasible mitigation.” Hawaii’s version requires consideration of effects on “cultural practices of the community,” a broad standard that invites litigation over what counts and what impacts matter.

The compounding problem: For projects involving both federal and state approval (which is most infrastructure projects), officials must satisfy both NEPA and the state equivalent. This isn’t just double the work; it’s potentially contradictory requirements, different timelines, duplicative analyses, and multiple opportunities for opponents to delay projects.

Want to build a transit line? You’ll need federal environmental review (NEPA) because you’re getting federal funding, state environmental review (mini NEPA) because the state is involved, local environmental review (in some cities), plus all the other federal, state, and local permits. Each review has its own procedures, timelines, and litigation risks.

States can’t just hire more staff to handle this. Remember the fiscal constraints from Part I? State agencies don’t have unlimited budgets. They can’t simply hire dozens more environmental planners. So procedural requirements don’t just slow things down; they prevent things from happening at all.

Judicial Review: Stricter and More Accessible

When agencies act, courts review them. How intensely matters enormously.

Standing is much looser in states. Only about half of states have adopted the federal “injury in fact” standard from Lujan v. Defenders of Wildlife. Many allow taxpayer standing (any taxpayer can sue over how government spends money), public importance exceptions (courts hear cases that don’t meet normal standing requirements if the issue is sufficiently important), and citizen standing (any citizen can challenge certain types of government action).

Pennsylvania’s constitution explicitly guarantees “a right of appeal in all such instances” when rights are affected. Michigan’s constitution makes all quasi-judicial agency decisions “subject to direct review by the courts.” This means more litigation. When standing is easy, more people can sue. When more people can sue, agencies face more litigation, which slows everything down and makes agencies more cautious.

Deference is weaker. Only about fourteen states have adopted something resembling Chevron deference (and the Supreme Court recently eliminated Chevron at the federal level anyway). Most state courts apply “weak deference” or no deference at all to agency interpretations of law. Ohio has anti-Chevron rules: The Ohio Supreme Court has held that “any uncertainty” in legal interpretation “should be construed in favor of the person or entity affected by the law,” not in favor of the agency. This is the opposite of Chevron: systematic deference to regulated parties over agencies.

Substantive review can be more intense. While intensity varies, many state courts apply something like the federal “hard look” standard, searching review of whether agency decisions are arbitrary or capricious. Some apply even stricter standards. Money damages are more available. In at least ten states, including New York, New Jersey, and Michigan, money damages are presumptively available for constitutional violations by government officials. This is broader than the federal regime after the Supreme Court cut back on Bivens actions. The threat of personal financial liability makes officials more cautious, which can be good (preventing abuse) but can also paralyze administration.

Judges are elected in most states. Unlike federal judges with life tenure, most state judges face elections. Judicial elections require money. The biggest sources of judicial campaign money are business groups (supporting Republican judges) and trial lawyers (supporting Democratic judges). Both groups benefit from active judicial review of agency action: businesses want judges to constrain regulation; trial lawyers want opportunities to sue. This creates pressure for activist judicial review of administration.

The Participation Trap

Perhaps the most distinctive feature of state and local administrative law is the emphasis on public participation.

Every state has open meetings laws. These typically require advance notice of meetings, public access to meetings, public agendas, and limitations on private communications between officials. California’s is particularly strict. The Bagley-Keene Act (for state bodies) and the Brown Act (for local agencies) require all multimember governmental bodies to meet in public, dates, times, and agendas to be posted in advance, private communications about agenda items between a majority of board members to be prohibited, even one-on-one communications to be prohibited if they’re part of a daisy chain that reaches a majority, and the public to be able to attend and observe all meetings.

Many states require public comment periods. California and at least a dozen other states require government bodies to allow public comment at meetings. Not just observation: actual participation. This sounds democratic. But the reality is more complicated.

Who actually shows up? Research by Katherine Einstein, Maxwell Palmer, and David Glick found that participants in local government meetings are wealthier, older, whiter, and more likely to own homes than the median resident. A study cited on Wikipedia’s NIMBY page, published in Perspectives on Politics, confirms that these individuals overwhelmingly oppose new housing construction. A study of San Francisco planning commission meetings between 2018 and 2019 found the same pattern, noting a crucial structural barrier: planning meetings usually happen during weekdays, and most working-class people impacted by gentrification are unable to attend them.

The participants aren’t representative. And they certainly don’t represent people who might want to live in the community but currently don’t, like aspiring homebuyers priced out by restrictive zoning.

The land use disaster illustrates the problem. State enabling acts, often based on the 1924 Standard State Zoning Enabling Act, typically allow any “citizen” to participate in zoning decisions, even if they’re not directly affected. Combined with open meetings laws, this means zoning changes require public hearings, these hearings are dominated by homeowners opposed to change, officials who want to approve new housing face a room full of angry NIMBYs, aspiring homeowners aren’t there (they don’t live there yet), and renters often don’t attend (less time, less stake in property values). The result is that development gets blocked. Half of states require public hearings even for variances, individual exceptions to zoning rules. In tight-zoning jurisdictions, virtually all development requires variances, which means virtually all development requires public hearings dominated by opponents.

As Anika Singh Lemar argues, “public participation is utterly dysfunctional” in land use, and “poor people bear the brunt of that dysfunction.”

That said, the participation story may be more nuanced than the simple NIMBY framing suggests. A recent study in the Journal of Urban Affairs finds that regulatory preferences, rather than simple proximity, drive public acceptance for densification, suggesting that the focus on proximity oversimplifies the political dynamics at play. People’s opposition often reflects genuine concerns about regulatory design (who builds, how it’s built, what affordability requirements apply) rather than pure self-interest. This suggests the participation problem might be partially addressable through procedural reforms (evening meetings, remote participation, better notification of renters and prospective residents) rather than requiring wholesale elimination of public input.

Beyond land use, participation requirements empower organized interests across the board. Public employee unions dominate hearings about labor rules, industry groups dominate hearings about regulations, neighborhood groups dominate hearings about local services, and single-issue activists dominate hearings about their issues. Diffuse majorities, everyone who benefits from better government services, more affordable housing, or faster permitting, don’t organize to show up.

The Small Agency Problem

Here’s the crucial point about all these procedural requirements: They impose roughly fixed costs.

Holding a public hearing costs about the same whether you’re EPA with thousands of employees or a local planning department with five staff. Conducting environmental review takes roughly the same effort regardless of agency size. Defending against litigation requires similar resources whether you’re DOJ or a city attorney’s office.

But the effective burden is much higher for smaller agencies.

The federal government has enormous administrative agencies. EPA has roughly 17,000 employees, FDA has roughly 18,000, the Department of Education has about 4,000, and the Department of Transportation has around 55,000. These agencies can absorb procedural requirements. They have dedicated staff for FOIA compliance, rulemaking procedures, legislative affairs, and litigation defense. A public hearing is a routine matter.

State agencies are smaller. State environmental agencies typically have 100 to 1,000 employees, state education departments typically have 100 to 500, and state transportation departments typically have 1,000 to 5,000. They’re a fraction the size of federal counterparts, but face comparable procedural requirements (often stricter, as we’ve seen).

Local agencies are tiny. City planning departments often have 5 to 50 employees. Local health departments often have 10 to 100 employees. Municipal housing authorities often have 20 to 200 employees. For these agencies, procedural requirements are crushing. A small city planning department might have one person handling all environmental reviews, another handling all public hearings, and a third trying to actually do planning. When litigation hits, the city attorney’s office (maybe 5 to 10 attorneys total) must defend against law firms with dozens of lawyers.

The effective tax rate of proceduralism is inversely proportional to agency size.

This has serious implications for where state capacity is weakest. The jurisdictions that most need effective government (poor cities, rural counties) are precisely the ones with the smallest agencies facing the highest effective procedural burden.

Part III: The Vicious Cycle

How Fiscal and Procedural Constraints Reinforce Each Other

The fiscal straightjacket and procedural hyperactivism don’t just coexist. They reinforce each other in a vicious cycle.

Fiscal limits prevent addressing procedural costs. States can’t hire enough staff to handle procedural requirements efficiently. They can’t invest in technology to streamline compliance. They can’t afford specialized expertise in environmental review, legislative affairs, and so on. They can’t build institutional capacity to handle litigation.

Procedural requirements multiply fiscal problems. Delays increase costs as inflation hits projects and financing costs mount. Litigation is expensive in terms of attorneys, experts, and staff time. Excessive process means fewer projects get completed per dollar spent. Public hearings dominated by status quo defenders prevent cost-saving changes.

Poor outcomes generate demands for more restrictions. Government fails to deliver, so citizens distrust government. Distrust generates demands for more oversight, more transparency, more participation. More oversight means more procedures. More procedures mean worse performance. Worse performance means more distrust.

Interest groups exploit the complexity. Complex procedures favor those with resources to navigate them. Organized interests can use procedures to block changes they dislike. Diffuse majorities can’t effectively counteract this. The result: procedures protect the status quo and prevent capacity-building reforms.

The California-Texas Natural Experiment

We can see the vicious cycle most clearly by comparing states that have escaped it with states that remain trapped. California and Texas represent near-ideal natural experiments: both large, diverse, economically significant states with very different regulatory and fiscal regimes. Recent research provides striking comparisons that illuminate how fiscal and procedural constraints interact.

A 2025 RAND Corporation study analyzed cost data from more than 140 completed apartment projects across California, Colorado, and Texas. The findings are stark: The cost of building multifamily housing is 2.3 times higher in California than Texas, and the time to bring a project to completion in California is more than 22 months longer than in Texas. Municipal impact and development fees average $29,000 per unit in California, compared to less than $1,000 per unit on average in Texas and $12,000 per unit in Colorado. That’s a 29-fold difference in fees alone.

What drives these gaps? As Multifamily Dive reported, RAND attributes the gulf to differences in state and local policies that contribute to long permitting and construction timelines and higher local development fees. While California does have higher land prices, more expensive labor, and seismic safety requirements, the report found that most of the higher costs stem from policy choices.

The California YIMBY analysis of the RAND data breaks down the mechanisms. California’s slow permitting timelines impose a “time tax” of $1,284 per unit per month. California’s impact fees average more than 20 times higher than Texas. California’s predevelopment phase takes 27.9 months versus 13.1 months in Texas. Overly prescriptive design standards go far beyond legitimate safety requirements, with cost-of-living differences explaining only 10 percent of variation.

As Jason Ward, the RAND study’s lead author, wrote for CalMatters: “The average apartment in Texas costs roughly $150,000 to produce; in California, building the same apartment costs around $430,000, or 2.8 times more.” A privately financed apartment building that takes just over two years to produce from start to finish in Texas would take over four years in California.

The policy implications are clear. RAND recommends that California adopt a policy similar to Texas state law that requires local jurisdictions to approve or deny a proposal for a housing development within 30 days, or else it is presumed to be approved. Texas has such a rule; California does not. As Planetizen summarized: just two Texas metropolitan areas (Dallas and Houston) approved more new housing permits in 2024 than the entire state of California.

We should be clear about what we’re observing here. These are not merely “constraints” imposed on hapless California officials. They’re choices that California voters and legislators have made, repeatedly, over decades. Californians have chosen to prioritize environmental protection, worker rights, and public services in ways that Texans have not. The costs that result are the price of those choices.

This doesn’t mean California’s choices are wrong. Many Californians genuinely prefer stronger environmental protection, even at higher cost. They prefer prevailing wage requirements, even if they make public construction more expensive. They prefer a larger public sector, even if it requires higher taxes.

The state capacity critique is most powerful when focused on genuinely wasteful procedures: duplicative environmental reviews, excessive litigation, capture by narrow interests. It’s less powerful when applied to policy choices that reflect genuine democratic preferences about what government should provide and who should pay for it. A state that chooses high taxes, strong labor protections, and extensive environmental review isn’t failing to build capacity; it’s building a different kind of capacity, one that reflects different values. The question is whether the specific procedures are well-designed to achieve those values, or whether they’ve become captured by narrow interests that use them to block development regardless of broader public benefit.

Private Thrives, Public Struggles: Why?

Here’s the puzzle we opened with: Why does private enterprise in America work relatively well while public services struggle?

It’s not that Americans hate government or prefer small government. If that were true, we’d expect limited government to work well. Instead, we see something more complicated: Government is constrained in ways that prevent it from working effectively.

The private sector faces competition (if you don’t serve customers well, they go elsewhere), profit motive (efficiency creates value that can be captured), customer feedback (people vote with their wallets), flexibility (can reorganize, change strategies, try new approaches quickly), investment incentives (can borrow against future returns), hard budget constraints (bankruptcy is real), and consequences for failure (firms that fail actually fail).

The federal government faces electoral accountability (people pay attention to presidential and congressional performance), significant fiscal capacity (can borrow easily, print money, run deficits), some procedural burden (NEPA, APA, and so on), professional norms (civil service protections, expertise), and soft budget constraints (can always borrow more).

State and local governments face weak electoral accountability (voters don’t pay attention), severe fiscal constraints (balanced budgets, no money printing, limited borrowing), heavy procedural burdens (equal to or greater than federal, applied to smaller agencies), fragmentation (over 90,000 local governments including special districts, 50 state systems), organized opposition (public employee unions, incumbent businesses, NIMBYs), and no exit (unlike private firms, government agencies rarely close; unlike federal agencies, they can’t just expand budgets).

State and local governments have the worst of all worlds: They lack both market discipline and strong democratic accountability, while facing the strictest fiscal and procedural constraints.

We should be clear about what this comparison does and doesn’t show. It shouldn’t be taken as a blanket indictment of public sector workers or agencies. Many public employees are talented and dedicated. Many agencies accomplish remarkable things despite the constraints they face. But the structural environment makes sustained high performance much harder than in either the private sector or the federal government.

The comparison also shouldn’t obscure real problems within public agencies themselves. Public sector unions, while serving important functions, often resist reforms that would improve efficiency or accountability. Agencies sometimes gold-plate projects, adding features and requirements beyond what’s necessary. The California high-speed rail disaster isn’t just about CEQA; it’s also about governance capacity, project management failures, and an inability to learn from peer countries that build rail infrastructure at a fraction of the cost. These internal problems compound the structural constraints.

The Accountability Vacuum

The structural constraints we’ve described should, in a functioning democracy, generate pressure for reform. Voters who experience poor government services should vote for candidates promising to fix them. Politicians seeking reelection should have incentives to build capacity and deliver results.

But this feedback loop is broken at the state and local level.

Start with turnout. According to a study compiled by Portland State University for the Knight Foundation, in 20 of America’s 30 largest cities, voter turnout for electing community leaders like mayors and city councilors was less than 15 percent. School board turnout is even lower: the National School Boards Association estimates often just 5 or 10 percent.

The National Civic League documents the demographic skew. Affluent voters have 30 to 50 percent higher turnout in local elections than low-income voters. Those 65 and older are seven times more likely to vote in local elections than voters aged 18 to 34. White voters participate at rates 20 percent higher than non-white voters.

According to FairVote’s analysis, a 2013 study of 340 mayoral elections in 144 U.S. cities found that average turnout was just 25.8 percent. In some cities, mayors have been elected with single-digit turnout. Dallas’ 1999 mayoral election saw just 5 percent of eligible voters participate.

The Center for Effective Government at the University of Chicago summarizes the research: The relatively few voters who do turn out for local elections are unrepresentative of the overall electorate. White voters are significantly more likely to turn out than nonwhite voters, with Latinos and Asian Americans especially underrepresented. Voters have notably higher incomes and education levels than nonvoters.

Why does turnout matter for state capacity? Because the people who bear the costs of government dysfunction (renters priced out by slow permitting, workers who can’t afford housing near jobs, communities suffering from underinvested infrastructure) are systematically underrepresented among those who vote. Meanwhile, the organized interests who benefit from procedural complexity (homeowners protecting property values, incumbent businesses avoiding competition, unions protecting jobs) vote reliably.

Research from the University of Wisconsin confirms that moving local elections to coincide with presidential elections would have by far the largest impact on voter turnout. Switching to presidential-year elections yields an 18.5 percentage point jump in turnout; switching to midterm elections yields an 8.7 point increase. When Baltimore aligned its local elections with presidential contests in 2016, turnout soared from 13 percent to 60 percent.

Yet most cities maintain off-cycle elections. The stated rationale, that voters will pay more attention to local issues when not distracted by federal races, has it exactly backwards. What actually happens is that organized interests dominate low-turnout elections while diffuse majorities stay home.

This is why the constraints we’ve described persist despite their obvious costs. The people who bear those costs don’t vote in the elections that matter. The people who benefit from the status quo do. And so the trap endures.

Part IV: Escape Routes

Evidence That Reform Works

The picture we’ve painted is grim. But history suggests that structural reforms to state capacity can work.

Research by Abhay Aneja and Guo Xu published in the American Economic Review examined the Pendleton Act, the landmark 1883 federal civil service reform that shielded bureaucrats from political interference. Using newly digitized records from the Post Office, they found that civil service reform reduced postal delivery errors and increased productivity. These improvements were most pronounced during election years when the reform dampened bureaucratic turnover.

The Special District Model

Some jurisdictions have found ways around the fiscal and procedural straightjacket, and those escape routes actually work.

The mechanism? Special districts: independent, limited-purpose governments that exist separately from cities, counties, and states. According to the 2022 Census of Governments, there are now over 39,555 special districts in the United States, making them the fastest-growing category of local government. When we say there are “17,000 local governments” in America, we’re dramatically undercounting. That figure typically includes only general-purpose governments, not the sprawling universe of water districts, fire districts, transit authorities, and development districts that increasingly deliver public services.

The Government Finance Research Center at UIC calls these “shadow governments” that now comprise roughly 43 percent of all independent local governments. Their growth has been explosive: from just over 8,000 in 1942 to nearly 40,000 today.

Why does this matter for state capacity? Because special districts often serve precisely to escape the fiscal constraints we’ve described. They can issue debt that doesn’t count against city or county limits. Their obligations don’t threaten municipal bond ratings. They create self-financing mechanisms for new development.

Texas Municipal Utility Districts (MUDs) are the paradigmatic example, and they work at massive scale. According to official Texas government documentation, MUDs function as independent, limited governments authorized to issue bonds and levy taxes for infrastructure (water, sewer, drainage, and roads) without burdening the city’s balance sheet. The mechanism works like this: A developer finances infrastructure construction upfront. After completion and state approval, the MUD issues bonds to reimburse the developer and levies property taxes on residents to service the debt.

The fiscal engineering directly addresses the constraints we’ve described. As the City of Austin’s MUD overview explains, a MUD may issue bonds to reimburse a developer for authorized improvements and will utilize property tax revenues and user fees to repay the debt, with bonds that are not an obligation of the city. The city bears no risk for the development or the MUD while controlling infrastructure quality.

The scale is significant, and the results are undeniable. According to Harris County MUD 500, more than 1 million Texans live in special districts like MUDs, which have been used to develop numerous master-planned communities including The Woodlands (27,000 acres), Clear Lake City/NASA (15,000 acres), First Colony, Sienna Plantation, Cinco Ranch, and Bridgeland. In 2010, it was estimated that more than 2.1 million people resided in the approximately 650 special districts in the Houston metropolitan area alone.

The Texas Infrastructure Program has pioneered MUD receivable financing, allowing developers to access capital upfront using tax-exempt bonds backed by future MUD reimbursements. Since completing the first such financing in 2021, TIP has helped raise more than $1.4 billion of non-recourse debt to fund infrastructure projects across the state. A single March 2025 transaction secured $196 million for Starwood Land developments.

Whatever theoretical concerns one might have about MUDs, Texas is building housing at scale and California is not. For the families who can afford homes in Texas that would be unattainable in California, the practical difference matters more than abstract concerns about governance structure.

That said, the tradeoffs are real. The UIC Government Finance Research Center notes that higher levels of overlapping special districts correlate with 10 to 25 percent higher local government revenues, money that appears to go toward “excess spending” due to lack of coordination between independent entities. When multiple special districts overlap the same territory, each with its own overhead, administration, and board, inefficiencies multiply.

Special districts also have democratic deficits. Political participation in local government elections is already low; participation in special district elections is lower still. Board members are often appointed rather than elected, and when elections occur, turnout is minimal. Residents of MUDs may not fully understand the tax obligations they’re assuming or the governance structures that will shape their communities.

But here’s the key point: The existence of these escape valves complicates any simple story of structural constraint. Texas has found institutional workarounds that enable infrastructure development at scale. The question is not whether MUDs have costs (they do) but whether those costs outweigh the benefits of actually building housing and infrastructure that people need. For advocates of state capacity, the Texas model suggests that when general-purpose governments are too constrained to act, alternative institutional arrangements can fill the gap.

The deeper question is why these mechanisms haven’t diffused more broadly. California could, in principle, create similar special district structures to bypass its procedural constraints. That it hasn’t reflects political economy, not structural impossibility. The interests that benefit from California’s current arrangements (incumbent homeowners, environmental groups, construction unions) have successfully blocked reforms that would enable Texas-style development. The structural constraints are real, but they’re also politically maintained.

Well-Run Pension Systems

The contrast between well-run and poorly-run pension systems shows that governance choices matter.

South Dakota’s Retirement System has maintained a funded ratio at or above 100 percent every year since 2013 and was the only state where actual returns did not fall short of investment targets between 2001 and 2017. How? According to the Pew Charitable Trusts, the South Dakota Investment Council’s disciplined processes and low-cost investment management have consistently produced some of the top long-term returns in the country among state plans.

Analysis by ValueWalk found that South Dakota and Minnesota, the two best performing pension funds in one ranking, didn’t allocate any of their portfolios to alternative investments. South Dakota also maintains unusually high cash reserves (about 18.7 percent of its portfolio compared to a nationwide average of 1.8 percent), giving it flexibility to buy assets when markets are cheap rather than being forced to sell when they’re down.

The Wisconsin Retirement System offers another model. According to the Reason Foundation, while national public pension plan funding averaged 72.1 percent in 2017, WRS reported a market value-based funded ratio of 102.9 percent and an actuarial value-based funded ratio of 100 percent. This wasn’t something that happened by chance, but rather through a series of careful considerations and thoughtful, timely reforms.

The key feature, as Urban Milwaukee explains, is that post-retirement benefit increases can be “clawed back” if investment performance dictates, a risk-sharing feature that was the major reason WRS was able to climb back to the 100 percent funded level so quickly after the 2008-2009 meltdown. Wisconsin also maintains a conservative assumed rate of return and, crucially, has been disciplined about contributions. As the state investment officer told Route Fifty: “We never postponed a penny. We paid 100 percent on time, every time.”

According to Pew’s research, from 2007 through 2023, five states (Arkansas, Idaho, Nebraska, South Dakota, and Wisconsin) maintained their contribution volatility within 3 percent of payroll while maintaining well-funded pension plans. Meanwhile, Kentucky, New Jersey, and Pennsylvania had high levels of contribution volatility as policymakers struggled to address past shortfalls and policy mistakes.

These aren’t accidents or lucky circumstances. They’re the result of deliberate policy choices sustained over decades. Other states could emulate them if they mustered the political will.

Public pension funds also represent one of the largest pools of patient capital in the American economy: $6.5 trillion that could, in principle, be deployed strategically for infrastructure, economic development, and other long-duration investments that match pension liabilities. The Bank of North Dakota offers a glimpse of what strategic deployment of public capital could look like. According to Wikipedia, founded in 1919, BND is the only state-owned, general-service bank in the United States, using state deposits to fund short-term loan and bond financing for local and state infrastructure projects, direct lending to private borrowers, and banking services for local banks. Analysis by Ellen Brown found that the BND’s average return on equity from 2000 to 2023 was 19.51 percent (substantially higher than JPMorgan Chase’s 11.38 percent over the same period) and more than $1 billion has been transferred to the state’s general fund and special programs.

The Institute for Pension Fund Integrity compared all 50 states’ pension performance to a simple 60/40 passive index portfolio and found that only five of the 52 pension funds analyzed outperformed the 60/40 passive portfolio. IPFI’s president, a former Connecticut Treasurer, concluded bluntly: if a fund can’t outperform a basic balanced passive investment strategy, it is time to fire the fiduciaries and outsource the management of the pension fund to a simple, no cost, passive mutual fund.

Incremental Reform

Some jurisdictions are trying to reform existing institutions rather than bypass them.

California’s recent CEQA reforms represent incremental progress. According to the California Governor’s Office, Governor Newsom signed legislation in June 2025 including CEQA reforms to accelerate housing and infrastructure by streamlining CEQA review for infill housing, high-speed rail facilities, utilities, broadband, community-serving facilities, wildfire prevention, and farmworker housing. Whether these reforms will meaningfully close the gap with Texas remains to be seen. The history of CEQA reform is littered with modest changes that failed to shift the underlying dynamics.

Election timing offers another lever. Moving local elections to coincide with presidential elections would dramatically increase turnout, changing who participates and potentially shifting political incentives toward broader public interests rather than organized stakeholders.

What Would It Take?

Neither path out of the trap is fully satisfying. Reforming existing institutions requires overcoming the organized interests that benefit from the status quo. Creating alternative institutions risks fragmenting governance further. But the evidence that reform is possible (from Texas MUDs to South Dakota pensions to the Pendleton Act) should temper pessimism about the state capacity trap.

State constitutions are easier to amend than the federal constitution. State administrative procedure acts can be revised. Local budget rules can be changed. Election timing can be synchronized with federal races to boost turnout. Public participation requirements can be redesigned. Pension investments can be shifted to low-cost index funds.

Some reforms are harder than others. Unwinding decades of pension underfunding is more difficult than changing election timing. CEQA reform faces more entrenched opposition than shifting pension investments.

But reform requires coalitions. The people who benefit from change (renters who want housing, commuters who want infrastructure, taxpayers who want efficient services) are diffuse and poorly organized. The people who benefit from the status quo (homeowners, incumbent businesses, public employee unions, Wall Street asset managers) are concentrated and politically active.

Building coalitions for state capacity reform means making the stakes visible. When people can see the concrete costs of the status quo, pressure for change can build. The trap is maintained by political economy, not natural law. It can be escaped by political economy too.

Conclusion: The Trap Is Real, But Not Inescapable

Let us return to where we began, with a governor who wanted to make government work better.

The fiscal straightjacket means she can’t borrow to invest in capacity, can’t save enough for counter-cyclical spending, must cut during recessions when needs surge, faces pension obligations crowding out everything else, fights cost disease with inadequate revenue growth, watches Medicaid consume the budget, and sees poor communities struggle most.

The procedural trap means every action requires multiple hearings, environmental review takes years, any citizen can sue over almost anything, courts scrutinize decisions intensely, organized opponents exploit every procedure, small agencies can’t handle the burden, and projects take forever and cost fortunes.

The accountability vacuum means local election turnout often falls below 20 percent, voters who do participate are older, whiter, and wealthier, organized interests dominate policy processes, diffuse majorities stay home, and politicians face little pressure to reform.

These constraints are real. But they’re not natural laws. They’re the accumulated result of decades of political choices, each defensible individually, collectively creating a system where effective government is nearly impossible.

The evidence shows that escape is possible. Texas has built housing at scale through special districts that bypass general-purpose government constraints. South Dakota and Wisconsin have maintained fully funded pensions through disciplined contributions, conservative assumptions, and low-cost investment strategies. The Pendleton Act transformed federal administration by shielding bureaucrats from political interference. These are the result of deliberate choices, sustained over time.

Structural constraints explain much about why state and local government fails despite employing millions of capable people. But structures can be changed. The constraints are political, not natural. They’re maintained by interests who benefit from the status quo and changeable by coalitions willing to challenge them.

Whether American state and local government can meet the demands of the 21st century depends on whether such coalitions can be built.

The trap is real. But it’s a trap of our own making. We can unmake it.

In 2024 and 2025, the United States built data centers at a pace that dwarfed China’s. Amazon, Microsoft, and Google poured hundreds of billions of dollars into facilities exceeding a million square feet. Some rose in Loudoun County, Virginia: liberal-leaning, densely populated, exactly the kind of place where common wisdom insists America can no longer build, well, anything!

The same America that supposedly can’t build housing or high-speed rail because of restrictive zoning, environmental reviews, and procedural gridlock built data centers at breakneck speed.

Share

These projects faced real opposition. Data Center Watch documented 142 activist groups across 24 states organizing resistance. Local communities raised concerns about water consumption, energy strain, noise, property values. Over the past two years, $18 billion in data center projects were blocked or delayed, with another $46 billion facing regulatory challenges.

Yet as points out in his substack, , about how most data centers still got built.

Compare this to housing, where neighborhood opposition routinely kills projects. Or transit, where decade-long delays are normal. The contrast should make you suspicious.

Here’s what else got built despite nominal obstacles: Sports stadiums. Cities that can’t fix potholes somehow coordinate across multiple agencies to deliver billion-dollar stadiums with public financing. Highway expansions. The same DOTs that take a decade to plan transit lines fast-track highway widening. Tesla factories. Governor Gavin Newsom personally intervened to help Elon Musk navigate California’s regulatory maze to build factories that other manufacturers said were impossible.

The capacity isn’t gone. It’s selective.

For a decade, a “state capacity movement” has warned that America faces a governance crisis. They’re half right. Government struggles when serving diffuse public interests: people who want housing, riders who need transit, Medicaid patients seeking care. But government coordinates effectively when powerful private interests demand it: corporations with lobbying operations at all three levels of government, connected industries, wealthy individuals who can call governors directly.

That’s not a capacity crisis. That’s asymmetric capacity.

This article will show you what state capacity actually means, where it actually exists in America, and whose interests it actually serves.

The State Capacity Movement’s Federal Fixation

What We Talk About When We Talk About “State Capacity”

The term “state capacity” comes from development economics and political science. It means the ability of government to achieve its goals and produce good policy outcomes. Can the government collect taxes? Enforce contracts? Build infrastructure? Provide basic services? Prevent private violence?

Strong states can do these things. Weak states struggle. The difference matters enormously. There’s a reason Somalia and Switzerland have such different outcomes.

American intellectuals borrowed this concept for a more specific concern. The United States government seems less able than it used to be, or than peer nations are today, to accomplish basic tasks. We can’t build high-speed rail. Infrastructure projects cost multiples of what they cost elsewhere. Permitting takes forever. The basic machinery of governance seems broken.

This observation is correct. But understanding state capacity in America requires recognizing that it operates on three distinct dimensions:

Resource capacity: Can the government mobilize money, people, and equipment? Does it have fiscal resources to hire skilled workers, buy modern equipment, sustain programs over time?

Operational capacity: Does the government have expertise to design and implement effective policies? Can it collect accurate data, analyze problems, coordinate across agencies, adapt when circumstances change?

Political capacity: Can the government make and enforce decisions? Does it have legitimacy with citizens? Can it overcome opposition from organized interests? Can it maintain policy continuity across election cycles?

Strong states have all three. Weak states lack one or more.

The research concludes America has severe deficits in all three dimensions. That diagnosis misses something crucial: where these deficits actually exist.

The Federal Focus Problem

Consider the major works in popular books.

Brink Lindsey’s State Capacity: What Is It, How We Lost It, and How to Get It Back identifies problems across levels of government but directs virtually all its reform proposals at Washington. Staffing the federal workforce. Improving federal tax collection. Enhancing federal information technology. Streamlining federal environmental laws. Lindsey acknowledges that dispersing authority across federal, state, and local jurisdictions complicates policymaking, but dismisses constitutional reform as “a waste of time” because the Constitution is “absurdly difficult to amend.”

Rick Pildes’s “The Neglected Value of Effective Government” makes a powerful theoretical argument: Democratic theory overemphasizes values like accountability, transparency, and fair representation while neglecting effectiveness. But his examples focus on federal institutions. Short House terms. Federal campaign finance laws. The Voting Rights Act’s impact on congressional redistricting. Federal transparency laws. He notes that governance challenges “extend down to the local level,” but the analysis centers on national politics.

Steve Teles’s “Kludgeocracy” anticipated many current concerns, criticizing the byzantine complexity of federal programs and federal-state arrangements. His solutions? End the filibuster. Reduce congressional committee referrals. Give federal agencies more discretion. Establish a “norm” that whoever pays should also administer. Only this last proposal substantively addresses state governance, and it’s actually a call to end cooperative federalism as we know it. Politically impossible.

Even newer entrants follow the pattern. The Roosevelt Institute’s framework for “democratic state capacity” focuses entirely on federal issues: congressional funding for federal agencies, presidential initiatives, congressional and judicial oversight of federal regulators. The Niskanen Center’s “The How We Need Now” concentrates on actions for the White House, Congress, and federal civil society (but to be fair the Niskanen folks have a lot on state and local capacity).

The pattern is bit of a cliche. Identify state capacity as the problem. Concentrate analysis and solutions on federal institutions alone.

This consensus crosses ideological lines. Libertarian economists and progressive think tanks agree American government isn’t working. They agree we need more state capacity. They all look to Washington for answers.

They’re looking in the wrong place.

Imagine your house is sinking. Cracks spider across the walls. Doors won’t close. The floors slope noticeably.

So you hire an architect to redesign your roof. They’re excellent - they propose a stunning new roofline with solar panels! Not to mention it somehow provides better ventilation and improved insulation for the house! The plans are detailed and professional.

But your foundation is crumbling. The roof redesign won’t stop your house from sinking.

That’s where the state capacity literature is right now. It has correctly identified that something is wrong with American governance. The diagnoses of federal dysfunction are often accurate. Congress is gridlocked. Federal agencies are overburdened with procedural requirements. The proposed solutions (ending the filibuster, streamlining NEPA, increasing congressional staff) might well improve federal governance.

But most of what Americans experience as “government” isn’t federal. So federal reforms, however well-designed, can’t fix the problems most people care about most.

If you want to understand why your city can’t build housing, studying the filibuster won’t help. If you want to know why infrastructure is so expensive, analyzing federal agency staffing won’t provide answers. If you’re concerned about failing schools, debating the structure of congressional committees misses the point entirely.

You need to look at your city council, your state legislature, your state transportation department, your local school board.

Who Actually Governs America

Public Employment: Where Government Workers Actually Work

Let’s start with the most basic question: Who works for the government?

The federal government employs about 2 million civilians. Add active-duty military and postal workers and you get to 3.8 million. If you include contractors and grant employees, we are talking about 9.1 million. Even this upper bound requires heroic assumptions about which contractor employees are “really” government workers.

State and local governments employ 19.9 million people.

Read that again. State and local government workforces are more than double the size of the federal workforce, even using the most generous federal counting method. And it might be larger than these numbers suggest, because state and local governments also rely heavily on contractors, but those aren’t included in the 19.9 million figure.

Where Do State and Local Government Employees Work?

According to the U.S. Census Bureau’s Annual Survey of Public Employment & Payroll (ASPEP), which has tracked this data annually since 1957:

March 2019 Data (from the 2019 ASPEP Summary Report):

• 11.2 million in education (8.3 million at local level in elementary/secondary; 2.9 million at state level, mostly higher education)

• 1.1 million in hospitals (0.7 million local, 0.4 million state)

• 1.0 million in police protection (0.9 million local, 0.1 million state)

• ~0.7 million in corrections (based on 2010 Census data showing 731,692)

• Hundreds of thousands more in fire protection, highways, public welfare, sanitation, parks, libraries, and other functions

Nearly three-quarters of these government workers are employed by local governments. Not even states, but counties, townships, school boards, cities, special districts.

If personnel is policy, state and local governments are policy in America.

You might object: Sure, states and localities employ lots of teachers and police officers, but those workers don’t “set policy” the way an EPA official does. Federal regulators make the important decisions (whether to crack down on air pollution, approve a new drug, tighten scrutiny of banks).

This objection is wrong in two ways.

First, teachers and police officers do make policy, both explicitly and implicitly. School boards and police departments formulate policies of general application. But more fundamentally, the day-to-day performance of teachers and officers is policy. A school district with excellent teachers implements a very different education policy than a comparable district with poor teachers, regardless of what curriculum guidelines say. A police force that professionally serves the community implements a different public safety policy than one that shirks duties or abuses citizens. Their collective actions don’t just “influence” policy. They are policy in the most meaningful sense.

Second, most federal jobs aren’t actually that different from state and local jobs. Federal law enforcement (Customs and Border Protection, TSA, FBI) employs about 137,000 officers. The Department of Veterans Affairs employs 371,000 people running what is effectively the nation’s largest healthcare system, accounting for nearly 20% of the federal civilian workforce. The IRS employs 76,000 people, while state and local tax agencies collectively employ many thousands more doing essentially similar work.

The biggest difference isn’t that federal workers do fundamentally different jobs. It’s that there are vastly fewer of them.

Infrastructure: They Build It, They Run It, They Pay for It

High-quality infrastructure has symbolized effective governance since the Roman aqueducts. American politicians understand this. “Infrastructure Week” became a running joke in the Trump administration. The Biden administration passed the massive Infrastructure Investment and Jobs Act and proclaimed it would get America building again.

Yet here’s a basic fact that Washington’s infrastructure discourse obscures: The federal government owns almost no public infrastructure.

Outside of post offices, military bases, and some dams, federal infrastructure holdings are minimal. What the federal government does is provide money (grants to states and localities that actually build and operate roads, bridges, transit systems, water treatment plants).

Most of this money flows through formulas based on population and need, not specific project approvals. A smaller portion comes through discretionary grants requiring competitive applications. The federal government also runs loan programs and credit enhancements. But construction and operation remain firmly in state and local hands.

The numbers bear this out. In 2019 (pre-Infrastructure Investment and Jobs Act), according to the Congressional Budget Office and Census Bureau, state and local governments outspent the federal government across every infrastructure category:

• Highways: $131 billion (state/local) vs. $46 billion (federal) in 2017—representing nearly 3:1 state/local dominance

• Water utilities (drinking water and wastewater): 96% of total investment came from state and local governments($109 billion state/local vs. $4.5 billion federal in 2017)

• Mass transit and rail: State and local governments provided the majority of funding (total spending approximately $75 billion)

• Aviation, water transportation, and water resources: State and local governments outspent federal across all remaining categories

Overall in 2017, state and local governments contributed $342 billion (78%) of the total $441 billion in public spending for transportation and water infrastructure, while the federal government contributed $98 billion (22%). Before you bring up Build Back Better and the CHIPS act, I am taking a wait and see approach considering at time of writing and the chaos of current leadership.

These figures include both capital spending AND operations/maintenance. For operations and maintenance specifically (which the federal government largely ignores), state and local dominance is even more pronounced: In 2017, state and local governments covered $240 billion, or 90 percent, of the $266 billion total spending for operation and maintenance.

Your state and city don’t just build your infrastructure. They maintain it, operate it, and pay most of the bills.

Federal money comes with federal strings, of course. Environmental regulations, labor requirements, and procurement rules shape how states and localities build. We’ll come back to this. But the fundamental point stands: If you’re asking “who builds America’s infrastructure,” the answer is state and local governments.

The Cost Crisis and What It Reveals

American infrastructure costs are, bluntly, insane.

Transit costs illustrate the problem most starkly. The Marron Institute’s Transit Costs Project found that U.S. transit projects cost dramatically more than comparable projects elsewhere. The Second Avenue Subway in New York City cost, per kilometer, eight to twelve times the international average. Not double. Not triple. Eight to twelve times.

Compare some representative projects:

• Paris built 10 miles of automated subway for $3.8 billion

• Berlin built 13 miles of subway for $3.3 billion

• New York built 3.5 miles of the Second Avenue Subway for $17 billion

The U.S. doesn’t just have the world’s most expensive subway projects. It has the most expensive highway projects too. Zach Liscow and Leah Brooks found that the cost of building a mile of interstate highway has increased dramatically over time in ways that can’t be explained by rising wages or materials costs. These costs far exceed international comparisons and vary wildly across states within the U.S.

Why are U.S. infrastructure costs so high?

The Transit Costs Project’s analysis points to lack of state and local agency capacity. American transit agencies rely too heavily on consultants because they lack in-house planning expertise. They show little interest in how construction is done abroad. They’re internally divided by politics and labor organization, leading to bloated staffing requirements during construction. When Liscow and Brooks studied highway costs, their leading explanation was the increased power of “citizen voice” since the 1970s (the ability of project opponents to exploit legal and political tools to demand expensive mitigation measures and cause delays).

Let that sink in. The problem in this case isn’t that Congress is gridlocked (unstable funding is its own can of worms). It’s not that federal agencies are hidebound by procedural rules (though they are). The problem is that the governments that actually build things (state departments of transportation, municipal transit agencies, local water authorities) can’t build efficiently.

Property, Contracts, and the Rule of Law

Two features define capitalist economies: secure property rights and enforceable contracts. State capacity scholars rightly treat the security of these rights as crucial.

But here’s what often gets missed: The definition and enforcement of property and contract rights in America is overwhelmingly a state responsibility.

The primary bodies of contract and property law are state common law and state statutes. Yes, federal interventions matter. The Federal Arbitration Act affects contracts. The estate tax influences property transfers. Federal constitutional guarantees constrain state power. But the day-to-day content of property and contract law comes from state courts and state legislatures.

This matters more than you might think.

When State Decisions Shape Global Markets

Consider New York. Sophisticated parties drafting major commercial agreements must choose which state’s law will govern their deal. They choose New York law for about 46% of non-merger commercial contracts. About half of all sovereign debt contracts worldwide are governed by New York law. Seven judges on the New York Court of Appeals in Albany shape the rules for international sovereign debt, cross-border commercial transactions, and major domestic business deals.

Yet when Governor Kathy Hochul nominated Hector LaSalle to the Court of Appeals in 2022, the contentious public debate focused entirely on criminal law, social issues, and an anti-labor track record. No one mentioned commercial law. No one discussed the court’s role in making New York a global financial capital. No one asked how the nominee might affect the ability of governments worldwide to borrow money.

That same year, the New York Legislature began considering the “Sovereign Debt Stability Act,” legislation that would fundamentally change how sovereign debt restructurings work for bonds governed by New York law. The proposed law would create a comprehensive mechanism to restructure sovereign debt, override existing contract terms, and cap creditor recoveries under certain conditions.

This is a state legislature proposing to rewrite the rules for roughly half of global sovereign debt.

Critics (particularly in New York’s financial services industry) warn the Act would raise borrowing costs for vulnerable countries, trigger extensive litigation, and prompt a migration of sovereign debt contracts to other jurisdictions where contractual rights are more predictable. England. Texas. Delaware. Markets would route around New York if New York law became too uncertain.

The Act hasn’t passed. But the fact that it’s being seriously considered reveals something fundamental about American governance: A single state legislature can credibly threaten to reshape global financial markets. Not through superior expertise or careful coordination with international institutions. Simply by exercising the authority over contract law that the federal system gives to states.

State officials themselves sometimes forget they’re in charge of contract and property law. Markets don’t forget.

When State Courts Can’t Handle What They Control

Texas provides a different kind of example. The oil and gas sector generates over $4 trillion in profits annually. Texas produces 43% of U.S. oil and 29% of U.S. natural gas. Over 20 energy-related Fortune 500 companies are headquartered there. Oil and gas disputes originating anywhere in the country often look to Texas law as authoritative.

But for decades, much of this litigation was handled in rural Texas state courts where district judges presiding over “cattle call” dockets heard multimillion-dollar oil and gas disputes alongside family law and criminal matters. Appeals went to understaffed appellate courts covering vast geographic areas. Delays mounted. The state courts shaping rules for a trillion-dollar industry lacked the capacity to handle that role effectively.

Texas recognized this as a state capacity problem. In 2023, the legislature created specialized business courts with statewide jurisdiction for disputes exceeding $5-10 million, along with a new appellate court to review their decisions.The explicit goal: provide uniform, efficient resolution of complex commercial disputes that drive the state economy.

These examples expose a pattern. States control crucial economic infrastructure (contract and property law). Markets depend on this infrastructure working well. When it doesn’t work well, the consequences ripple far beyond state borders thanks to interconnected supply chains (and financial derivatives that are affected by shocks of said supply chains). International sovereign debt markets depend on New York courts and legislatures making predictable decisions. Global energy markets depend on Texas courts resolving disputes efficiently.

Yet state court capacity is largely invisible in national policy debates. The federal fixation means we don’t notice when state courts lack resources, expertise, or institutional design to handle what they control. We don’t connect judicial capacity to economic outcomes. We don’t see court reform as state capacity reform.

This is asymmetric capacity in a different form. Sophisticated parties can navigate inadequate state court systems through forum shopping, arbitration, or expensive lawyers. Smaller parties can’t. When state courts lack capacity to handle what they control, the dysfunction falls unevenly.

State courts are state capacity. When we ignore them, we’re ignoring where a lot of critical core economic governance actually happens.

Zoning and Land Use

Nowhere is state and local control of property rights more consequential than in land use regulation.

Local governments, via power delegated by states, control what you can build through zoning, building codes, subdivision requirements, historic preservation laws, and environmental regulations. Some states have clawed back power, but local control remains dominant and the federal government stays on the sidelines.

Restrictions on building housing have made it unaffordable across entire metropolitan areas. The consequences cascade: endemic homelessness, household precarity, reduced economic growth, increased inequality, racial segregation, environmental damage from sprawl.

Failure at Every Level

Land use is a prime example of failures at every level of government and in how those levels interact.

Federal: Shaped housing markets for decades through policies that subsidized sprawl (highway funding, mortgage interest deductions) and enforced racial segregation (redlining). Has constitutional authority to override exclusionary local zoning but refuses to use it.

State: Delegated land use authority to localities without adequate oversight. Created a system where each jurisdiction externalizes costs onto neighbors by blocking housing. Lacks political will to preempt local obstruction even when exclusionary zoning clearly harms regional housing markets.

Local: Responds to organized homeowners who dominate public meetings and blocks new construction even when most residents want affordability. Planning departments lack capacity to process permits efficiently.

Coordination: No level coordinates with the others. Federal policy subsidizes sprawl while most states delegate unchecked power to localities. Most localities block housing while demanding federal and state infrastructure funding. Nobody takes responsibility because responsibility is genuinely diffused across levels and can be easily gamed by people with extra time and a pen.

In October 2025, Senators Tim Scott (R-SC) and Elizabeth Warren (D-MA) got the Senate Banking Committee to unanimously advance the ROAD to Housing Act, the most significant pro-housing supply legislation in decades.

The bill offers incentives (competitive grants for jurisdictions that increase housing permits), technical assistance (helping cities identify zoning reforms), and modest penalties (reducing Community Development Block Grants for high-cost cities that refuse to build). It streamlines federal environmental reviews, reforms mortgage rules and manufactured housing regulations, and ties federal transit funding to local pro-housing policies.

What it refuses to do is override local zoning directly. The federal government has constitutional authority under the Commerce Clause and Spending Clause to preempt state and local laws, including zoning. It used this authority before with the Fair Housing Act. But the ROAD Act is a (small) step in the right direction, offering carrots and threatening small sticks, hoping localities will voluntarily reform.

This is the pattern: recognize the problem, identify the barriers, propose solutions that avoid confronting the actual source of dysfunction. The federal government won’t override localities. States won’t override localities. Localities won’t override homeowners. Housing doesn’t get built. Prices soar. Nobody can fix it because no level will act decisively.

When housing becomes unaffordable, voters blame “government” generally. They can’t trace the chain from federal sprawl subsidies through state delegation of authority to city council decisions blocking apartments. This is invisible if you’re only looking at Washington.

Public Safety: The OG State Function

A lot people will reference Max Weber as they defined a state as holding a monopoly on the legitimate use of violence within a territory. The ability to maintain that monopoly (to prevent private violence) is a central measure of state capacity in theory.

In the United States, preventing private violence is almost entirely a state and local function.

The numbers:

1.2 million state and local law enforcement officers (including 780,000 sworn officers)

137,000 federal law enforcement officers

1.5 million people in state prisons and local jails

200,000 people in federal prisons and jails

State and local governments spend more than four times as much as the federal government on police, more than twelve times as much on corrections, and three times as much on courts.

This decentralization has profound consequences.

Law enforcement responsibilities are scattered among more than 17,000 different agencies. About two-thirds of all officers work for local police departments, another 17% for county sheriffs. This radical fragmentation means we don’t even have good data on the number of crimes committed annually in the United States. International comparisons (straightforward in most wealthy countries) become exercises in estimation and approximation.

Prosecution is local too. District attorneys, elected at the county level, exercise enormous discretion over charging decisions. As John Pfaff argues in Locked In, the power of local prosecutors is the primary driver of mass incarceration, more than sentencing laws, more than drug policy, more than private prisons.

The United States has far more interpersonal violence than peer nations. The homicide rate is six times higher than the European Union average. The gun homicide rate is twenty-three times higher. This isn’t driven by higher overall crime rates (property crime rates are comparable to other wealthy countries). It’s about violence specifically, which is largely a product of firearm availability (state-regulated) and policing resources (state and locally funded).

State and local control of criminal justice means policy varies wildly. Some cities have defunded police; others have hired aggressively. Some prosecutors decline to charge certain offenses; others pursue maximum penalties. Some states have eliminated cash bail; others have expanded it. This variation can be valuable for policy experimentation. But it also means that when criminal justice fails (and by international standards, American criminal justice clearly fails), that failure is rooted in state and local governance.

The Safety Net Is State-Administered, (Partially) Federally Funded

State capacity scholars often use government’s ability to provide social welfare services as a measure of capacity. In the United States, the federal government finances a large portion of the safety net. But states and localities administer it.

The biggest program is Medicaid, which provides healthcare to about 95 million people (nearly 30% of the American population). Total Medicaid spending (including the Children’s Health Insurance Program) amounts to roughly 30% of total state expenditures, almost half as much as states spend on education.

The federal government pays for about two-thirds of Medicaid costs (varying by state). But states are entirely responsible for implementation. They set eligibility rules, design enrollment processes, determine benefits, establish cost-sharing requirements, and set payment rates for providers. They do so with broad “experimental” waivers granted by federal authorities. The result: fifty wildly different Medicaid programs.

States consistently struggle with administration: ensuring adequate provider networks, overseeing nursing home quality, preventing fraud. During the COVID-19 pandemic, state implementation failures led to massive coverage disruptions as states “unwound” temporary enrollment expansions. These aren’t federal failures. They’re state administrative failures.

Unemployment insurance tells a similar story. In a typical year, state unemployment agencies distribute about $40 billion in benefits. When COVID-19 hit and claims surged, thinly-staffed state agencies with antiquated computer systems collapsed under the weight. An estimated $163 billion in fraudulent claims were paid out. From 2013 to 2015 in Michigan, broken computer code led to 40,000 people being falsely accused of fraud, with some facing bills as high as $100,000.

States also administer SNAP (food assistance, $115+ billion annually to 22+ million households), TANF (cash assistance, $30+ billion for low-income families), housing vouchers ($30 billion through local public housing authorities), and school lunch programs feeding millions of low-income students daily.

The October 2025 government shutdown starkly illustrated how state administration of federal programs can fail. For the first time in the program’s 60-year history, SNAP benefits for 42 million Americans were at risk of not being disbursed. Federal courts had to intervene, ordering the administration to use contingency funds. Even then, recipients initially received only 50% of their normal benefits, with significant delays as state agencies struggled to recode their antiquated systems. Some states stepped in with emergency funding; others could not. The crisis exposed the fragility of state-administered safety net programs and the chaos that ensues when 50 different state systems must respond to federal funding disruptions.

Local governments run additional crucial services: public hospitals (roughly one-sixth of American hospitals, disproportionately serving low-income and uninsured patients), mental health facilities (about 7% of the nation’s mental health facilities), homeless shelters (emergency housing in most major cities), and public health clinics (basic healthcare in communities nationwide).

The COVID-19 pandemic starkly revealed the importance of state and local public health infrastructure. County health departments, state epidemiologists, and local hospital systems were the front line of response. Their capacity (or lack thereof) determined how communities weathered the crisis.

When Americans complain about government failing to provide basic services, they’re usually complaining about state and local failures.

A Historical Note

This federal fixation would have baffled earlier generations of Americans.

In the nineteenth and early twentieth centuries, the federal government consumed less than 3 percent of GDP. It was a bit player in most Americans’ lives. State and local governments built the infrastructure, regulated the economy, provided what limited social services existed. When scholars studied American governance, they studied state and local government. When reformers wanted to improve government, they targeted city hall and the state capitol.

And American government then, despite its many flaws, was actually pretty impressive by international standards. Consider the 1893 World’s Columbian Exposition in Chicago. The fairgrounds displayed what American city governments had accomplished: an electrical system with 16 generators powering 172,000 incandescent lights, a scale two to three times larger than Chicago’s entire commercial district. This wasn’t federal prowess on display. It was what American cities could do.

As historian Jon Teaford documented in The Unheralded Triumph, American cities of the late nineteenth century were remarkably successful at meeting unprecedented challenges. By 1900, American cities boasted the most abundant water supplies, brightest street lights, grandest parks, largest public libraries, and most efficient systems of transportation in the world. American cities had better infrastructure than their European counterparts.

The federal budget has since expanded dramatically. Federal spending grew from 3 percent of GDP in 1900 to over 20 percent in recent decades. Federal regulatory power has grown. These changes matter. But they haven’t fundamentally altered the fact that most governance (most of what “the state” does) happens at state and local levels.

What’s changed more dramatically is our attention. National media, national politics, and national policy debates dominate. State and local governance has become largely invisible, even though it affects daily life far more than federal governance does.

When Capacity Appears (For Those Who Can Demand It)

Now we can return to the puzzle from the opening: How does America build data centers and stadiums while failing to build housing and transit?

The answer reveals what American state capacity actually is.

America has coordination capacity. The federal government can act decisively when it wants to. State governments can fast-track approvals. Local governments can override opposition. The administrative machinery works when deployed.

The problem is deployment. That capacity activates for organized interests with money and multi-level lobbying operations. It doesn’t activate for diffuse public interests.

This isn’t a capacity deficit. It’s asymmetric capacity.

Let’s trace how data center coordination actually worked.

Tech giants needed to build massive facilities quickly. They faced nominal obstacles at every level of government. Federal environmental review. State permitting. Local zoning. Opposition from residents and activist groups that blocked or delayed over $64 billion in projects.

But tech giants possess something most constituencies don’t: the ability to operate across multiple venues simultaneously. They lobbied federal agencies and the White House. They negotiated with state governments. They pressured county boards and city councils. When one jurisdiction resisted, they credibly threatened to move the project elsewhere, creating competition among localities for their investment.

What distinguishes these cases? Three things. Money to hire experts who understand all three levels. Organization that enables simultaneous lobbying at federal, state, and local levels. Credible threats to move projects elsewhere if one jurisdiction doesn’t cooperate.

Diffuse constituencies have none of these tools.

The result: Trump issued an executive order accelerating federal permitting for data centers. States provided massive subsidies and fast-tracked approvals. Local governments overrode opposition. In Warrenton, Virginia, residents voted out all town council members who supported Amazon’s proposed data center. Amazon adapted its approach and many similar projects proceeded elsewhere.

The coordination happened. Federal environmental review moved quickly. State permitting bent. Local opposition, while real and organized, got overcome more often than not.

Sports stadiums follow the same pattern.

Cities that can’t fix potholes somehow deliver billion-dollar stadiums with public financing. Multiple agencies coordinate. Federal transportation dollars flow. State bonds get issued. Local zoning changes. Tax increment financing districts get created. Eminent domain gets deployed.

The coordination happens because stadium owners (wealthy individuals, sports leagues with sophisticated lobbying operations) can activate it. They operate across all three levels simultaneously. They can credibly threaten to move teams. They coordinate with officials at federal, state, and local levels to secure subsidies, expedite approvals, and override opposition.

Highway expansions follow the same pattern.

State DOTs that take a decade to plan transit lines fast-track highway widening. Why? Highway construction interests (construction companies, engineering firms, auto manufacturers) are organized at all three levels. They lobby federal transportation officials for formula funding. They work with state DOTs on project priorities. They secure local approvals.

Then there’s Tesla. Other manufacturers said California’s regulatory environment made building new factories impossible. Too many agencies. Too many reviews. Too many opportunities for opposition.

Elon Musk called Governor Gavin Newsom. Newsom personally intervened. State agencies coordinated. Permits moved quickly. Factories got repurposed. Electric Cars get subsidies and sold. Lawsuits about mass pollution get suppressed. Even Gavin Newsom admits “We created the market. There is no Elon Musk, there’s no Tesla without California’s regulatory framework, period, full stop. It wouldn’t exist. It was because of the regulations.” Across the Pacific pond, Xi is better at reminding EV manufacturers who butters their bread.

When powerful, connected interests need government to coordinate across federal, state, and local levels, government coordinates. Environmental reviews that normally take years move in months. Permits that normally take eighteen months get processed in weeks. Opposition that normally blocks projects gets navigated, accommodated, or overridden.

The capacity exists. The question is who can activate it.

When Coordination Fails (For Everyone Else)

Picture yourself as a state transportation director trying to build a subway line.

You need federal money. The project is too expensive to fund entirely with state dollars. So you apply for federal transit grants, competing with every other state. The application takes months. You hire consultants because your agency doesn’t have staff who understand federal grant procedures.

You get the grant. Now you need federal environmental approval. NEPA review begins. The federal government requires an environmental impact statement. This takes two years.

But you’re not done. Your state has its own Little NEPA requiring separate environmental review. Different process. Different timeline. Potentially contradictory requirements. Another 18 months.

Meanwhile, localities along the route each have their own review processes. Public hearings. Design review boards. Historic preservation commissions. Neighborhood consultation requirements. Each provides another opportunity for opponents to demand expensive modifications or delay the project.

You need god only knows how many different permits from how many different agencies at three levels of government. You lost count at 50 and 20 respectively

By the time you’re ready to break ground, costs have doubled. Your project now costs eight to twelve times what a comparable subway costs in Paris or Berlin.

This is American transit construction.

Read that again: eight to twelve times the international average.

Why? Not because American workers are less skilled. Not because American technology is inferior. Because the intergovernmental system multiplies points of failure. Each level requires its own environmental analysis. Each level has consultation requirements with overlapping stakeholder groups. Each level can impose design changes that require re-engineering.

Nobody coordinates to eliminate redundancy. Nobody coordinates to ensure the project gets built efficiently. The capacity to coordinate exists. We’ve seen it work for data centers and stadiums. But transit riders can’t activate that coordination the way tech giants can.

Housing follows the same pattern.

Local governments control zoning. State governments delegate that power but increasingly try to override exclusionary practices. Federal policy shapes housing markets through mortgage policy, transportation funding, and Fair Housing Act enforcement.

Each level has some authority. None has full control. No coordination mechanism exists to align efforts across levels.

Federal policy subsidizes homeownership and sprawl. State policy delegates too much power to localities without enough oversight. Local policy responds to homeowners who oppose new housing.

Housing doesn’t get built. Prices soar. Nobody can fix it because no level can coordinate action across all three levels the way stadium developers can.

Social services show the same dynamic. States administer Medicaid, covering 95 million people. The federal government pays for about two-thirds of costs. But states are entirely responsible for implementation.

This cooperative federalism model works when the federal government provides stable funding and reasonable rules. It breaks down when federal funding becomes a political football.

Trump’s “Big Beautiful Bill” cuts federal Medicaid funding. Virginia voters said these federal cuts affected their family finances and voted accordingly. But states face the immediate consequences. They can’t print money. They must balance budgets. So they either cut Medicaid or slash other services.

When Arkansas faced similar federal Medicaid cuts in 2017, the state responded by reducing eligibility, cutting benefits, and lowering provider reimbursement rates. Thousands lost coverage. Doctors stopped accepting Medicaid patients. Rural hospitals closed. The federal decision cascaded through state budgets and local service delivery.

When Medicaid patients can’t find doctors, voters blame “government” generally. They can’t trace the chain from federal budget decision through state fiscal constraints to their local clinic closing.

The pattern is consistent: Diffuse public interests (transit riders, aspiring homeowners, Medicaid patients) can’t activate the coordination capacity that corporate interests (tech giants, stadium owners, highway contractors) routinely deploy.

The capacity exists. Access to it is unequal.

How Other Systems Coordinate (And What That Reveals About Ours)

China provides the starkest contrast.

China has one of the world’s most complex, fragmented governance structures: 34 provincial-level governments, 333 prefecture-level cities, 2,800+ counties. Local governments control most implementation. They compete with each other, sometimes fiercely.

Yet China builds infrastructure at one-quarter to one-eighth of American costs, depending on project type. When China decided to build an EV industry, different levels deployed different tools in a coordinated strategy. Central government provided R&D funding. Provincial governments offered land and infrastructure. Cities provided consumer subsidies. Each level adapted national priorities to local conditions. Information flowed between levels. Successful approaches spread rapidly.

The result: China went from producing almost no EVs to dominating global production in 15 years.

The key difference: China’s coordination advances state-defined goals. Central authorities set priorities. Local governments implement them with substantial autonomy in execution. The Communist Party manages personnel across levels, rotating officials to spread knowledge and setting performance targets for career advancement.

The authoritarian versus democratic distinction matters enormously for normative reasons. We rightly reject systems that suppress dissent and eliminate political choice. But technically, both systems have coordination mechanisms. China’s mechanisms respond to party-defined priorities. America’s mechanisms respond to lobbying power.

Neither is neutral or “natural.” Both are designed, just designed to serve different interests.

Germany and Switzerland show democratic coordination is possible. These federal systems have strong state and local governments. They build infrastructure efficiently. They maintain excellent schools. They deliver high-quality services.

How? They’ve developed explicit coordination mechanisms.

Germany’s fiscal equalization system redistributes resources from wealthy to poor states, ensuring some level resources for capacity everywhere, even with an “austere” leadership from Merkel to Scholz with a “questionable” taste of policy. Which may explain why Germany is doing better than one would expect.

When Hamburg builds infrastructure, federal formulas ensure Bremen can too. Constitutional provisions clarify which level has authority over what functions. Joint federal-state planning bodies coordinate on shared priorities like university funding and regional development. When coordination is needed, institutional structures make it happen systematically, not through lobbying.

Switzerland’s cantonal system preserves remarkable local autonomy while coordinating through clear constitutional divisions of responsibility, revenue-sharing mechanisms, and horizontal agreements between cantons. When multiple cantons need to coordinate (on transportation, for instance), formal inter-cantonal conferences create binding agreements. The system enables both local variation and coordinated action when needed.

These aren’t perfect systems. But they demonstrate that multilevel governance can coordinate democratically when institutional design prioritizes public coordination over private access.

Here’s a puzzle worth considering: Many countries poorer than the United States have better public services. Their transit works better. Their infrastructure costs less. Their cities are cleaner. If the problem were that Americans fundamentally distrust government or prefer small government, we’d expect the opposite pattern. We’d expect America’s relatively limited government to work well. Instead, we see the reverse: Americans have grown increasingly distrustful of government because it performs poorly.

The state capacity crisis isn’t about American culture or American preferences. It’s about American political institutions, specifically about how state and local governments are structured and how they interact with federal policy.

America has cooperative federalism in theory. In practice: conflict, duplication, and selective coordination based on who can demand it.

The Wrong Tools for the Job

The state capacity literature identified a real problem but diagnosed it wrong. They concluded America lost state capacity. Actually, American state capacity deploys asymmetrically. The system works fine for concentrated interests, fails routinely for diffuse ones.

When major works in this literature focus almost entirely on federal institutions, they miss three crucial facts.

First, most governance happens at state and local levels. State and local governments employ ten times more people than the federal government. They build and operate infrastructure. They maintain public safety. They administer social services. They educate children.

Second, federal decisions shape what state and local governments can accomplish. Federal funding determines state resources. Federal mandates create state obligations. Federal regulations constrain state action.

Third, the coordination capacity exists but deploys selectively. Data centers, stadiums, highways, and Tesla factories prove government can coordinate across levels when powerful interests demand it.

This reframe matters for reform. But before discussing what to do, understand what not to do.

The conventional response to government dysfunction (especially from centrist reformers) borrows from private sector management fads. “Government efficiency.” Metrics and rankings. Performance management systems. These sound reasonable. They’re mostly destructive.

This isn’t systems thinking. It’s bad management dressed up as systems thinking.

The difference matters. Real systems thinking (W. Edward Deming’s Total Quality Management, Stafford Beer’s Management Cybernetics) starts from a fundamental principle: Management is responsible for system performance, not workers. When systems fail, look first at how management designed the system, what incentives leaders created, what constraints management imposed, what resources workers had.

Bad management fads and the government messes (Jack Welch’s Six Sigma, the Clinton administration’s National Performance Review, DOGE, most “government efficiency” initiatives) do the opposite. They treat workers as variables to optimize. They rank and rate individuals. They use metrics to identify “underperformers.” They cut staff and call it efficiency. They blame workers for system failures that management created.

When you hear someone propose “government efficiency,” ask what they mean. If they mean cutting staff and budgets, they’ll make capacity worse and only thing that would come from it is making Rahm Emanuel giddy with joy. If they mean redesigning systems so competent people can do their jobs effectively, that might help. But the former is far more common than the latter.

Real capacity-building requires investment: in people, in systems, in institutional knowledge. The cheapest government isn’t the most effective. Effective systems require resources, training, and time to develop.

This matters because intergovernmental coordination requires functional systems at each level. You can’t coordinate what doesn’t work. States with hollowed-out agencies can’t implement federal programs effectively. Localities without planning capacity can’t participate meaningfully in regional coordination. Cutting capacity in the name of efficiency makes coordination harder, not easier.

What We Can Actually Do

The ideal reform would build systematic mechanisms for intergovernmental coordination that serve public interests. Joint federal-state-local planning bodies. Fiscal formulas that reward coordination. Clear divisions of authority. Information-sharing systems. Germany and Switzerland show these mechanisms can work democratically, even with less than ideal national governments.

You’re not getting that. Not this decade, probably not next. Reform happens piecemeal: one state at a time, one policy area at a time, one level of government at a time. (Unless we learn on how to divide and conquer, you can imagine how mind-numbingly slow the reform process will be!)

Does that mean partial reforms are pointless? No. It means thinking strategically about which reforms create value even without full coordination, and which reforms make future coordination more likely.

If you’re working on federal policy: Focus on understanding what are the actual resources being sent to the states, not just mandates. States can’t coordinate effectively when they’re broke. Federal funding that gives states fiscal breathing room enables capacity-building. Reduce duplicative requirements where federal authority is clear, or use it to overwrite state law to assure that state and local players can’t block it if needed. The federal law (and not just in the US) can preempt duplicative state/provincial/prefecture/whatever reviews in areas of clear federal authority. Reward coordination when it happens through grants that prioritize multi-jurisdictional projects.

If you’re working on state/provincial/prefecture/whatever policy: Build capacity even if federal and local constraints remain. Hire more state agency staff. Develop in-house expertise. Modernize IT systems. When opportunities arise, states with capacity can act. States without capacity can’t. Preempt local obstruction where state authority is clear. State zoning reform that limits local blocking power doesn’t require federal coordination. Make it easier for other states to copy success by documenting what worked and sharing implementation guides.

If you’re working on local policy: Don’t wait for state or federal help. Cities can reform their own permitting, streamline their own approvals, and build their own capacity. Houston built affordable housing by simply allowing more building. Minneapolis upzoned without federal help. Build coalitions for state reform. Cities working together have more power than individual cities complaining separately.

This approach won’t produce optimal outcomes. Piecemeal reform is less efficient than systematic coordination reform. Redundant reviews will continue. Fiscal constraints will persist. Powerful interests will still activate coordination more easily than diffuse publics.

But “less than optimal” beats “paralyzed waiting for comprehensive reform.” The purpose of a system is what it does, and right now the system coordinates for concentrated interests. You will be surprised on what you can do, as I can go on the many different ways local governments can achieve remarkable results (especially with boosting birth rates!). Any reform that makes it slightly easier for diffuse interests to get coordination, slightly harder for concentrated interests to block things, or slightly more likely that good examples spread moves in the right direction.

Take the wins you can get. Build capacity where you can build it. Reform what you can reform. Create examples that demonstrate what’s possible. Build coalitions that can demand more.

The asymmetry won’t disappear overnight. But it can erode, piece by piece, reform by reform.

What You Should Take Away

If you care about housing affordability, infrastructure costs, school quality, or government effectiveness generally, understand this:

State capacity exists in America. Groups, especially well organized ones, can coordinate across federal, state, and local levels. We’ve seen it happen for data centers, stadiums, highways, and Tesla factories. The coordination mechanisms work when activated.

That capacity deploys selectively. It activates for interests that can lobby all three levels simultaneously, threaten to move investment elsewhere, and hire experts who understand each jurisdiction’s rules. It doesn’t activate for interests that can’t: transit riders, aspiring homeowners, Medicaid patients.

This isn’t an accident or natural outcome. It’s the result of institutional design (or the lack thereof). Other democracies coordinate across levels more systematically because they’ve built mechanisms that enable public coordination, not just private access.

The next time someone tells you American government lacks capacity, ask them three questions:

• Which government are they talking about? Most governance happens at state and local levels, not federal.

• How do different levels coordinate? The problems people care about most involve all three levels. Coordination determines whether government works or fails.

• Whose interests does that coordination serve? The answer reveals whether you’re looking at a capacity problem or an access problem.

The state capacity literature correctly identified that American government struggles. But by focusing almost entirely on federal institutions, it missed where most governance happens, how different levels interact with each other, and whose interests the system serves when it does manage to coordinate.

That’s not a neutral analytical oversight. It shapes which reforms get proposed and whose problems get solved.

The capacity isn’t gone. It’s selective. And until we understand that selectivity and how it is causing the crisis, until we see clearly that the system’s purpose is what it does, we even more limited on what we can do and what we can build. That’s where reform must start.

Share

In The Expanse, a character observes the civilizational contrast between Earth and Mars. Mars is unified by a dream: transforming a lifeless rock into a garden. Earth had a garden and paved it over. Mars still dreams; Earth gave up.

The observation resonates because it touches on lost state capacity: the ability not just to imagine better futures but to systematically build them. America once had that capacity. We built the Interstate Highway System, landed on the moon, created the internet. We were Mars. Somewhere along the way, we became Earth.

Share

Or so the narrative goes.

The same federal institution demonstrates both spectacular dysfunction and extraordinary implementation success.

The Dysfunction Is Real

The United States Department of Defense has failed its financial audit seven consecutive times since audits became mandatory in 2018. The Pentagon cannot properly account for its $824 billion budget. In 2024, auditors gave DoD a “disclaimer of opinion.” They couldn’t obtain sufficient evidence to form any opinion on the finances.

The F-35 Joint Strike Fighter program, once projected to cost $233 billion, now exceeds $428 billion in acquisition costs (84% over initial estimates), with total lifetime costs now exceeding $2 trillion. The aircraft remains plagued by cost overruns, delays, and poor performance. Mission-capable rates hover around 50-60%.

The Zumwalt-class destroyer program was cut from 32 ships to just three after costs ballooned to $7.5 billion per ship. That’s more than many aircraft carriers. The ship’s primary weapon system was canceled because ammunition cost $800,000 per round. Together with the Littoral Combat Ship, these programs “consumed tens of billions of dollars more to acquire than initially budgeted” and delivered far less capability than promised.

This is the military most Americans imagine: bloated, wasteful, bureaucratic, lost in its own complexity. These failures are real and staggering.

The Success Is Also Real

This same institution operates America’s highest-performing school system. DoDEA students scored 234 in fourth-grade reading on the 2024 NAEP, outperforming the national average of 214. That’s roughly two grade levels ahead. In eighth-grade math, DoDEA scored 291 versus 272 nationally. When 2024 NAEP results showed national reading scores declining, DoDEA was the only jurisdiction where scores increased.

The Pentagon runs the world’s safest nuclear energy program. For over seventy years, the Naval Nuclear Propulsion Program has operated more than 80 nuclear-powered vessels without a single reactor accident resulting in radiological release. Since 1968, no personnel have exceeded 5 rem/year radiation exposure, well below federal limits. Civilian nuclear power looks reckless by comparison.

Buried within the defense budget sits one of America’s most effective infrastructure implementation apparatuses: the Army Corps of Engineers. In Iraq alone, the Corps delivered over $9 billion in reconstruction projects. Schools serving 324,000 students. Crude oil facilities producing 3 million barrels daily. Water projects serving 3.9 million people. Delivered faster than it takes California to approve high-speed rail.

The Paradox

The Pentagon that cannot find warehouses containing billions in spare parts operates schools that consistently outperform Massachusetts. The institution that has missed its audit deadline for seven consecutive years maintains a seven-decade nuclear safety record without peer. The military that wasted $24.5 billion on three Zumwalt destroyerssystematically deploys renewable energy faster than civilian utilities.

These contradictions coexist within a single bureaucracy.

Policy circles obsess over state-level education reforms while ignoring the federal government’s most consistently successful schools. We debate renewable energy deployment while the Pentagon systematically builds microgrids. We agonize over infrastructure failures while the Corps delivers complex projects in war zones.

The left resists militarization of civilian functions. The right resists expansion of federal power. Both prefer not to acknowledge that the U.S. military may be better at implementing domestic policy than civilian agencies designed for that purpose.

But there’s a deeper story here, one that’s been almost entirely forgotten...

I. The Education Apparatus: Beyond K-12 Excellence

How DoDEA Became America’s Best School System

When fourth-graders in DoDEA schools scored 234 on the 2024 NAEP reading assessment, they outperformed every single state. The national average was 214. Their eighth-grade peers scored 282 versus a national average of 257. In mathematics, DoDEA fourth-graders averaged 251 against a national 237; eighth-graders hit 291 versus 272 nationwide.

These translate to proficiency rates of 53% in eighth-grade reading compared to 29% nationally, and 54% in fourth-grade math versus 39% nationwide. Unlike state reforms that show recent gains, DoDEA’s performance has been consistent for decades.

The immediate objection (a fair one) is selection bias. Military families have stable employment, guaranteed healthcare, housing. Officers are college-educated. Perhaps DoDEA’s success tells us nothing about educational methods and everything about student populations.

But this objection requires careful examination. DoDEA serves approximately 67,000-71,000 students across 160-163 schools in 11 countries, seven states, Guam, Puerto Rico. This is a diverse, geographically dispersed population including both officers’ and enlisted families. The system maintains consistent excellence whether schools are in South Korea, Germany, or Kansas. When states like Massachusetts and New Jersey (serving more advantaged populations than the national average) are compared to DoDEA, the Pentagon’s schools still win.

The reality of military family demographics is more complex than stereotypes suggest. Contrary to popular perception, military recruits don’t come disproportionately from poor families. A Heritage Foundation analysis found that enlisted recruits in 2006-2007 came from neighborhoods with median household incomes of $54,834, above the national average of $50,428. Low-income families are underrepresented in the military, while middle-class families are overrepresented. Over 60% of 2016 enlistments came from neighborhoods with median household income between $38,345 and $80,912.

Yet despite stable employment and middle-class origins, military families face significant challenges. Between 24% and 27% of active-duty military families experience food insecurity, roughly double the national rate of 13.5%. Approximately 15% rely on food stamps or food banks. This paradox (middle-class families with stable employment facing food insecurity) reflects the unique stressors of military life: frequent relocations every 2-3 years that disrupt spousal employment, unemployment rates for military spouses running 24 percent before the pandemic, housing costs in high-cost military locations, financial volatility of special pays and deployment-related expenses.

Military children also face elevated mental health challenges despite their families’ relative economic stability. Research shows that approximately 30% of military children show signs of distress after multiple parental deployments: increased anxiety, depression, declining grades, behavioral problems. Children with deployed parents have significantly higher rates of anxiety and depression compared to civilian children. Military children ages 5-9 admitted to hospitals are 113% more likely to receive an anxiety diagnosis and 93% more likely to receive an affective disorder diagnosis than non-military children.

When we discuss DoDEA serving a “selected” population, we must be precise: these families chose military life and passed background checks, yes. But they’re not uniformly affluent or problem-free. They represent a lower middle-class/working-class population facing unique, service-related stressors. Frequent moves that no family can opt out of. Extended parental absences during deployments. Elevated mental health challenges for children. Surprisingly high rates of food insecurity despite stable military paychecks.

This creates a “bit” of challenge. We can observe that the military implements systematically and produces superior results, but we cannot cleanly separate method effects from selection effects without experiments that will never happen. Military populations (whether K-12 families, nuclear operators, or officer candidates) represent fundamentally self-selected groups who have committed to military life with all its unique constraints and command structure. DoDEA families accept that they cannot quit mid-school-year when policies change. Naval Nuclear applicants come from the top 10% of candidates and most then wash out during training. Service academy applicants are pre-screened for leadership potential.

Selection operates at multiple levels: initial choice to join the military, continued commitment despite hardships, background checks and eligibility requirements, acceptance of authority structures that civilian contexts don’t impose. These selection effects likely explain some significant portion of military success, but we cannot determine if it’s 30%, 70%, or somewhere in between. That uncertainty should make us cautious about wholesale adoption of military methods for universal civilian populations. This constraint applies to nearly everything that follows.

What exactly does DoDEA do differently? The system implements technology integration throughout daily instruction, maintains consistent curriculum despite geographic dispersion, operates under centralized oversight with standardized accountability. Student-teacher ratios, facilities, and technology infrastructure exceed what most civilian districts can afford.

But here’s where the analysis gets uncomfortable: even accounting for these resource advantages and the complex reality of military family demographics, DoDEA’s consistent implementation of evidence-based practices across 160 schools (with no local school boards to fragment decision-making, no teachers’ unions to resist changes, no electoral pressures to chase pedagogical fads) may be intrinsic to its military structure in ways that don’t transfer to civilian contexts serving more diverse populations under democratic constraints.

From High School to Highly Specialized: Military Technical Training

If DoDEA demonstrates sustained K-12 excellence, the military’s technical training programs showcase something even more striking: the ability to take 18-year-old high school graduates and transform them into operators of extraordinarily complex systems, safely and at scale.

Consider the Navy’s Nuclear Power Program. Every six months, several hundred young sailors enter Nuclear Power School for six months of intensive theoretical training in nuclear physics, reactor engineering, thermodynamics, electrical systems. Survivors spend another six months at Nuclear Power Training Units operating actual nuclear reactors under supervision. All operators are qualified on operating naval nuclear propulsion plants before their first sea tour.

The program accepts only the brightest minds from among applicants, meaning significant selection effects are at work. But selection alone doesn’t explain the outcomes: approximately 8,000 personnel maintain the world’s safest nuclear enterprise. These aren’t theoretical physicists or MIT graduates. Most are enlisted personnel with high school diplomas systematically trained to operate the most dangerous technology humanity has created.

The contrast with civilian nuclear training is instructive. Naval Nuclear operators receive roughly 12-18 months of intensive training before touching an operational reactor. Civilian programs vary widely in rigor, duration, outcomes. The Navy’s operators face immediate, potentially lethal consequences for error; the training reflects those stakes.

Or consider Air Force pilot training, where Undergraduate Pilot Training takes officers through structured progression from basic flight to aircraft-specific qualification. The curriculum is standardized, assessment continuous, seat assignments performance-based. Graduation means you’re qualified to fly complex aircraft; there’s no ambiguity about competence.

Even military vocational training shows systematic skill development. The GI Bill enables veterans to pursue vocational training in automotive, HVAC, welding, culinary arts. DoD worked with the Departments of Labor, Education, and VA to develop vocational licensing and certification pathways that translate military training into civilian credentials. Veterans with military medical training have a 41.7% medical school acceptance rate versus 40.7% nationally, despite entering with 0.16 lower GPAs and 3.4 lower MCAT scores. The training quality compensates for lower test performance.

The implementation model common across these programs: clear standards at every stage, hands-on training on actual equipment before operational deployment, intensive screening up front, structured progression with defined milestones, long-term institutional commitment epitomized by the eight-year director terms at Naval Reactors (the longest standard assignment in the U.S. military).

Could civilian technical training replicate these outcomes? For nuclear plant operators, arguably yes. The stakes are similar, the technology comparable, NRC oversight already exists. The barriers are less technical than political: the cost per trainee would be astronomical by civilian workforce development standards but that can be scaled up and optimized.

For vocational training more broadly, the military’s success partly reflects captive audience advantages: trainees can’t quit mid-program, face clear consequences for failure, have strong incentives to complete. Civilian vocational programs serve students juggling work, family, financial pressures. A fundamentally different context.

Elite Development: The Service Academy Model

The service academies demonstrate what unlimited investment in elite development produces. West Point ranks #10 among National Liberal Arts Colleges with an 84% four-year graduation rate and 6:1 student-faculty ratio. The Naval Academy’s 9.4% acceptance rate makes it more selective than West Point’s 14%.

These institutions function as both elite universities and leadership development crucibles. West Point ranks among the top undergraduate engineering programs in the nation, with recent rankings showing #3 in civil engineering, #6 in mechanical engineering, and #7 in electrical engineering.

Total undergraduate enrollment at West Point is only 4,473. With roughly 1,300 cadets entering annually and 1,000 graduating, the per-graduate investment likely exceeds $450,000 over four years. That’s sustainable for producing a small officer corps; it’s fantasy economics for mass higher education.

But the academies exist alongside a larger, more accessible system: ROTC. More than 1,700 colleges and universities offer ROTC programs. Four-year scholarships cover full tuition, $1,200 annual book allowance, $420 monthly stipend. This makes college affordable for middle-class students who commit to military service. ROTC produces the majority of military officers; the academies produce only 20-25%.

The training methodology is worth examining. Cadets attend 35-day Advanced Camp at Fort Knox, the culminating leadership assessment. “Blue Cards” continuously record leadership abilities, physical fitness, military skills during labs and training. After-action reviews are conducted after nearly every event to assess leader and organizational actions, building a culture of continuous feedback.

Research on ROTC effectiveness reveals something unexpected: a study of 234 cadets found “temporal self-distancing” (the ability to see challenges from a long-term perspective) was the only significant predictor of leadership effectiveness among factors tested. This suggests the continuous cycle of challenge, stress, feedback, reflection may matter more than specific content.

Even high school JROTC programs (which create no military service obligation) provide leadership development, civic education, life skills training that many participants credit with transforming their trajectories. The curriculum addresses Common Core State Standards while developing core abilities and emphasizing integrity, civic engagement, preparation for post-secondary options.

The leadership development formula: performance-based assessment with continuous feedback, real-world scenario training under stress, mentorship from experienced personnel, clear progression pathways, integration of classroom and experiential learning. This isn’t rocket science. It’s sustained execution of known best practices.

What civilian higher education could learn here is genuinely unclear. Top universities produce excellent graduates through very different methods: more intellectual freedom, less structure, diverse pedagogies. Perhaps the lesson is that different populations need different approaches, and the military’s structured development model works brilliantly for those who choose it but shouldn’t be universalized.

Or perhaps the real lesson is simpler: massive investment in human capital development, with clear standards and consequences, produces results.

II. The Energy Powerhouse: Nuclear Excellence and Renewable Leadership

Seven Decades Without an Accident

In the seventy years since the USS Nautilus became the world’s first nuclear-powered submarine in 1955, the Naval Nuclear Propulsion Program has operated more than 80 nuclear-powered ships without a single reactor accident resulting in radiological release to the environment. The only notable incident occurred in 1978 on the USS Puffer when a valve opened releasing up to 100 gallons of radioactive water into a drydock. The water was fully contained, no personnel were irradiated, and the incident reinforced safety protocols. Since then: nothing.

Average annual radiation exposure for naval nuclear personnel is about one-tenth the natural background radiation the American public receives annually. No personnel have ever exceeded federal lifetime radiation exposure limits. Since 1968, none have exceeded 5 rem/year, which became the federal limit in 1994.

This safety record has international implications. U.S. nuclear-powered warships are welcome in over 150 ports in more than 50 countries precisely because the program’s well-documented record showing the absence of adverse environmental effects enables global port access. Nations that wouldn’t tolerate civilian nuclear facilities in their harbors accept American naval nuclear vessels because the safety case is overwhelming.

Compare this to the civilian nuclear power industry: Three Mile Island, Chernobyl, Fukushima. Even accounting for different risk profiles, the contrast is stark. The Soviet Union’s naval nuclear program experienced significant problems, demonstrating that military nuclear programs aren’t inherently safer. What makes Naval Nuclear safe is how it’s run.

The organizational structure is unique. Presidential Executive Order 12344 in 1982 established a dual-authority model where the Director reports to both the Secretary of the Navy and the Secretary of Energy, serving an eight-year term with total “cradle-to-grave” responsibility for every aspect of naval nuclear propulsion from design through decommissioning.

This institutional continuity matters. Eight years gives a director time to implement systemic improvements, see their consequences, be held accountable for outcomes. Compare this to civilian energy agencies where political appointees churn every 2-4 years. The Naval Reactors organizational structure has remained virtually unchanged since 1982, 42 years of institutional stability.

The program operates extensive research infrastructure. Bettis and Knolls Atomic Power Laboratories employ nearly 8,000 engineers, scientists, technicians, support personnel. Knolls operates prototype nuclear propulsion plants in New York for operational testing before fleet introduction. The Naval Reactors Facility at Idaho National Laboratory examines spent nuclear fuel and irradiated test specimens.

Independent oversight is rigorous. The U.S. Nuclear Regulatory Commission and Advisory Committee on Reactor Safeguards independently review each Navy reactor plant design. All U.S. naval nuclear powered warships use pressurized water reactors (PWRs) with established safety history. Four barriers prevent radioactivity release: the fuel itself, the all-welded reactor primary system, the reactor compartment, the ship’s hull. These barriers are “far more robust, resilient and conservatively designed than those in civilian reactors”.

The implementation secret: technical rigor combined with uncompromising standards, long-term institutional continuity, total lifecycle responsibility with no handoffs between agencies, intensive personnel selection, no separation between design, operation, and regulation, principles of personal responsibility, technical knowledge, rigorous training, auditing consistently applied.

Could this transfer to civilian nuclear power? The technical answer is probably yes. The political and economic answers are murkier. The per-operator training investment Naval Nuclear makes likely exceeds $100,000 and takes 12-18 months. Sustainable for a fleet of 80 ships, absurd economics for an industry competing with natural gas and renewables on price.

More fundamentally, Naval Nuclear’s organizational model (unified authority, no separation between regulator and operator, eight-year leadership terms) violates virtually every principle of civilian nuclear governance. We deliberately separated the NRC from the Department of Energy precisely because concentration of authority in nuclear matters terrifies us. The military gets away with it because military necessity overrides normal institutional safeguards. Replicating this in civilian contexts means accepting more concentrated authority than our regulatory philosophy allows.

Microreactors and Military Innovation

While Naval Nuclear operates proven technology, the Pentagon is now pioneering portable microreactors that could transform both military operations and civilian energy infrastructure.

Project Pele, launched by the DoD Strategic Capabilities Office in 2019, aims to develop a transportable, cost-effective advanced nuclear microreactor prototype. X-energy received an expanded $17.49 million contract in September 2023 to build a prototype at Idaho National Laboratory. Assembly begins in February 2025, with delivery targeted for 2026. The unit will be transportable in four 20-foot shipping containers.

The broader Advanced Nuclear Power for Installations (ANPI) program selected eight vendors in April 2025. The goal: design, license, build, operate microreactor nuclear power plants on military installations. Microreactors generate up to 20 megawatts thermal energy (small by power plant standards but sufficient for a military base or small town).

The strategic rationale is compelling. DoD uses approximately 30 terawatt-hours of electricity per year and more than 10 million gallons of fuel per day. The goal is generating 100% of mission-critical energy load at each installation by 2030.

Energy resilience matters for national security. Between 2002-2011, approximately 1,000 soldiers were killed on fuel-related missions to forward operating bases. Microreactors that eliminate those supply lines save lives.

But the real innovation may be the commercial dual-use potential. DoD is effectively de-risking early-stage projects for broader commercial adoption, using military procurement to validate technologies that private capital won’t yet fund.

This isn’t unprecedented. The Army Corps of Engineers successfully operated small nuclear reactors for remote sites from 1954 through 1979. The Shippingport commercial reactor (America’s first civil nuclear power station) grew directly from the naval nuclear program.

The innovation pipeline: DoD becomes early adopter and validator, the Defense Innovation Unit manages private sector partnerships, testing at military bases provides real-world operational data, regulatory pathways get established through DoD-NRC coordination, technology becomes de-risked for subsequent commercial deployment.

The model shows how military procurement can serve broader public purpose. GPS, the internet, countless medical technologies emerged from defense research. Microreactors could follow that path.

But limitations exist. Military procurement moves slowly despite rhetoric about “rapid advancements.” Project Pele launched in 2019 for 2026 delivery. Regulatory approval remains uncertain. The commercial business case depends on unit economics that won’t be clear until multiple units are deployed.

Renewable Energy at Scale

While the microreactor program represents the future, the Pentagon is already America’s largest deployer of renewable energy.

DoD has deployed over 750 megawatts of solar capacity across installations, representing 1.3 gigawatts of total renewable capacity installed since 2010. The portfolio includes 130+ operational renewable energy projects, with the Army alone operating 950 renewable energy projects supplying 480 megawatts.

The Army plans to add 25 new microgrids by 2024, with plans to incorporate microgrids in 100% of bases by 2035. The first Army microgrid was installed in 2013 at Fort Bliss, Texas.

Fort Riley, Kansas exemplifies the scale. Its 16-megawatt solar installation powers 40% of base housing. Camp Lejeune in North Carolina operates a 17-megawatt solar installation with microgrid system that kept critical operations running during Hurricane Florence in 2019 when grid power failed.

Los Alamitos Joint Forces Training Base in California showcases the most sophisticated system: a 26-megawatt hybrid solar microgrid combining solar, batteries, backup diesel with 14-day self-sufficiency in the event of civilian grid failure. When power isn’t needed for base operations, energy is distributed to the nearby San Diego region.

Perhaps most significant is the Duke Energy partnership announced in 2024: a $248 million contract providing 135 megawatts and 4.8 million megawatt-hours over 15 years, powering five installations through two newly constructed off-site solar facilities in South Carolina, operational by September 2026.

The resilience focus distinguishes military renewable deployment from civilian. Naval Air Station Jacksonville’s solar-powered microgrid can isolate from the main power grid within 15 milliseconds of detecting a threat, ensuring continuous operation during cyberattacks or widespread power outages.

An Association of Defense Communities 2018 report noted DoD is deploying renewable projects “because of increasing threats to the U.S. electric grid.” Russian hackers have proven capable of breaking into the power grid, a vulnerability that’s strategic, not theoretical. Energy independence isn’t just about carbon emissions or cost savings; it’s about operational readiness when adversaries target civilian infrastructure.

The implementation characteristics matter. DoD uses partnership models with commercial providers like Duke Energy and Corvias, integrates battery storage for resilience, feeds excess power back to civilian grids for community benefit, employs public-private partnership structures with clear contractual frameworks.

The deployment model differs fundamentally from civilian approaches. DoD prioritizes operational resilience over cost savings, though some bases report annual energy savings exceeding $1 million. Long-term contracts of 15+ years provide investor certainty that civilian utilities rarely offer. Technology integration combines solar, storage, grid management, backup systems in sophisticated configurations. Community co-benefits create local support and regional resilience. Learning from deployments systematically informs subsequent projects.

The military’s climate targets are aggressive: 50% installation emissions reduction by 2032, net-zero emissions by 2045, 100% carbon-free electricity by 2030 (Executive Order 14057’s requirement with 50% matching on a 24/7 basis), 100% non-tactical vehicle fleet electric by 2035. These aren’t aspirational goals. They’re mandated requirements with implementation plans and budgets.

What can civilian energy infrastructure learn? The procurement models (15-year power purchase agreements, public-private partnerships with clear risk allocation, standardized contracting frameworks) transfer directly. The technology integration approaches work for any large energy consumer: hospitals, universities, data centers, industrial facilities. The resilience-first mindset applies to critical civilian infrastructure that can’t afford downtime.

What probably doesn’t transfer: mission-driven implementation where operational resilience trumps short-term economics, the ability to make multi-decade commitments without electoral pressures, unified decision-making authority without regulatory fragmentation, acceptance of higher upfront costs for resilience benefits.

But here’s the uncomfortable insight: the military is deploying renewable energy at scale while civilian utilities struggle with similar projects. It’s doing so faster, at comparable or better costs, with superior resilience features, achieving community co-benefits. If a civilian federal agency or state government deployed renewables this systematically, policy circles would celebrate it as proof of concept for public-sector climate action. Because it’s DoD, the achievement gets ignored or dismissed as militarization rather than studied for replicable lessons. That’s ideological squeamishness preventing practical learning.

III. The Infrastructure Machine: Army Corps of Engineers

America’s Original Nation-Builders

Before the Department of Education existed, before the Environmental Protection Agency, before most federal civilian agencies, there was the Army Corps of Engineers, and it literally built America.

In the 19th century, the Corps built the bulk of the nation’s initial railways, bridges, harbors, roads. Westpoint was the only engineering school in the country until the founding of Rensselaer Polytechnic Institute in 1824. When America needed infrastructure, the Corps provided it.

Today, the Corps employs approximately 26,000 civilian employees on civil works programs across 38 district offices and multiple field offices worldwide. It manages construction, operation, maintenance of dams, canals, flood protection in the U.S., plus a wide range of public works worldwide.

The civil works portfolio is extensive. Congress authorizes three business lines: navigation, flood and storm damage protection, aquatic ecosystem restoration. The Corps generates 24% of U.S. hydropower capacity and administers the Clean Water Act Section 404 program.

But the Corps’ most striking work happens overseas. In Iraq, the Corps delivered over $9 billion in infrastructure projects including schools serving 324,000 students, crude oil production facilities with 3 million barrels per day capacity, potable water projects serving 3.9 million people, fire stations, border posts, prison and courthouse improvements, transportation infrastructure, communications systems, village roads, expressways, railway stations, postal facilities, aviation projects.

The Corps’ Middle East District currently operates Foreign Military Sales (FMS) programs providing infrastructure for partner nations. It provides master planning, engineering and design services including site planning, infrastructure layout, building systems, utilities, force protection requirements.

The deployment expertise matters most in crises. Forward Engineer Districts deploy to disaster and war zones, designed to provide immediate technical-engineering support. Corps personnel bring real estate, contracting, mapping, construction, logistics, engineering, management experience.

One part is project management infrastructure. The Defense Acquisition University has evolved over 40+ years to train project managers systematically. The training methodology seems simple enough, but the fact that there is in-house training is more than a lot of private firms and civilian administration. Students share personal learning goals with small groups; peer feedback sessions occur every few weeks using the Situation-Behavior-Impact (SBI) process. Integration of feedback practices increases the likelihood of use with real project teams.

But the Corps also operates under constraints, especially considering the bulk of their work is in water management. Congress typically authorizes projects through the biennial Water Resources Development Act (WRDA), with annual discretionary appropriations required before USACE can act. Nonfederal cost-sharing is required for most projects.

The Corps faces real challenges. Aging infrastructure at some facilities includes World War II-era organic industrial base with outdated depot equipment.

How the Corps Compares

The Corps offers advantages over private contractors: institutional continuity not driven by quarterly earnings, public interest alignment without the mercenary incentive structure Machiavelli identified in The Prince, extensive project management training infrastructure, proven ability to work in challenging environments, small business integration and local capacity building expertise.

Compared to civilian federal agencies, the structural differences matter: military discipline and clear chain of command, more robust decision making and governance structures (broad goals are set by the top, and decision making on topics is delegated to appropriate units), comprehensive project management training through Defense Acquisition University, access to military logistics and personnel in crises, faster deployment capability for emergencies.

The historical precedent is instructive. In the 19th century, the Corps built America’s foundational infrastructure because no civilian alternative existed. In the 20th century, it was assigned the military construction mission after the Quartermaster Department struggled. The New Deal deployed the Corps for major civil works. Repeatedly, when America has needed infrastructure built at scale and speed, it has turned to the Corps.

Could civilian infrastructure agencies replicate this capacity? The technical answer is yes. There’s nothing mystical about project management or engineering excellence. The political answer is much harder: Would Congress grant civilian agencies the authorities, continuity, resources the Corps enjoys? Would the local or regional unions accept the performance standards and deployment requirements? Would state and local governments cede enough control for centralized implementation?

The uncomfortable possibility is that we can’t have it both ways: we can have highly effective infrastructure implementation or we can have whatever we have now.

IV. What Separates Success From Failure (Fully Cited Version)

The Mississippi Lesson

Mississippi is America’s poorest state, with per capita income below $50,000 and spending less on public schools than all but three states. Yet Mississippi improved from 49th to 29th in fourth-grade reading between 2013-2019 and achieved top-tier results when demographic-adjusted by the Urban Institute in 2024.

Mississippi wasn’t the first state to pass literacy laws, but excelled at execution. The 2013 Literacy-Based Promotion Act mandated phonics emphasis, early screening three times annually in K-3, literacy coaches, third-grade retention. The state invested $15 million annually and sustained that commitment over a decade.

The implementation components: 55-hour training requirement for all K-3 teachers and principals, highly trained literacy coaches supporting classroom teachers, state test overhaul aligned with NAEP frameworks, intensive tutoring and summer literacy camps, sustained investment over a decade.

Mississippi’s largest NAEP gains occurred between 2013-2015 when no third graders were retained, refuting claims that retention created statistical illusions. Mississippi’s Black students now rank third nationally in reading; Hispanic students lead the nation.

Why didn’t this work elsewhere? Oklahoma passed a similar 2012 law, then defanged it two years later. More than half of U.S. states adopted early literacy policies in the last two decades, but most didn’t achieve Mississippi’s results. Policy adoption without implementation depth consistently failed (at least that’s my working theory).

Former Superintendent Dr. Carey Wright: “Educators do not call these achievements a ‘miracle’ because we know Mississippi’s progress in education is the result of strong policies, the effective implementation of a comprehensive statewide strategy and years of hard work from the state to the classroom.”

Mississippi didn’t invent phonics; the military didn’t invent training or safety protocols. Both simply executed well, consistently, over time.

The Lost Art of Government Implementation

What Mississippi and the Pentagon share isn’t just disciplined execution. It’s something the federal government once knew how to do systematically but largely forgot.

During World War II, the federal government faced chronic manpower shortages, inexperienced managers, bureaucratic dysfunction. The Bureau of the Budget launched what Kevin Hawickhorst calls a “work simplification” initiative. The concept was elegantly simple: teach managers to think critically about processes in their office and make them a little bit simpler each and every day.

The approach was adapted from “Training Within Industry” (TWI), the same methodology used to rapidly train workers in new war factories. Hawickhorst explains: “The Bureau of the Budget said, we can take this idea and adapt it for training government managers.”

W. Edwards Deming, the management consultant who would later transform Japanese industry, served as a long-term adviser to the Bureau of the Budget in the 1940s. His contribution: statistical control. Instead of trying to review every government transaction, agencies should use randomized spot checks and audits, then hold agencies accountable for managing their own work effectively.

The tools were deceptively simple. Managers learned process charting: documenting every step of how their office actually worked, then systematically eliminating unnecessary steps, combining related documents, streamlining workflows. : “It was a process for getting rid of process.”

The General Accounting Office provides a perfect example. The GAO tried to examine every single government transaction, resulting in cursory reviews, endless paperwork sent back for minor typos, no real fraud detection, everything hopelessly late. Deming’s solution: stop trying to look at everything. Use statistical sampling to spot-check agency work, relax controls, tell agencies to figure out good management themselves, but audit them randomly to ensure accountability.

This wasn’t just theory. The approach worked across government. These 1940s-50s practices were “the immediate precursors of total quality management and lean,” according to Hawickhorst. Training Within Industry died out in the U.S. after the war but became popular in Japan, where Toyota adapted it and called it “lean.” The government in the 1940s-50s “actually looks pretty modern” because “the actual founders of these disciplines were consulting for the government.”

Then something went wrong.

The Reforms That Made Things Worse

In the 1960s, American corporations embraced “long-run planning”: centralized planning offices setting high-level goals, generalist managers translating plans into actions, workers executing whatever they were told. The theory: better prioritization and long-term focus. The reality: more top-down control, more red tape, worse processes.

America was so economically dominant that the dysfunction wasn’t obvious. Hawickhorst: “People said, if General Motors and DuPont do it, then it must be modern management.”

The federal government decided it should adopt these “modern” corporate practices. The driving force: Robert McNamara, Kennedy and Johnson’s defense secretary, previously CEO of Ford. He was “keen to get the government to adopt these modern management practices, as he saw them.”

The irony is almost unbearable: “The government was actually much more modern before it was reformed than after.”The government in the 1940s-50s had progressive operational improvement, rapid iteration, workforce investment. Then in the 1960s, “people assumed it must be an outdated practice, and they actively went to get rid of it at the federal level.”

Corporate America would eventually pay for these bad practices. The companies that embraced centralized planning “got destroyed by Japanese competition”—competition using the very practices America had pioneered in the 1940s then abandoned.

The government paid an even steeper price. It traded systematic process improvement for planning bureaucracies. It traded workforce development for management hierarchies.

When Digital Transformation Actually Worked

One government success story from this era deserves attention: the modernization of the Internal Revenue Service under Treasury Secretary John Snyder in the late 1940s and early 1950s. It’s arguably the only truly successful case of government digital transformation.

The IRS in the 1940s was a disaster. Regional revenue collectors were political appointees: party donors and bigwigs. The predictable result: endemic corruption. Meanwhile, experienced accountants were leaving for the war effort, work was running hopelessly late (tax refunds took over a year), inexperienced staff couldn’t catch fraud.

Snyder, a businessman from Missouri and longtime Truman friend, diagnosed something crucial: the corruption and delays were “two sides of the same coin,” both symptoms of poor procedures and bad management. Hawickhorst: “All of these confusing procedures are what causes everything to be running late. And also, it gives cover to the corrupt officials.”

Snyder’s approach was revolutionary. Instead of just cracking down on corruption or throwing new processes at the problem, he focused on getting to the root causes: the fact that the organization didn’t make sense, documents were confusing, processes for processing returns were outdated.

His strategy started small. Low-ranking managers began improving office procedures and experimenting with new technologies at trial-run scale. The IRS reworked tax forms to be more legible. They combined related documents. They streamlined office workflows.

Snyder was “trying to change the culture, to get people thinking about the fact that the IRS had problems and they were responsible for fixing them. He started with the small problems with the aim of quickly working up to tackling the big problems, after he had won some successes and got people invested in reform.”

When corruption scandals broke and Congress tried to rake the IRS over the coals, Snyder could respond: “Shame on you. I’ve been working to make the IRS much better and here’s my successes.” Congress approved his reorganization plans.

The digitization initiative that followed was masterful. Snyder started with the most unambitious goal possible: taking a single tax form in a single office (Cincinnati) and seeing if they could automatically add up numbers instead of tallying by hand. Just one step. One form. One office.

When that worked, they expanded: other offices tried it, then multiple procedures on multiple forms, then producing records on punch cards, then integrating with Treasury headquarters. Hawickhorst marvels: “He had figured out the problems with waterfall and the benefits of agile decades in advance.”

The lesson for today’s digital transformation efforts: start small, prove it works, learn systematically, scale gradually, all while building culture change and institutional buy-in. Snyder’s IRS modernization took years but transformed one of government’s most troubled agencies.

When Reorganization Destroys Capacity

If Snyder’s IRS shows how reform can work, the U.S. Department of Agriculture shows how it can go catastrophically wrong.

The early USDA (in the 1900s and 1910s) was “the best department in the United States, the most competent,” according to Hawickhorst. Its structure was straightforward: multiple agencies each with technical focus. The Forest Service did forestry. The Bureau of Entomology did insects. The Bureau of Soils did soils.

Each agency combined expertise with mixed functions. Hawickhorst: “Each of those agencies had a narrow technical focus and they were able to attract pretty good people. If you’re an entomologist, the Bureau of Entomology could say, ‘Hey, this is the only place in the United States where you’re going to see such a breadth of issues in your career.’” Entomologists could do regulation, oversee research, talk to farmers about practices: “a little bit of everything.”

But the org chart looked “messy.” The secretary of agriculture had 10-20 people reporting directly to him. Reformers thought this lacked “integrated focus.” From the 1920s to 1950s, USDA was systematically reorganized: all scientific research moved to one agency, all farmer aid to another, all regulation to a third.

On paper, this looked much cleaner. In practice, it destroyed what made USDA effective.

The research agency, separated from farmers and regulation, “no longer work[ed] with farmers. It didn’t care that much about the usefulness of its research. Its research rapidly became much less applied.”

The farmer aid agency, isolated from research and other perspectives, “became completely and totally captured by the farm lobby. The agency did absolutely nothing except hand out money to the farmers.”

The reorganization “got rid of the mix of perspectives and the sense of mission.” USDA went from exemplar of government competence to just another agency.

The parallel to modern corporate organization is exact: classic USDA was structured like Apple (product lines that are self-contained, with some redundancy, focused on end products, constantly growing and improving). Modern USDA is like any struggling corporation: all R&D in one organization, removed from operations.

The lesson: organizational structure isn’t just about neat org charts. It’s about preserving mission focus, maintaining diverse perspectives within units, keeping expertise connected to application, resisting the temptation to make things look tidy on paper while destroying what actually works.

V. Why DoD Implements Better: Seven Structural Advantages

The Pentagon’s implementation advantages aren’t mysterious. Seven factors explain most of its superior execution and reveal the limits of transferability.

Long-term institutional continuity. Navy Nuclear directors serve eight-year terms, enabling deep expertise accumulation and continuous improvement. Typical political appointees serve 2-4 years, barely enough time to understand an agency. The military gets away with longer terms because defense is seen as above politics.

Comprehensive accountability. Clear chains of command with defined responsibilities. Performance standards at every level. Regular evaluation and structured feedback. Meaningful consequences for failure. When standards aren’t met, people are removed from programs because lives depend on competence. Civilian agencies have accountability systems on paper but rarely enforce consequences.

Training infrastructure investment. DoD trains its own implementers rather than relying on external markets. Nuclear Power Schools plus six-month prototype training represent enormous per-capita investments. Defense Acquisition University provides comprehensive program manager training. The civilian sector invests far less. Training is easy to cut when budgets tighten because effects aren’t immediate. This is precisely what the Bureau of the Budget understood with work simplification in the 1940s: systematic training in process improvement, sustained over time, compounds into organizational excellence.

Mission clarity. Operational readiness is measurable, urgent, consequential. Either the reactor operates safely or it doesn’t; either the pilot can land the aircraft or can’t. Civilian agencies serve multiple masters with conflicting objectives. Education must balance academic excellence, equity, social services, workforce preparation, democratic citizenship. These trade-offs are inherent to democratic governance. They make execution harder.

Integrated design-implementation. Organizations that design also execute and maintain. No handoffs. Feedback loops directly inform decision-makers. Naval Reactors has total “cradle-to-grave” responsibility from R&D through decommissioning. Civilian governance fragments authority: Congress authorizes, the executive implements, agencies issue regulations, contractors deliver, states and localities operate. This diffusion serves real purposes (checks and balances, federalism) but creates massive coordination costs. This was precisely what destroyed USDA’s effectiveness: fragmenting integrated agencies into separate functional units lost the accountability and feedback loops that made it work.

Tolerance for standardization. Military culture accepts centralized, uniform approaches. DoDEA’s curriculum is consistent across 160 schools in 11 countries. Standardization enables systematic improvement. Civilian contexts value local control and variation. This pluralism has benefits: innovation through experimentation, responsiveness to local conditions. But it prevents system-wide learning and quality control.

Selective personnel. The military can screen and select, particularly for officers and specialized roles. Service academy acceptance rates below 15%. Selection effects compound training effects. Civilian institutions serving universal populations can’t select this way.

The seven factors interact and reinforce each other. But they also explain why transfer is hard. Civilian institutions operate under different constraints: political churn, diffuse missions, fragmented authority, universal service. These aren’t accidents. They reflect conscious choices about democratic governance.

The critical question isn’t whether civilian agencies can copy military methods wholesale (they can’t and shouldn’t). It’s whether civilian agencies can selectively adopt some practices (intensive training, continuous feedback, long-term leadership, outcome accountability) while preserving democratic values.

Mississippi suggests the answer is yes: disciplined implementation of known best practices, sustained over a decade, with adequate resources and political support, produced dramatic gains. Mississippi didn’t become the military. It remained a civilian education system with local control, democratic accountability, universal service. But it borrowed implementation disciplines: standardized training, systematic assessment, consistent support, sustained focus.

The historical record shows civilian government once knew how to do this. The work simplification programs of the 1940s-50s. Snyder’s IRS transformation. The early USDA’s integrated technical agencies. The Civilian Conservation Corps. These weren’t military operations. They were civilian government implementing excellently through systematic process improvement, careful organizational design, sustained investment in workforce development.

The Marshall Legacy

The Pentagon’s implementation excellence isn’t primarily a product of modern military leaders being superior managers. These are inherited institutional practices, organizational cultures, structural frameworks largely established during and immediately after World War II under leaders like General George C. Marshall, called the “Last Roman” by Churchill and the “Organizer of Victory” by Eisenhower.

Marshall’s legacy includes the systematic training infrastructure, the emphasis on after-action reviews, the integration of technical expertise with operational command, the long-term institutional continuity that enabled knowledge accumulation. These practices were codified during the massive expansion of the military in the 1940s and became embedded in organizational DNA.

The same inherited structures that enable Naval Nuclear’s seven-decade safety record and DoDEA’s educational excellence also coexist with significant modern management failures. The Pentagon has failed its financial audit seven consecutive times. In 2024, DoD received a “disclaimer of opinion.” The department can’t properly account for 63% of its $3.8 trillion in assets. The target to correct this: fiscal year 2031.

This reveals a critical insight: the military’s operational excellence in specific domains (nuclear safety, certain educational outcomes, renewable energy deployment) coexists with severe administrative and financial management failures. Modern military leaders inherit both functional practices (training systems, safety protocols, standardization) and dysfunctional ones (accounting chaos, inventory management failures, bureaucratic bloat).

The lesson isn’t “military leaders are better managers than civilians.” It’s that specific inherited organizational practices in particular domains work remarkably well, while others are catastrophic failures. These successes deserve study precisely because they’re replicable systems and processes, not dependent on the genius of any particular generation of leaders.

When we talk about learning from the Pentagon, we’re really talking about learning from what Marshall and his generation built. The same institution that operates the world’s safest nuclear program also can’t locate warehouses containing $126 million in spare parts and routinely procures equipment it may already own.

VI. The Uncomfortable Truth

The data compels an awkward conclusion: the U.S. military implements certain domestic functions (education, energy deployment, infrastructure projects) better than civilian agencies designed for those purposes. DoDEA consistently outperforms every state. Naval Nuclear operates 70 years without accidents while civilian nuclear struggles with safety. The Army Corps delivers complex projects globally while civilian infrastructure crumbles.

The capabilities exist within the federal government. They’re just in an institution we’re uncomfortable expanding for domestic purposes.

The historical record proves civilian government once had this capacity. The Bureau of the Budget’s work simplification programs. Snyder’s IRS transformation. The classic USDA’s integrated technical agencies. The Civilian Conservation Corps that employed Norman Borlaug and built infrastructure across Depression-era America. These achieved implementation excellence without militarization. We abandoned proven practices for “modern management” fads that made things worse.

Three Paths Forward

Study and Adapt: Commission comprehensive analysis of current military practices and historical civilian successes. Test adapted methods in pilots. Scale based on results.

Cautious Expansion: Expand Army Corps civil works authorization for urgent infrastructure needs. Include strict safeguards: time-limited missions, Congressional authorization for each expansion, civilian agency leadership, sunset provisions.

Build Civilian Capacity: Establish civilian equivalents of Defense Acquisition University. Implement 6-8 year terms for key positions. Resurrect work simplification training. Create modern versions of programs like the Civilian Conservation Corps, using the Army Corps as an organizational model.

None of these paths are easy. The first requires years of research while crises compound. The second creates mission creep risks. The third demands political commitments unlikely to survive electoral cycles and faces opposition from contractors profiting from current inefficiencies, unions protecting work rules, and those concerned about federal overreach.

What we’re doing now: ignoring military implementation capacity while starving civilian agencies, then expressing shock when projects fail.

VII. What Might Actually Work

This analysis doesn’t claim certainty about what will succeed. It identifies patterns worth testing.

Research First

Political parties, local, state, and federal governments and agencies can and should study implementation practices: current DoD operations, historical civilian successes (work simplification programs, Snyder’s IRS, classic USDA, Civilian Conservation Corps), international examples.

Document what actually works. DoDEA’s operational procedures. Naval Nuclear’s safety culture. Army Corps project management. How the Bureau of the Budget trained managers in the 1940s-50s. Why McNamara’s reforms made things worse.

Run pilots. Scale what succeeds.

Specific Tests Worth Running

Education: Partner struggling school districts with DoDEA. Adapt teacher training, continuous assessment, literacy coaches. Resurrect work simplification training for school administrators.

Infrastructure: Army Corps project management for selected civilian projects. Test small business development approaches. Simultaneously, establish civilian project management training modeled on Defense Acquisition University.

Training: Open DAU courses to civilian project managers. Establish new civilian training programs based on work simplification principles.

New Civilian Corps: Create modern equivalents of the Civilian Conservation Corps, using Army Corps organizational structure for civilian infrastructure and climate adaptation work.

All pilots need: pre-specified outcomes, independent evaluation, clear metrics, honest assessment of what works and what doesn’t.

What Could Transfer Now

Long-term leadership: Authorize 6-8 year fixed terms for directors of major programs. This worked before the 1960s reforms.

Training investment: Establish civilian project manager training. The Bureau of the Budget’s work simplification materials still exist in archives.

Integrated authority: For selected programs, grant single agencies responsibility from planning through operation. Don’t fragment integrated functions to make org charts neat.

After-action reviews: Require systematic learning from major projects.

The Political Reality

Building support requires a coalition: governors frustrated by federal inflexibility, unions where training provides career pathways, climate and infrastructure advocates, defense hawks, public administration scholars.

Opposition will come from: contractors profiting from inefficiency (see the fight AMLO had in Mexico with his republican austerity!), those opposing federal power, unions protecting current rules, civil liberties advocates worried about militarization.

Success requires: federal employees, state and local officials, teachers, project managers. Top-down elite reforms fail.

The appropriations process remains the binding constraint. Military gets stable multiyear budgets; civilian agencies fight for scraps annually. Changing this requires increased spending, reallocation, or acceptance that improvement proceeds slowly.

Constitutional constraints (Posse Comitatus, federalism, separation of military and civilian spheres) aren’t bugs. They’re features protecting against authoritarianism. Reforms will be slower and more compromised than military models. That’s acceptable.

What Earth Forgot

Civilian government once knew how to implement effectively. The Bureau of the Budget trained thousands of managers systematically. Snyder transformed the IRS through careful iteration. USDA’s integrated agencies produced applicable research. The Civilian Conservation Corps built infrastructure that still functions today.

We abandoned these practices for management fads. We fragmented integrated agencies. We stopped training managers in process improvement. Japanese competition later destroyed American companies using the very methods America had pioneered then discarded.

The question isn’t whether democratic governance can match authoritarian efficiency. Can we learn from success wherever it exists and do the patient work of building capacity while preserving democratic values?

DoDEA serves 70,000 students exceptionally. America has 50 million public school students. Naval Nuclear operates 80 ships without incident. America needs hundreds of new nuclear plants. The Corps delivers globally. America needs trillions in infrastructure investment. Scaling excellence 714 times is different from demonstrating it works.

But scale challenges are arguments for proceeding carefully, not for inaction.

The path forward: learn from current military practices, resurrect civilian successes from the 1940s-50s, study international examples, honestly assess why 1960s “reforms” failed. Test adapted methods through rigorous pilots. Invest in civilian training. Establish leadership continuity. Accept that democratic governance won’t achieve authoritarian efficiency.

This requires facing uncomfortable truths: The federal government’s most effective implementation engine sits in the wrong agency. We had effective civilian practices and abandoned them. Civilian weaknesses reflect political choices. Building alternatives requires authorities and resources we’ve been unwilling to grant.

The Expanse poses a difficult question: What happens when the dysfunctional-but-free civilization can no longer maintain the infrastructure that makes freedom possible?

The answer can’t be abandoning democracy. But it can’t be accepting permanent dysfunction while pretending we don’t know how to implement effectively. We have examples. Mississippi proved dramatic improvement is possible. The Bureau of the Budget proved it’s possible.

Whether we choose to remember what we once knew, learn from what works now, and build the civilian implementation capacity that makes democratic promises credible remains an open question. That’s the work democracies must do. Harder than ignoring successes or outsourcing to generals. Harder than pretending we lack models. But it’s the only path that preserves democratic control while improving execution.

In an era when authoritarian states claim superior implementation capacity, that’s the challenge of 21st-century governance.

Share

Walk through downtown San Francisco or Los Angeles and you’ll navigate a shifting obstacle course of tents, human waste, and unstable individuals. Business districts that once thrived now see foot traffic evaporate as customers avoid entire blocks. Parents can’t take children to public parks. Elderly residents can’t use their own sidewalks. The social contract that public spaces belong to everyone has collapsed.

Between 2015 and 2022, Los Angeles County’s homeless population surged by 56% while Houston’s fell by 32%. Today, California houses 28% of America’s homeless population with just 12% of its residents. San Francisco’s homelessness rate is nearly 20 times higher than Houston’s.

Share

California has spent over $27 billion on homelessness in recent years. The difference is systems architecture. Houston and Dallas built something that works. California built something that doesn’t, then spent billions pretending otherwise.

This matters because instability breeds instability. When encampments persist for years, residents and business owners face constant uncertainty. When sweeps just move people two blocks over, when every neighborhood waits to see if it will host the next relocated camp, the crisis simply shifts location without resolution.

Texas Democrats proved there’s an alternative through disciplined systems that create stability by resolving homelessness at scale. They didn’t do this primarily to help homeless people, though that happened. They did it because sprawling street encampments make cities unlivable, and the only way to make them go away permanently is to house the people living in them.

What Texas Cities Actually Built

The success in Houston and Dallas came from building operational infrastructure to make encampments disappear permanently instead of temporarily.

Houston designated the Coalition for the Homeless as a “backbone” organization with real power: control over funding, management of a unified data system, and authority to enforce performance standards across over 100 partner agencies. Dallas did the same with Housing Forward, deliberately restructuring its governing board from one dominated by service providers to one controlled by major sector leaders from philanthropy, corporations, and county government. A board of service providers protects existing programs and funding streams. A board of resource-controllers thinks systemically and imposes strategic alignment.

This created what California lacks: a single entity in a city that can tell nonprofits what outcomes they must deliver, find the appropriate metics, and cut funding if they’re aren’t playing ball or refusing to do their job. One organization with the authority to impose order on what was previously chaos.

The architecture: centralize strategy, decentralize operations. Texas cities mandated unified intake systems so people enter the housing system the same way regardless of entry point. They required all partners to use the same data system so performance is transparent and comparable. They set clear metrics: housing placements per dollar spent, time from intake to placement, retention rates. But case managers retained autonomy in how they work with clients. Nonprofits could innovate in service delivery.

California does the opposite. It allows 44 different Continuums of Care to pursue incompatible approaches with fragmented data systems. But it imposes extensive compliance requirements on how nonprofits must staff programs and structure services. The system can neither coordinate at scale nor adapt locally.

Houston has housed over 33,000 people since 2012 with a 90% retention rate. The city’s homelessness rate stands at 52 per 100,000 residents, the lowest of any major U.S. metro. Street encampments don’t migrate from neighborhood to neighborhood because the system resolves them. Only after residents are housed does the encampment close permanently. The tents disappear because the people who lived in them now have addresses.

Inspired by Houston’s work, Dallas’s first downtown pilot housed 107 chronically homeless individuals in under 100 days. The site hasn’t returned to an encampment.

The operational workflow in Texas: Street outreach teams engage encampment residents. Everyone undergoes the same assessment and gets placed on a unified priority list based on objective vulnerability scores. When housing becomes available, it goes to the highest-priority match. Case managers handle everything: finding apartments, negotiating with landlords, covering move-in costs from flexible funding pools braiding federal grants, local government funds, and private philanthropy.

San Francisco’s 200 Days of Displacement

Mayor Daniel Lurie was elected on a platform of building more homes and cleaning up the streets. “We are just getting started,” Mayor Lurie said in March 2025, promising to be “relentless” in clearing Mission Street and the side alleys of unpermitted vendors, drug dealing and drug use. Two hundred days later, the results document what enforcement without housing capacity produces.

San Francisco’s experience in the Mission District is instructive. For 200 days, the city deployed police, street outreach teams, private ambassadors, and Public Works crews to clear the area around 16th and Mission Streets.

The pattern is mechanical. Clear Mission Street between 15th and 16th, drug users and encampments move to Caledonia north of 15th. Clear those alleys, Capp Street fills up. Station an ambassador on Capp to keep it clear, within an hour, “10, 15 people all piled up again,” according to the private security team. When that block finally clears, “around the corner, on the south side 16th street, more than a dozen people were doing drugs out in the open.”

San Francisco reorganized its entire street team structure, consolidated workers from seven departments under unified leadership, added private ambassadors working 11:30am to 8pm daily, and maintained consistent police presence. After 200 days, they’ve moved the crisis from block to block.

A mother picking up her child from Marshall Elementary found a drug user sitting on the school stairs. She used to call security guards stationed at nearby temporary housing, but that facility closed. Business owners on Capp Street report staff fear for their safety. One resident described “dozens of clothing items and several suitcases scattered throughout the street. Feces was smeared on the sidewalk.”

Residents can’t plan because they never know which block will host the next rotation. A restaurant owner found the ambassadors effective at clearing his block while streets behind him got worse. The city achieves temporary cosmetic improvement on prioritized blocks while crisis intensifies elsewhere.

Most telling: 200 days into Lurie’s cleanup priority, city officials still cannot answer whether they’re connecting people to permanent shelter or “just pushing people to different places.” When a supervisor demanded data on outcomes in May, the city asked organizations for suggestions on improving data collection. Four months later, it remains “unclear if any changes are underway.”

Houston would answer this question in real-time through its mandatory HMIS. Every interaction is logged. Every housing placement is tracked. Retention rates are measured. San Francisco doesn’t know because it lacks the infrastructure to know. The city fills shelter spots quickly each morning, but “it’s unclear if the people in those spots move into permanent housing or if they end up back on the street.”

Houston houses people first, then closes encampment sites permanently. San Francisco deploys enforcement first, achieves temporary displacement, and watches areas refill. Houston tracks every person from intake through permanent placement. San Francisco can’t determine if anyone is being permanently housed at all.

The Human Cost of Managing Crisis Indefinitely

San Francisco’s approach doesn’t just fail to resolve homelessness. It creates dangerous, unaccountable systems that put workers at risk without solving underlying problems.

On September 27, 2025, Joey Alexander, a 60-year-old Urban Alchemy employee, approached a man using drugs outside the Main Library near City Hall. Alexander asked him to stop, noting there were families nearby. The man pulled a shotgun from his bag, said “F— Urban Alchemy,” and shot Alexander at close range. Alexander died three days later.

Urban Alchemy workers are unarmed. They don’t hold state licenses like private security guards. Their job is to ask unhoused residents to move their belongings off sidewalks, discourage drug users from using in public, and reverse overdoses. Alexander is at least the third Urban Alchemy worker to be shot while on duty.

The organization itself embodies California’s dysfunction. Founded in 2018, Urban Alchemy has grown rapidly to tens of millions in contracts across California cities by hiring formerly incarcerated individuals as “ambassadors” to manage street disorder. But the model has serious problems. Two former employees filed lawsuits alleging a supervisor sexually harassed multiple women; Urban Alchemy transferred him to Portland and gave him another supervisory role. When an LA worker was filmed hosing down a sidewalk feet from a homeless person scrambling to save belongings, Urban Alchemy initially fired him, then reinstated him months later. Several ambassadors have been accused or convicted of serious crimes including attempted murder.

When Los Angeles’s controller tried to investigate the hosing incident, Urban Alchemy sued to block oversight, and the city attorney sided with the nonprofit against the elected controller. The organization resists transparency about how it spends taxpayer money while collecting millions in public contracts.

California outsources street management to contractors with minimal oversight, deploying workers without adequate security backup to enforce behavioral norms where violent individuals may be present. The system regulates workers but not leadership. Violent individuals exist in every city and require law enforcement response, but California compounds the danger by using contractors as the front line while perpetually managing rather than resolving the crisis. Alexander died doing work that required security support he didn’t have, deployed by an organization that resists accountability.

Why California’s Architecture Fails Everyone

California’s dysfunction stems from getting the architecture of control backwards: decentralizing what should be unified while centralizing what should be flexible.

The housing bottleneck. California faces a structural deficit of 3.5 million units and builds fewer than 80,000 homes annually when 180,000 are needed. Median rent stands at $2,200 versus $1,233 in Texas in 2023.

Housing someone annually through Houston’s system costs approximately $18,000. Building a single supportive housing unit in Los Angeles averages $600,000, sometimes exceeding $700,000 in 2022. Even if California had Houston’s operational efficiency (which it doesn’t) the underlying economics break the model.

Houston has no zoning code, making it cheap and fast to build housing. Dallas maintains far more permissive development policies than California. California’s regulatory gauntlet (restrictive zoning, CEQA litigation weaponized to block development, endless permitting delays) actively prevents housing production.

Strategic fragmentation, operational rigidity. California operates nine separate state agencies administering 41 different homelessness programs. Despite spending $10,786 per unhoused person (versus Texas’s $806), the system cannot convert resources into outcomes.

California had political advantage. Houston and Dallas are blue cities in red states, forced to build systems without state support. California has unified Democratic control from Sacramento through city councils and used that advantage to avoid hard choices.

The nonprofit-industrial complex. California maintains rigorous oversight of most government contractors but homeless services nonprofits operate in a privileged space where political connections matter more than outcomes.

The August 2025 San Francisco case: Providence Foundation signed off on $105,000 in falsified invoices for maintenance work that never occurred. Investigators found rust and fungus on walls the nonprofit claimed it had painted. The organization hired family members of executives in violation of anti-nepotism rules. Labor enforcement found wage theft. The consequences: a $1 million settlement, leadership changes, continued city funding.

Another provider, HomeRise, operates nearly a third of city-funded homeless housing. An audit found it spent $12,500 on a social event and $200,000 in bonuses while oversight remained minimal.

California’s homeless services became a sprawling industry of nonprofits that produce activity metrics (beds provided, meals served, case management hours) while avoiding the outcome metric that matters: permanent housing placements per dollar spent.

Texas cities broke this through structural reform. Houston’s Coalition and Dallas’s Housing Forward were given real authority: control over funding decisions, management of unified data, power to enforce performance standards. The unified data system makes every organization’s performance transparent. Organizations that don’t deliver housing placements lose federal grants to competitors.

These lead agencies don’t dictate how to do case management. They set clear outcome expectations and require transparent reporting. Nonprofits that perform well get more funding. Those that don’t either improve or exit. California could do this (the state has unified political control and far more resources) but it would require confronting politically embedded organizations.

California’s Two Failed Approaches

For years before Governor Newsom’s enforcement push, California, especially under Newsom, normalized urban decay. Encampments grew from tent clusters to semi-permanent settlements blocking sidewalks, filling parks, creating public health hazards. The 2016 legislation codifying Housing First was treated as victory rather than starting point, as almost like it was an excuse not to, you know, build the units. Money poured into programs without backbone organizations to coordinate them, unified intake systems, or mandatory data participation.

Los Angeles County’s homeless population rose 56% between 2015 and 2022 despite billions in investment. Business districts emptied. Parents couldn’t take children to parks. The frustration grew because the policy imposed costs on working and middle-class residents while delivering no visible progress.

Newsom’s pivot to enforcement (executive orders demanding clearances, a model ordinance requiring relocation every three days, threats to withhold funding) represents different dysfunction, same failure. California still hasn’t built infrastructure that would allow enforcement to resolve homelessness rather than relocate it.

San Diego conducted 6,400 encampment clearings, stored belongings 36 times, and saw them recovered just 4 times. One woman’s kidney medication was confiscated during a sweep; her body swelled with fluid for days until a doctor could rewrite the prescription. She moved two blocks and rebuilt. Imagine what kind of destabilizing effect it has on the homeless who see this stuff? It’s not exactly a stabilizing experience, and instability does not bring out the best in people.

Requiring moves every three days doesn’t make encampments disappear. It makes them proliferate unpredictably, and may even metastasize them like a cancer. For residents, this is worse than static encampments. At least with permanent camps, you knew which blocks to avoid. Now every neighborhood waits to see if it will host the next rotation.

California’s permissive era (letting encampments grow) and enforcement era (forced relocations) produce the same outcome. Permanent instability. Both approaches treat homelessness as something to be managed indefinitely rather than systematically solved.

The Political Choice

California’s Democrats had unified control from Sacramento through city councils and chose to protect organizational interests over building functional systems. Houston Democrats (let alone Dallas Democrats working in a purplish blue government), operating as blue cities in red states without state support, made the opposite choice: confronting nonprofit interests, centralizing strategy, and enforcing performance standards. California spent billions avoiding hard choices. Texas cities with a fraction of those resources built systems that work.

Houston’s achievement is particularly instructive given the city’s structural fragmentation. Beyond lacking traditional zoning, Houston must navigate special-purpose districts, restrictive deed covenants, and a ring of heavily zoned suburbs and exurbs that historically resist regional coordination on any issue, and aren’t that fond of the homeless. That the Coalition for the Homeless could unify over 100 partners across this fragmented landscape demonstrates what political will can accomplish. If Houston can build a coordinated system despite these obstacles, California’s failure to do so with far greater structural advantages becomes harder to excuse.

What This Means for Other Cities

Cities contemplating reform should understand the Texas model requires building specific infrastructure:

Designate a single backbone organization per city with real authority over funding, data, and performance standards. This must be an entity focused on system coordination, not service delivery. Half-measures (creating “coordinating committees” without enforcement power) accomplish nothing.

Mandate unified intake and data systems. Every person entering the homeless response system goes through the same assessment. Every organization reports into the same database. Performance becomes transparent and comparable. Without it, you’re managing organizational silos, not solving homelessness.

Braid flexible funding by combining federal grants with local government commitments and substantial private philanthropy. The flexible private capital removes the small barriers that collapse housing placements.

Grant operational autonomy within the performance framework. Don’t micromanage how case managers work or how nonprofits structure programs. Standardize outcomes and data reporting, then let organizations innovate on execution.

Deploy encampment resolution only after housing capacity exists. Sweeps without housing placements just relocate the problem. Build the system first, then close sites permanently by housing residents.

The political cost is real. Existing nonprofits will resist. Some will need to exit the system. Politicians will face criticism from organizations accustomed to funding without performance expectations. But the alternative is California’s cycle: spending billions to produce worsening outcomes while quality of life deteriorates for everyone.

The Fragility of Success

Houston (and Dallas’s younger program) have produced measurable results, but their systems remain vulnerable to forces beyond local control.

Federal funding dependencies create existential risk. Both Texas cities rely heavily on HUD Continuum of Care grants. Houston receives approximately $45 million annually, Dallas $27 million. These are competitive, performance-based awards. But they’re federal discretionary spending subject to political winds.

The Trump administration has signaled plans to fundamentally restructure HUD, potentially cutting housing assistance and tying remaining funds to immigration enforcement priorities. If federal CoC funding gets slashed or conditioned on cooperation with deportation efforts, Houston’s system could lose its financial foundation regardless of operational excellence.

The temporary COVID relief funds that accelerated Houston’s recent progress have already expired. The Coalition for the Homeless estimates the system needs $50 million to $70 million in new annual funding just to maintain current service levels.

Housing market pressures threaten the model’s core advantage. Houston’s success was enabled by cheap, abundant housing. Between 2015 and 2021, median rent in Harris County increased 29% while wages grew only 23%. Eviction filings now exceed pre-pandemic levels. Rising costs make it harder for clients to achieve self-sufficiency when rental assistance ends.

Dallas faces worse constraints. The region has a deficit of nearly 40,000 rental units for households at or below 50% of Area Median Income, projected to nearly double by 2035. Rents grew faster in Dallas than Houston between 2015 and 2024. Even with excellent operational systems, these cities can’t escape basic economics.

Local political will can erode. Houston’s model survived three mayoral administrations, demonstrating unusual political durability. But this isn’t guaranteed. The consolidated authority that makes the system effective also makes it easy to dismantle. One budget cycle could defund the Coalition, scatter responsibility back across competing agencies, and return to pre-2012 fragmentation.

The comparison remains valid despite vulnerabilities. Houston and Dallas built functional systems during years when federal support was available, local housing markets were manageable, and political leadership was aligned. They converted favorable conditions into measurable progress.

California had the same favorable conditions, longer, with more resources and greater political control. The state chose not to build functional systems. Now, as federal support becomes uncertain and housing costs rise everywhere, California has nothing to fall back on. Texas cities at least constructed infrastructure that might survive partial funding cuts. California built nothing that could work even under ideal conditions.

The question isn’t whether Houston and Dallas have solved homelessness permanently. They haven’t. The question is whether systematic approaches produce better outcomes than fragmentation. Systems require maintenance, political will, and resources. When those disappear, even functional systems can collapse. California never gave its approach the chance to fail this way because it never built anything coherent enough to succeed in the first place.

What Actually Works

Houston and Dallas prove systematic approaches can work when conditions align. They built systems that actually house people because sprawling encampments destroy quality of life for everyone. But these systems remain fragile to federal funding cuts, rising housing costs, and political change. The Trump administration’s proposals to restructure HUD funding threaten even high-performing systems dependent on federal grants.

California shouldn’t mindlessly import Houston’s specific programs. The lesson is about systems capacity: unified data infrastructure that tracks who you’re serving and what outcomes you’re achieving, consolidated strategic authority that makes and executes decisions, performance measurement that directs resources to what works, operational flexibility that lets frontline workers adapt to local conditions.

California had unified political control, massive resources, and years to build this capacity. Instead, it maintained comfortable dysfunction: nine state agencies administering 41 programs, 44 Continuums of Care pursuing incompatible strategies, rigorous audits for most contractors but extraordinary latitude for homeless services nonprofits. The state shifted from permissive tolerance to Newsom’s enforcement without fixing foundational problems. Both produce permanent instability. Texas cities with a fraction of the resources built functional infrastructure while conditions were favorable.

After all, how many more years of deteriorating quality of life will residents tolerate before demanding politicians stop doing a bad job and start building systems that achieve (let alone exceed) parity with what Houston and Dallas demonstrate is possible? This is just a couple of Texan cities, globally we seen massive cities who are even *safer* despite being even poorer.

Ask people about Detroit and Baltimore, and 9 out of 10 would say those cities are dying. Are they right? No!

Recent headlines, especially from the Washington Post about how the progressive mayor Brandon Scott cut crime to a 50 year low in infamous city of Baltimore. Before that the heterodox centrist Mike Duggan was also achieving dramatic cuts in crime another “failed” city, Detroit.

That said, people used to be right about how bad things were (70,000 abandoned buildings in 2012 Detroit, over 300 annual homicides in Baltimore during 2015). Baltimore's governance failure alone inspired The Wire, the HBO series that defined urban dysfunction for a generation. Numbers can't capture the desperation citizens felt watching traditional government fail, year after year, as the “Game” kept grinding forward, indifferent to their suffering.

Share

What happened next surprised everyone. New mayors, refusing to become the next Tommy Carcetti (all reform rhetoric, no real change) or Nerese Campbell (Campbell was based on real-life mayor Sheila Dixon, who Dixon denied being in a Washington Post chat, but was later convicted of corruption in 2009. She epitomized the very failures Scott would later overcome), forced their respective cities to reimagine what government could be. They actually broke the system of failure. These mayors invented organizational forms that challenge our basic assumptions about local public sector capacity, even in "failed cities."

When Mike Duggan became mayor of a Detroit emerging from bankruptcy and when Brandon Scott took the helm of a Baltimore recording its deadliest years, traditional approaches, the political "Game", had already failed citizens and government employees time and time again. They needed new organizational forms, not just new programs, if they wanted to end the damn cycle and make the “Game” work for citizens for once in its existence.

These turnarounds prove that cities, even in dire straits, can transform themselves through leadership and organizational improvements. These seemingly different approaches share core principles: improving service quality, tackling infrastructure , and building local state capacity. Duggan and Scott’s methods may differ, but the commitment to breaking old patterns remains constant, and I would argue that the approaches aren't incompatible.

Detroit's Breakthrough: When Community Groups Become Business Partners

Detroit’s turnaround under Mayor Mike Duggan is a story of pragmatic, competent, large-scale intervention. Duggan's strategy is rooted in the belief that to heal a city long plagued by decay and violence, one must first rebuild its economic foundations.

Blight

The transformation began with brutal honesty about reality. City government alone could never address the scale of breakdown they faced. Those 70,000 blighted structures weren't just eyesores, Abandoned or not, these buildings still have an impact on Detroit’s infrastructure, getting rid of them makes handling Detroit’s infrastructure easier to deal with. Not to mention, Wayne State University research showed clear correlations between abandoned buildings and violent crime. But instead of seeing this as purely a city service delivery problem, leadership spotted an opportunity to mobilize community capacity.

Proposal N, the $250 million bond program for blight removal that voters approved in March 2020. It funded demolition of 19,000 structures and renovation of 8,000 others. It also focus on keeping as much of the money in Detroit as 54% of city-funded demolitions went to Detroit-based contractors, compared to 37% under the previous federal program.

Removing blight didn’t just lower crime, The removal of blight is directly linked to a stunning increase in housing wealth, which grew by $4.7 billion (a 112% increase) between 2014 and 2023. Black homeowners accounted for 75% of the total gain, and the neighborhoods that had the lowest property values and highest poverty rates in 2014 saw the largest percentage increases in home values.

This demonstrates a positive feedback loop: the bond-funded, city-wide blight removal campaign created a safer and more stable physical environment, which in turn restored confidence, attracted investment, and generated substantial, equitably distributed wealth for the city's long-term residents.

Police Investments

Duggan didn’t just focus on indirect measures, he also gets law enforcement more investment. Duggan takes advantage of the American Rescue Plan (ARP) to direct more than $100 million into the Detroit Police Department (DPD). These funds have been used for critical upgrades, including officer retention bonuses, the purchase of 50 new police cruisers to improve response times, and the acquisition and upgrading of police helicopters equipped with thermal imaging cameras to track suspects and minimize the need for dangerous high-speed pursuits.

A centerpiece of this technological push is the city's Real-Time Crime Center, a facility that uses data-driven analytics to monitor crime in real-time and optimize police deployment. This is supplemented by Project Green Light, a well-established public-private partnership where businesses install high-definition cameras that feed directly to police monitors, creating a visible deterrent in high-crime areas. The DPD has also demonstrated a willingness to use targeted, traditional enforcement tactics to address specific crime trends. In response to a spike in youth-involved violence, the administration announced a "major crackdown" involving the strict enforcement of juvenile curfew laws, with significantly increased fines for parents (from $75 to $250 for a first offense) and the deployment of special vans to transport young offenders.

ShotStoppers

This philosophy reached its peak in the ShotStoppers program, Detroit's Community Violence Intervention (CVI) initiative started with funds from the American Rescue Package. Instead of dictating how community organizations should reduce violence, the city created a framework giving groups both autonomy and accountability. Each organization received geographic responsibility for a specific high-crime zone and base funding of $175,000 per quarter. There is a performance bonus where organizations could double their funding by achieving violence reductions at least 10 percentage points better than the citywide average.

This market-based, competitive system treats CVI providers as contractors hired to achieve a specific, quantifiable outcome. It fosters a highly accountable, data-driven environment that has yielded dramatic results. In the final quarter of the program's first year, all six CVI zones recorded reductions in shootings and homicides ranging from 37% to an astonishing 83%, far outpacing the citywide average. Groups like FORCE Detroit and New Era Community Connection have consistently posted quarterly reductions of over 50%. The program's efficacy is being rigorously evaluated by the University of Michigan's Poverty Solutions center to ensure independent analysis and validation of its success.

But Duggan understood that even the best violence intervention programs would fail without addressing the economic desperation that drives crime. Alongside ShotStoppers, Detroit launching programs to knock down the city’s unemployment rate. The city's unemployment rate, which stood at nearly 20% in 2013, fell to a city record low of 8% by 2023, and further down to 7.5% in 2024. This was facilitated by the creation of dedicated workforce development programs. An example is "Grow Detroit's Young Talent" initiative has provided summer employment for thousands of youth.

Another program is Project Clean Slate, a city-run program that provides free legal assistance to help residents expunge criminal records. Since its creation in 2016, the program has successfully expunged over 10,000 convictions with a remarkable 99.7% success rate for applications filed, removing a significant, long-standing barrier to employment for thousands of Detroiters.

Baltimore's Revolution: Violence Prevention Gets Equal Billing

Baltimore took a different organizational approach. While Detroit decentralized authority to community partners, Baltimore created a centralized institution giving violence prevention equal standing with law enforcement.

MONSE: A New City Agency

Mayor Scott established the Mayor's Office of Neighborhood Safety and Engagement (MONSE) as a permanent city agency dedicated to violence prevention through public health methods. Unlike previous cities that housed violence prevention within police or health departments, Baltimore made it an independent government function.

The city's Comprehensive Violence Prevention Plan (CVPP), launched in 2021, set a goal of 15% annual reduction in shootings. The plan emerged from community engagement sessions and established three pillars: public health approaches to violence, inter-agency coordination, and evaluation/accountability.

MONSE functions as a backbone organization - it doesn't deliver direct services but coordinates partners, creates shared measurement systems, and facilitates communication across agencies.

The CVI Ecosystem

Using $10 million in American Rescue Plan funds, Baltimore built a "CVI Ecosystem" comprising 44 partner agencies:

• Safe Streets for street-level conflict mediation (Johns Hopkins research shows 23% reduction in non-fatal shootings at program sites)

• Hospital-based violence intervention programs (HVIPs) that engage shooting victims in emergency rooms

• Wraparound services through partners like Roca and Youth Advocate Programs

• Group Violence Reduction Strategy offering services or enforcement

• Data portal developed with Everytown for Gun Safety integrating gun traces, ballistics, and alert data

When a shooting occurs, the ecosystem coordinates response: hospital interrupters engage victims, Safe Streets mediators work the neighborhood, social services support families, and youth workers prevent retaliation. MONSE protocols guide these activities.

Youth Programs

Baltimore's youth strategy emphasizes programming over enforcement. The FY2026 budget allocates $634.4 million for youth programs. Summer initiatives include:

• Extended recreation center hours (until 11 PM on weekends)

• 42 summer camp sites

• 12,000 program seats

• Partnership with B-360 connecting dirt bike culture to STEM education

• School-based violence intervention pilots

Results show 66% decrease in youth shooting victimizations, 31% drop in youth aggravated assaults, and 74% reduction in juvenile homicide and shooting victims in 2024.

Results and Challenges

Baltimore's homicides fell below 300 in 2023 for the first time in nearly a decade, followed by 20% and 23% drops in successive years. By mid-2025, the city was on pace for its lowest homicide count in 50 years.

Challenges remain:

• Critics view the Group Violence Reduction Strategy as repackaged "focused deterrence" that previously failed

• Safe Streets effectiveness varies by site

• The ecosystem depends on temporary ARPA funding and Scott has been blunt about the vulnerability: without sustained federal support, the ecosystem could collapse

• Coordinating 44 partners requires complex management

The model elevated violence prevention workers' status within city government. MONSE created professional standards, training programs, and career pathways for the field. This institutionalization of violence prevention as a core government function represents Baltimore's primary organizational innovation.

Two Cities, One Lesson: Finding Your Own Path

Detroit and Baltimore achieved historic crime reductions using different frameworks for the same basic approach: federal funding, infrastructure improvements, and organizational innovation.

Detroit's Economic Focus :

• $250 million blight removal creating jobs and $4.7 billion in housing wealth

• Performance-based contracts paying community organizations for results

• Unemployment dropped from 20% to 7.5%

• 203 homicides in 2024, lowest since 1965

Baltimore's Public Health Focus:

• MONSE coordinating 44 partners as "treatment" system

• $634.4 million youth investment as prevention

• 74% drop in youth shooting victims

• On pace for lowest homicides in 50 years

Both used American Rescue Plan funds. Both rebuilt infrastructure (Detroit physical, Baltimore organizational). The difference was framing: economics versus public health.

Context Determined Approach

Detroit post-bankruptcy had weak city government but strong community organizations. Market-based contracts fit this reality. Baltimore had functioning government but fragmented services. Coordination infrastructure addressed this gap.

Cities examining these models must inventory their own capacities and gaps. What exists? What's missing? What works? What doesn't? This assessment reveals which elements might transfer.

Learning from Both

Both cities share their experiences openly. Detroit explains how community organizations became data-driven contractors. Baltimore details how hospitals, police, and community groups learned to coordinate. These conversations reveal implementation details reports miss.

Synthesis Through Assessment

Economic opportunity and public health aren't opposing strategies, they're different lenses for the same problems and it’s useful to think in both contexts. Most cities need elements of both. Some need physical infrastructure improvement before social coordination can work. Others need coordination before economic incentives make sense.

The federal funding both cities used is temporary. The organizational forms they created (performance partnerships, coordinated ecosystems) can be permanent. Each city must determine which innovations fit their context.

Taking inventory of current operations while learning from both cities reveals the path forward. The goal isn't copying Detroit or Baltimore but understanding what worked and why, then building what fits your reality.

Share

Leave a comment

Xuan Li and Kasper Ingeman Beck's study "Mapping the investor state: state-led financialization in accelerating technological innovation in China" documents how Beijing turned financialization — which typically constrains governments — into a tool for technological advancement through state-directed venture capital.

By the numbers:

• 13 trillion yuan: Government funds now manage 10% of China's GDP across 2,086 funds

• 2 → 100: Companies in Guoxin/Chengtong portfolios (2016-2023)

• 200 billion → 1 trillion yuan: State shareholder equity value growth (2010-2022)

• 31.2% → 48.4%: State share of top 100 market cap in just 2 years (2021-2023)

• 87%: of central SOE profits now generated by listed subsidiaries

• 29: Bank wealth management companies created since 2019, controlling 17 trillion yuan

• 80%+: of all Chinese venture capital is state-affiliated

• 80%: of new equity funds established since 2023 depend on state capital

• 5,000+ vs <500: Tech firms funded in coastal provinces versus northeast regions

• 268 IPOs: achieved by single fund manager (SCGC) from 108.1 billion yuan invested

• 37 of 44: critical technologies where China now leads globally

• 4x: projected oversupply in solar/EV capacity by 2025

• 1.5% by number, 7.47% by value: Central funds small in count but massive in scale

The big picture: Three interlocking transformations created what researchers call China's "investor state," fundamentally altering how the world's second-largest economy channels capital toward innovation.

State enterprises became asset managers. Xi Jinping's 2013 directive to shift from "managing assets" to "managing capital" triggered a corporate metamorphosis. Twenty-one central SOEs transformed into State-owned Capital Investment and Operation Companies (SCIOCs), split between "investment" companies that take board seats and guide strategy, and "operation" companies that function like state-owned BlackRocks.

The researchers tracked Guoxin and Chengtong, two operation companies whose portfolios exploded from 2 companies in 2016 to 100 by 2023. They maintain 3-5% stakes across sectors Beijing deems strategic — railways, aerospace, telecommunications, semiconductors. Total state shareholder equity value surged from 200 billion yuan in 2010 to nearly 1 trillion by 2022, with 87% of central SOE profits now flowing from listed subsidiaries.

Banks shattered lending restrictions. The 2015 pivot from "loan-insurance linkage" to "investment-loan linkage" broke China's Glass-Steagall-style barriers. Article 43 of the Commercial Bank Law had banned equity investments, but new rules birthed 29 Bank Wealth Management Companies with 17 trillion yuan in capital. These subsidiaries partner with VCs, offer below-market "green channel" loans to startups, negotiate debt-to-equity conversions, and take direct stakes capped at 10% per company. BOCOM International established a science fund in 2019; Bank of China partnered with Europe's Amundi for expertise. Over 20 billion yuan now flows directly from banks to tech ventures.

Local governments abandoned land finance for tech investing. For two decades, Local Government Financing Vehicles leveraged land sales to fund infrastructure, accumulating $8.2 trillion in debt. The 2016 shift to Government Guidance Funds represents a wholesale transformation. Multi-stakeholder boards combining finance officials, development commissioners, and tech experts set strategy while professional managers pick investments. Fund managers face unique dual mandates — generate returns while hitting policy targets for strategic sectors and underserved regions. This explains stark geographic disparities: coastal provinces Zhejiang, Jiangsu, and Guangdong funded over 5,000 firms while the northeast supported fewer than 500.

Key insights: The study reveals how state entities now function as both principals and agents in China's venture ecosystem. Guoxin doesn't merely invest in funds — it established and operates the China State-owned Capital Venture Investment Fund with 200 billion RMB under management. This dual role concentrates power in ways unimaginable in Western markets.

The National Integrated Circuit Industry Investment Fund exemplifies the model. Established in 2014 with the Ministry of Finance holding 25.95%, China Development Finance 23.07%, and China Tobacco 14.42%, it targets semiconductor self-sufficiency through state-owned manager Huaxin Investment.

Unlike Western "de-risking" that lures private capital with guarantees, Chinese funds impose what researchers call "hard conditionalities" — mandatory investments in high-risk sectors with restricted exits. One venture capitalist lamented: "GGFs have made available plenty of capital, but top private venture capitalists do not necessarily want it."

What Does It Mean?: The transformation represents China's shift from infrastructure-driven to innovation-driven growth. The old model was straightforward: banks made loans to local government vehicles that used land as collateral to build highways and ghost cities. The new model creates complex webs of equity relationships linking every level of government to frontier technologies.

Shenzhen Capital Group stands as the poster child, investing 108.1 billion yuan across 1,807 projects and achieving 268 IPOs globally. Yet cracks emerge — SCGC recently began pursuing founders personally when portfolio companies miss IPO deadlines, even adding individuals to debtor blacklists. This shift from "patient capital" to aggressive enforcement signals growing pressure for returns.

The researchers conducted extensive interviews revealing a fundamental tension: fund managers report that "losing state assets severely damages one's political career" despite mandates to take innovation risks. Multiple managers independently confirmed this career threat, creating systematic risk aversion that contradicts innovation goals.

Warning signs multiply. Solar panel and electric vehicle capacity may exceed demand fourfold by 2025. Thousands of uncoordinated funds create sectoral bubbles and sustain "zombie firms" through overlapping investments. The 2018 reforms strengthened Party committees in corporate governance while demanding market-driven decisions — a contradiction the study calls "highly complex" with uncertain outcomes.

Since 2023, over 80% of new equity funds depend on state capital. Private firms increasingly pepper business plans with political buzzwords like "new productive forces" and "strategic emerging industries" to access funding. Foreign partners provide expertise through ventures like the proposed Goldman Sachs-ICBC partnership, recognizing that operating in China now requires navigating this state-dominated ecosystem.

Bottomline: Li and Beck document how China weaponized financialization itself, transforming a force that typically constrains governments into an instrument of technological competition. This "financial entrepreneurship" — where bureaucrats become venture capitalists and industrial planners morph into fund managers — represents history's largest test of whether state direction can systematically outperform markets in driving innovation.

The $2 trillion experiment shows early success in achieving technological leadership across critical sectors. But mounting coordination failures, overcapacity crises, and the fundamental tension between Party control and entrepreneurial risk-taking threaten the model's sustainability.

occupies a unique position in the Democratic Party's "abundance" debate. On Breaking Points, he articulates abundance as a vision rooted in FDR's Rural Electrification Administration—government actively delivering material benefits to those markets abandon, attempting to convince the host Krystal Ball not to disregard abundance while exploring ways it could collaborate with other factions of the left. Days later, he's at WelcomeFest 2025, the centrist Democratic gathering, moderating a panel where Derek Thompson dismisses such historical narratives: "Stories are for children…Americans need solutions."

This exchange crystallizes how "abundance" has become a Rorschach test for the Democratic Party—the same word meaning radically different things to different factions, revealing incompatible theories of political change.

Breaking Points: Abundance as Democratic Delivery

On Breaking Points, Kosloff begins by acknowledging the concept's complexity: "Abundance is a bunch of different things, right?" He identifies three distinct camps claiming the abundance mantle:

1. The Ezra Klein/Derek Thompson wing: Authors of a successful policy book advocating for building more and removing regulatory obstacles

2. The "dark abundance" tech right: VCs like Marc Andreessen supporting Trump's deregulatory agenda

3. The defensive centrists: Who've "adopted abundance as part of that project" of moderating on social issues while needing "something forward-facing to say"

Kosloff's critique of the Klein/Thompson book is telling. He objects to their 2050 vision opening: "I actually really did not like that first chapter, especially from the perspective of articulating to the left why they should actually care about these ideas." Why? Because "we live in an era where people are backlashing against oligarchy, where people aren't excited about technology."

Instead, Kosloff offers an alternative grounding—one rooted in Robert Caro's biography of LBJ. His favorite chapter covers the Rural Electrification Administration in 1937: "We had electricity in the country for more than 50 years, but the private sector was not delivering electricity to the Hill Country, to poor, hardscrabble farmers."

This becomes Kosloff's touchstone for abundance: "A vision of broad left liberalism that delivered for people and really mattered... a majoritarian left-liberal politics that could fundamentally change people's lives by delivering them things that are powered by technology."

Drawing on Marc J. Dunkelman's Why Nothing Works, Kosloff explains the tension between "Hamiltonian instincts" (big, ambitious projects like the New Deal) and "Jeffersonian instincts" (protecting local communities from those projects' excesses). The 1960s environmental and civil rights movements weren't wrong to challenge Robert Moses bulldozing Black neighborhoods—they were essential democratic feedback.

Kosloff's vision is explicitly "yes, and"—build more housing AND protect tenants, expand green energy AND respect local input. He's particularly wary of how abundance is being weaponized: "If you're trying to supplant an anti-oligarch agenda with a YIMBY agenda and a deregulatory agenda? Yes, those two things are actually at odds with each other."

His pitch moving forward: "Most people are not actually looking to do a big centrist interests versus progressive fight."

Krystal Ball, remarking on her interview with Thompson on another Breaking Points episode, drives home the political reality: abundance messaging polls worse than populist messaging. "To fight back against [techno-authoritarianism] with zoning reform," she argues, "feels so wildly inadequate to the moment."

WelcomeFest 2025: Abundance as Efficiency

At WelcomeFest, Thompson and Congressman Jake Auchincloss present abundance as a technical problem with technocratic solutions. Thompson's book promises to diagnose how "liberal policies restrain housing development, energy construction." The prescription is always the same: remove obstacles, unleash markets, optimize efficiency.

When Kosloff asks about narrative and meaning, Thompson's response is notable. After stating—"Stories are for children. Americans need a plan. Americans need solutions. You don't need a story."—he maintains this anti-narrative stance represents "a different kind of storytelling."

This reflects a strategic shift. Having failed to deliver material improvements after promising to restore the soul of the nation, some Democrats have concluded the error was making promises rather than failing to deliver them. Or worse, promising solutions that never really come.

Auchincloss makes the philosophy explicit: "Good economics tells you to be agnostic as to what is an impairment of a functioning market. You just go unplug that bottleneck." Whether it's environmental protection, labor standards, or democratic input—all are potential "bottlenecks" to be removed.

WelcomeFest itself, themed "Responsibility to Win," embodies this approach. Speakers include complaining that unions block development, multiple candidates who won by avoiding "purity tests," and panels on "Wins Above Replacement"—reducing politics to sabermetrics. This despite the AFL-CIO being extremely supportive of permitting reform, with President Liz Shuler stating "money won’t do any good if we can’t get the project built. We know permitting is a top priority for you and it’s a top priority for us." Or one of Josh’s favorite governors, Josh Shapiro cutting through red tape to rebuild a highway bridge in 12 days using union labor. Josh Shapiro told the workers. “I’m proud we came together around the union way of life.”

Beyond Surface Politics: The Real Divide

The competing visions of abundance outlined in the Kosloff-Thompson exchange—democratic delivery versus technocratic efficiency versus defensive positioning—manifest across American politics in unexpected ways.

has an interesting article that I would recommend you to read on California's housing debates and calls abundance politics "scrambling classical political alliances." This scrambling validates Kosloff's observation that abundance means "a bunch of different things" to different actors.

Consider the construction union split:

• The Carpenters partner with developers to maximize total construction jobs

• The Building Trades oppose projects unless they guarantee union-only labor

• Both claim to be "pro-labor" while supporting opposite policies

Or state legislators:

• Scott Wiener champions housing abundance while supporting trans kids and climate lawsuits

• Democratic Socialist Alex Lee votes for pro-housing bills while advancing rent control

• Republican Joe Patterson backs housing reform to protect property rights

These unconventional alliances suggest the divide concerns what Thompson might call "solutions" versus what Kosloff frames as competing visions of "who benefits and how." The traditional left-right spectrum dissolves into questions about delivery mechanisms and beneficiaries.

Jeremy's Quarterly

The Democratic Civil War is Here

Last week, sociologist Jonathan Chait wrote in The Atlantic about The Coming Democratic Civil War. In fact, the civil war is already here—and the political narratives we’ve created don’t capture the story…

Read more

10 months ago · 27 likes · 23 comments · Jeremy Levine

Organizational Fractures in Abundance Politics

The 2025 NYC Democratic mayoral primary demonstrated how organizations claiming similar principles reach opposite conclusions. It’s a practical test of the theoretical tensions discussed on Breaking Points.

NYC New Liberals endorsed four candidates without ranking either frontrunner. Abundance NY endorsed the same four, then crucially added a fifth choice between Cuomo and Mamdani. The divergence proved telling: Whitney Tilson (NYC New Liberals' top pick) endorsed Cuomo second, while Brad Lander (endorsed by both groups) backed Mamdani second.

Mamdani himself embodies these contradictions—supporting permit reform to speed up the MTA and New York's City of Yes zoning reform, while advocating rent freezes and free transit. He doesn't fit traditional camps in New York politics, and while people may disagree with him, he represents a chance for new networks and new politics to emerge. At the same time, those prioritizing police funding have historical reasons for distrust, and if they don't want to vote for Mamdani because of those issues, it's Mamdani's job to convince them.

On that note, the establishment's response proved revealing. The New York Times editorial board came out against Mamdani, while Reverend Al Sharpton attacked him for ranking Lander over Adrianna Adams (despite Mamdani fundraising for Adrianna), claiming "Somehow that politics ain't progressive to me." Both Sharpton and the Times represent established New York political players. Tellingly, these established players, along side Andrew Cuomo, haven't delivered a better—or more affordable—city or even state.

This split mirrors the broader abundance divide. NY New Liberals approach maintains maximum flexibility—what some might call defensive positioning. Abundance NY engages with messy realities, accepting that coalition building requires imperfect choices. The endorsed candidates themselves demonstrated this pragmatism.

The pattern exposes how "lesser evil" arguments become weapons of convenience. NYC New Liberals routinely lecture progressives about strategic voting and pragmatic compromise. They dismiss concerns about moderate Democrats as destructive purity politics, especially as Andrew Cuomo represents the “moderates” as is shown to be against many of the New Liberals’ stated policies of YIMBYism and permitting reform. Yet faced with their own imperfect choices, they discovered principled abstention. The same logic they condemn as naive when progressives use it suddenly became sophisticated positioning when it preserved their flexibility.

This selective deployment of pragmatism raises questions central to Kosloff's coalition-building emphasis. Organizations that demand strategic voting in some contexts while preserving their own flexibility create uncertainty. If you don’t want partner with or form a coalition with someone or some faction. That’s fine! If you do or demand their votes, well partners need consistency about when pragmatism versus principle prevails—a lesson relevant beyond this single primary. Trust requires reciprocal standards or at the very least you deliver something, not one-way demands for compromise.

Abundance in Practice: The Governors

Speaking of Democrat Governors, YIMBYism has been growing more popular among Democratic governors such as Tim Walz, Connecticut’s Ned Lamont, so on and so on. However, only a few actually bearhugs the abundance verbiage, and these Democratic governors provide some idea of how different abundance narratives perform, lets’s say California's Gavin Newsom and Colorado's Jared Polis.

Newsom's Healthcare Calculations

California's proposal requiring disabled and elderly residents to have no more than $2,000 in savings illuminates one interpretation of abundance politics. The limit, unchanged since 1989, affects 115,000 Medi-Cal recipients while Governor Newsom maintains rhetoric about expanding opportunity.

The proposal includes:

• Reinstating the $2,000 asset limit from 1989

• Applying it to savings, property, even funeral plots

• Creating eligibility changes at age 65 when Medicare's gaps require Medi-Cal

The fiscal dynamics prove complex. Home care costs $25,400 annually; nursing homes run $114,000. The proposal's savings might be offset if people forced into institutional care cost more than those maintaining independence. Over 120 organizations pooled half a million dollars opposing the changes.

Jim Mangia of St. John's Community Health observes: "Everything at this point, unfortunately, is about the political calculation of a presidential campaign." Meanwhile, Newsom opposes Republican healthcare proposals affecting 3.4 million Californians' coverage.

This approach resembles what Breaking Points discussed as "defensive centrists"—adopting abundance language while implementing policies that restrict rather than deliver. The gap between forward-facing rhetoric and 1989-era limits echoes the organizational dynamics seen in NYC, where positioning trumps consistent application of principles.

Polis's Market Protection Strategy

Colorado's Jared Polis demonstrates a different abundance interpretation. His systematic vetoes of consumer protection bills align with the "remove regulatory obstacles" vision championed in certain abundance circles.

The RealPage veto exemplifies this approach:

• The software increased Denver rents by $136/month through algorithmic pricing

• Creates coordinated pricing without direct communication

• Polis argued banning it would harm the rental market

• Critics called it protecting digital collusion as innovation

noted: "The governor talks a big game about affordability and abundance, but when given the chance to take real action, at no cost to taxpayers, he protected profiteers."

This also reflects NY New Liberals’ view of lesser evils for others and “dark” abundance’s removing barriers that doesn’t seem to benefit (or even get stuff built) except for a few. This is just cause more coalition distrust and infighting, especially as further permitting and zoning reforms requires *more* trust to pass clean bills. Coalition partners don’t need to agree on everything, and Polis did veto more expansive bills in the past, but this time after compromises been made burn capital that we *need*.

Institutional Logic & the Musk Test Case

The appeal of technocratic abundance to Democratic leadership follows clear institutional patterns. Tech billionaires and real estate developers favor deregulation. Financial sector donors appreciate "removing bottlenecks.” This approach allows courting such donors while maintaining progressive rhetoric. It also sidesteps redistribution questions—building more sounds less confrontational than taxing more.

This framework helps explain Democrats' pursuit of Elon Musk. Congressional Democrats and pundits actively court him:

• Rep. Ritchie Torres: "I'm a believer in redemption"

• : Urges leaders to call Musk about "electric cars and solar panels"

• (WelcomeFest co-founder): "It's a zero-sum game. Anything he does that moves more toward Democrats hurts Republicans."

This occurs after center left and the left factions both agree that the DOGE cuts resulted in estimated 300,000 deaths in developing nations, loss of HIV medication access, and refugee camps operating on starvation rations.

The electoral calculation appears flawed. Musk's endorsement alienates educated suburban voters Democrats need. He lost Wisconsin despite spending millions. His platform amplifies anti-Democratic messaging. The pursuit suggests institutional incentives override electoral strategy.

It is one thing that someone in the more conservative camps or associated with the Tech Industry were to defend and promote them. People are influenced or limited by their social networks at the end of the day. It’s another when your base rejects Musk and the issues he support, with yourself claiming he unleashed death and destruction.

Intellectual Contradictions on Display

The tension between abundance theory and political practice becomes visible when advocates encounter successful politicians. At WelcomeFest, Matthew Yglesias—who has written extensively against localism, antitrust enforcement, and right-to-repair laws—moderated a panel with Representatives Marie Gluesenkamp Perez and Jared Golden.

The successful centrists Democrats as described by WelcomeFest emphasized:

• The importance of "standing up for independent businesses"

• Protecting "chicken farmers in Washington and lobstermen in Maine"

• How "localism" and "preserving strong communities" creates "winning politics"

Yglesias, who dismisses these concerns coming from anyone else as economically inefficient, listened while the representatives explained how defending local interests against corporate power wins elections—positions he has argued against in other contexts, especially when he is telling other coalitions to expect nothing and vote for the lesser evil.

The Technocratic Critique

Charles Marohn of Strong Towns offers broader criticism, comparing Thompson and Klein's book to past technocratic initiatives—1950s "Planning for Permanence," 1990s financial "modernization," each promising prosperity through expert management.

These share "the conviction that structural complexity can be overridden by technocratic clarity."

This critique identifies patterns but may miss distinctions. Kosloff's vision explicitly includes democratic feedback—balancing Hamiltonian ambition with Jeffersonian humility. When Thompson states "stories are for children," he's expressing a different view about the role of narrative in policy legitimacy.

Chuck with Strong Towns

The Trouble with Abundance

Abundance is a powerful word. It evokes optimism, confidence, progress. It gives a sense that a better future is not only possible but within reach, if only we can clear away what holds us back. That’s the energy behind "Abundance," the new book by Derek Thompson and Ezra Klein. It’s a hopeful, energetic manifesto that diagnoses a key American failure: …

Read more

10 months ago · 23 likes · 18 comments · Charles Marohn

Political Reality vs Political Theory

The 2024 election results tested competing abundance visions against Kosloff's concern about "an era where people are backlashing against oligarchy."

What Lost:

• Democrats hemorrhaged non-white working-class voters

• The least politically engaged swung hardest against incumbents

• If only 2022 midterm voters had voted, Harris would have won

• Technocratic messaging about "removing bottlenecks" showed no positive movement

What Won:

• Defending local interests against corporate power (as verbally championed by Gluesenkamp Perez and Golden)

• Candidates emphasizing tangible, immediate benefits

• Clear villains and clear actions

• Politicians who live in their communities

The results validate concerns about technocratic abundance failing to address anti-oligarch sentiment. Voters rejected abstract efficiency arguments while rewarding concrete protection and delivery.

Patterns across levels reveal how different abundance interpretations perform. Defensive positioning creates messaging contradictions—whether in organizations avoiding tough choices or governors implementing austerity while preaching opportunity. Pure deregulation concentrates benefits upward. Institutional courtship of tech billionaires while imposing means-tested limits confirms voter suspicions about whose interests matter.

The vision least evident in practice, democratic delivery to abandoned communities, appears most successful electorally. Candidates channeling this approach, consciously or not, outperformed those offering technocratic solutions or defensive positioning. Whether party leaders recognize this pattern shapes the future of abundance politics and its competing camps.

5 Key Takeaways

It works: 58-70% of recipients moved to Tulsa solely because of the program
Huge ROI: Every dollar spent returns $4.31 in local economic benefits
17x cheaper: Attracting remote workers costs 17x less than luring businesses
Benefits all: Even the poorest residents see 3x returns on public investment
Secret sauce: Success requires incentives + support services + housing policy

The W.E. Upjohn Institute just delivered the most comprehensive analysis of any remote worker program in America. Their verdict on Tulsa Remote is stunning: the program generates $66,462 in economic benefits per person for a total investment of just $15,425. That's a 4.31x return that makes traditional business incentives look obsolete.

Since 2018, Tulsa has relocated over 3,000 households by offering $10,000 cash plus support services. With over 100 cities now competing for remote workers, this rigorous study provides the first real evidence about what works, what doesn't, and why people-based economic development might replace corporate subsidies entirely.

How They Proved It Works

The challenge was separating correlation from causation—did people move because of the program or were they coming anyway? The Upjohn Institute cracked this puzzle through an innovative methodology.

Researchers merged Tulsa Remote's 56,053 applications with Infutor, a commercial database tracking where Americans live. They successfully matched 43% of eligible applicants, creating a sample of 16,692 individuals. The key insight: compare approved applicants who got the $10,000 with rejected applicants who didn't.

Infutor only captures about 32% of actual moves, but it misses equally for both groups, preserving the comparison's validity. Using three different statistical methods—linear probability models, logit models, and exact matching—researchers found the same answer: 58-70% of participants moved solely because of the program. This "but for" rate dwarfs the 6% typical for business incentives.

Nuanced Truth About Who Moves

Not all applicants respond equally to incentives. The data reveals three distinct groups with dramatically different response rates.

True "free agents" with no Tulsa connections show 78-82% inducement rates. They're making purely economic decisions without emotional ties pulling them elsewhere. Former Tulsa residents considering return show only 17-20% inducement—most would come back anyway. But here's the twist: they might stay forever, potentially making them worthwhile despite lower impact. Those who know someone in Tulsa fall between at 35-41% inducement.

This creates a strategic puzzle. Should programs exclude low-inducement groups? The analysis says no. Even with 17% inducement, high-retention natives can generate positive returns exceeding 1x. The key is tailoring retention strategies to each group rather than blanket exclusions.

The Four-Part Economic Impact

Tulsa Remote generates four distinct benefit streams that compound over time, totaling $66,462 per member.

Fiscal benefits dominate at $32,252. New residents immediately pay taxes while consuming fewer services than they fund. Year 2 brings peak revenue of $25,095 per member—five times previous estimates. Why? Earlier studies counted only income taxes, missing property taxes from rising home values, sales taxes from local spending, and federal transfers tied to population. After covering program costs, a $16,827 surplus remains for tax cuts or service improvements.

Labor market benefits add $27,700 through job multiplication. Each remote worker household creates 0.58 additional local jobs as their spending ripples through the economy. A coffee shop hires another barista, restaurants add servers, retailers expand staff. These indirect jobs go predominantly to existing residents, boosting employment rates. The model values each permanent job at $420,000 in lifetime earnings benefits.

Property values jump $26,426 as new residents bid up housing. Homeowners see immediate equity gains of $49,730 in year one. But this reveals a critical vulnerability: without expanding housing supply, these price increases eventually choke off growth by making the city unaffordable.

Education improvements yield $6,400 in long-term returns. Fiscal surpluses fund better schools, raising future earnings for local children. These benefits take 30 years to materialize but grow indefinitely as better-educated workers earn more throughout their careers.

Who Wins and By How Much

The program expands Tulsa's economic pie while cutting relatively larger slices for the poor. The bottom 20% capture 11.6% of benefits despite earning only 5.1% of baseline income—effectively doubling their share. The middle class sees their portion grow from 13.7% to 18.2%. Even the wealthy benefit with returns exceeding 3x, though their 43.2% benefit share falls below their 52% income share.

This progressive tilt happens through multiple channels. Oklahoma's regressive tax system means fiscal surplus-funded tax cuts help poor residents most. Public service improvements naturally flow toward lower incomes. Education spending particularly aids poorer families with more children in public schools. Only property gains concentrate among the wealthy, insufficient to offset the overall progressive lean.

Every income group sees benefit-cost ratios between 3.28 and 4.87—everyone wins, but the poor win more proportionally.

The 80-Year Evolution

The program's impact unfolds in three distinct phases, each with unique challenges and opportunities.

Years 1-5 bring the honeymoon. Benefits explode to $57,780 in year one as new residents inject cash into local businesses. The job multiplier peaks at 1.37. Retention starts at 97.75% but drops to 55% by year 5 as some members discover Tulsa isn't their permanent home. Rising costs begin pressuring business expansion.

Years 6-10 see reality bite. Benefits turn negative some years as departures exceed arrivals. The multiplier crashes to 1.12 as higher costs discourage hiring. This painful adjustment tests political resolve—will leaders stay the course when headlines turn negative?

(Upcoming) Years 11-80 deliver compound returns. Benefits stabilize then grow as two forces kick in. College graduates create businesses at 0.57 new jobs per graduate. Better-funded schools produce higher-earning locals who contribute more in taxes. By year 80, annual benefits reach $2,379 and keep climbing. Patience pays off spectacularly.

Why Remote Workers Beat Corporate Subsidies

Traditional incentives fail because businesses face real constraints. Manufacturing needs suppliers nearby. Retailers need customers. Tech companies need specialized workers. These anchors mean even generous subsidies rarely tip decisions—just 6% of the time for a typical $15,425 per job offer.

Remote workers operate constraint-free. By definition, they work anywhere with WiFi. Personal preferences, not business necessities, drive decisions. The math is stark: achieving Tulsa Remote's 58% success rate through business incentives would cost $267,000 per job—17 times more expensive.

Business incentives average $359,000 per job created because most recipients would have expanded anyway. Tulsa Remote creates jobs at $46,252 initially, rising to $140,158 after ten years as members leave. Even then, it beats most corporate deals from day one.

What Makes or Breaks Success

Model simulations reveal powerful levers for improving returns. Target workers earning 10% above average and watch returns jump to 6.77x as higher incomes generate more tax revenue. Enable housing supply to match demand through zoning reform and returns soar to 8.07x by preventing affordability crises.

Retention and inducement rates interact multiplicatively. High inducement (69.7%) plus high retention (51% at year 10) yields 8.47x returns. Low inducement (16.9%) plus low retention (27%) crashes returns to 0.26x. Programs must optimize both, not choose between them.

If entrepreneurship support can triple business creation from 0.57 to 1.71 jobs per graduate, benefits increase by 1.75x costs. This massive upside justifies serious investment in startup infrastructure beyond basic networking.

The Implementation Blueprint

Success requires five elements working in harmony. Generous upfront cash ($10,000) grabs headlines and drives applications—back-loaded incentives fail because remote workers have infinite options. Robust screening through direct questions about moving intentions achieves 16.8% approval rates from 40% interview rates.

Community integration transforms visitors into residents. Co-working spaces provide instant colleagues. Monthly events (5-10 in Tulsa) build social networks. Entrepreneurship programs channel ambition locally. The $5,425 spent per member on these services proves as vital as cash. Housing strategy prevents self-destruction—without supply expansion, price spirals eventually reverse population gains. Long-term commitment captures education returns and entrepreneurship effects that take decades to fully materialize.

Miss any element and the system fails. Nail all five and communities build self-reinforcing growth cycles.

Critical Unknowns

Despite comprehensive analysis, key questions remain. The 18% of members reporting business starts need tracking—what are survival rates and growth trajectories? Do high-tech employers follow talent concentrations? Housing elasticity assumptions from national averages may not reflect Tulsa's specific dynamics.

Retention projections beyond year 10 assume stability through return migration and family attraction effects—reasonable but unverified. The 0.57 jobs per college graduate reflects economy-wide averages that targeted programs might beat or disappoint.

Another Way

Tulsa Remote has shown another route for economic development by treating talent as the ultimate mobile asset. At 4.31x returns benefiting even the poorest residents, it embarrasses traditional corporate subsidies. The formula seems simple but execution separates winners from losers.

The old game spent nine figures bribing corporations for uncertain returns. The new game invests five figures in individuals for proven results. Tulsa pioneered this shift from corporate welfare to human capital investment. As remote work becomes permanent and talent grows ever more mobile, cities ignoring this model risk irreversible decline. Early adopters will lock in sustainable growth for generations.

The future belongs to places betting on people, not corporations. Tulsa placed that bet and won big. The playbook is now public. The only question is which cities will be smart enough to use it.

A new study found that giving government workers in India a simple dashboard app made a big difference. It helped them pay rural workers faster and improved a huge government work program. The key was making existing information easier for officials to get and use.

Why This Matters: When governments create programs, they often focus on the big plan. But how the plan is carried out day-to-day (i.e. the implementation) is just as important, though often overlooked (Dave’s note: You guys know I been personally hammering on this point for a long *long* time). This study, detailed in the NBER working paper "From Delay to Payday: Easing Bureaucrat Access to Implementation Information Strengthens Social Protection Delivery" by Eric Dodge, Yusuf Neggers, Rohini Pande, and Charity M. Troyer Moore, shows that helping busy government workers easily access information can make programs work much better. It's a powerful tool that doesn't always (more like almost never) get enough attention.

The Story

Researchers looked at India's giant MGNREGS program, which guarantees rural families up to 100 days of paid work each year. A major problem was that payments were often very late. They focused on two states and tried to fix the delays by helping officials get the information they needed more easily.

The program involves several steps. Local agents manage work and track attendance. Then, mid-level managers in subdistricts approve the work and payments (this is called Stage-I). Higher-level district supervisors oversee the process. Getting payments through Stage-I was supposed to take 8 days, but it often took 18 days or more. Officials were overworked and struggled with poor internet and clunky government computer systems (MIS). It was hard for them to track down where payments were getting stuck or who was falling behind, making it difficult to fix problems quickly.

The Fix: Making Data Easy with "PayDash"

The researchers introduced an app called "PayDash." It was designed specifically to make life easier for the officials running the program. Instead of digging through confusing reports, PayDash automatically grabbed the necessary information about payment steps from the government's system. It showed officials clear, daily updates on delays, pointing out problems by step or by the specific person responsible.

The app was built for officials working in the real world. It worked offline on phones, which was important because of bad internet service in many areas. It offered simple ways to see payment details, track performance over time, and even included tools to quickly call or message other officials about specific delays shown in the app. The goal was to reduce the time and effort officials spent just trying to figure out what was going on.

PayDash was given to officials in 73 districts. They weren't forced to use it, but many did, checking it 4 or 5 times a month. When a technical problem temporarily stopped the app from showing real-time data, usage dropped, showing that officials really valued having easy access to current information.

The Experiment: Finding the Real Problem

To figure out why easy data access helped, the researchers randomly gave PayDash to different groups: just the mid-level managers, just the higher-level supervisors, or both. This helped them see if the main issue was managers not having information or supervisors not having tools to watch over them.

What They Found: Easier Access = Better Results

Looking at data from millions of payments, surveys, and government checks, the study found clear benefits:

• Faster Payments: Getting information easily led directly to faster work. Stage-I payment processing sped up by 1.4 days (a 17% improvement), and payments were more consistent. Fewer payments were rejected because of mistakes. Officials could spot and fix problems quicker because the information was right there.

• More Work Provided: Because officials spent less time hunting for data, they could focus on other parts of the program. Households in the program ended up working 10% more days each month. Officials also opened up 23% more job sites, especially during the slow farming season when work was needed most.

• Manager Access Was Key: It turned out that who got the app didn't matter as much as the fact that the information became easier to get. The results were the same whether only managers, only supervisors, or both got PayDash. This strongly suggested the main problem wasn't bad managers needing supervision, but managers struggling to get the information they needed to do their jobs well. When supervisors got the app, they often just shared the easy-to-understand information with their managers. Government checks also confirmed that corruption didn't increase.

• Helped Busiest Officials Most: Easy access helped the most in areas where managers oversaw more local villages (and likely had less time). In these areas, the app cut payment delays almost twice as much (22% faster vs. 12% faster).

• Smarter Management: Supervisors also changed how they managed. When they had easy access to information through PayDash, they transferred their mid-level managers less often (a 24% drop). Transfers are a common way to deal with poor performance, but they can be disruptive. The study suggests PayDash helped supervisors see why delays were happening – whether it was the manager's fault or something else – allowing them to manage performance more fairly and effectively. Managers themselves also got better at knowing how quickly payments were being processed (a 19% improvement).

• Very Cost-Effective: Finally, this approach was very affordable. Making data easy to access cost only about 1% of what it would have cost to hire enough extra staff to speed up payments by the same amount. The overall benefits to citizens (from faster payments and more work) were estimated to be worth over 170 times the cost of the app in the first year alone.

Bottomline

Governments can become more effective by focusing on the real challenges their employees face. Making important information easy for officials to find and use can significantly improve how well public programs serve the people they are meant to help, and it can be done without spending a lot of money.

Dave Deek: Okay, recording has started. How's your week been going?

Kevin Hawickhorst: My week's been going pretty well. I've been scrambling to finish a submission for a magazine article, but I got it over the line. So, I've been just kicking back a bit since then to take a breather for a day.

Dave Deek: That sounds fantastic. The moment between when you're done with a deadline and before the next deadline... [pause]

Kevin Hawickhorst: The calm before the storm.

Dave Deek: So let's get the interview started. First, you've written a very delightful article called "Eisenhower Bureaucrats." You detailed basically the government teaching a concept of process improvement called process charting and as part of this greater program called work simplification. Could you give us a bit more detail about that?

State Capacitance

Eisenhower's Bureaucrats

For the federal bureaucracy, the 1940s through the 1960s are a nostalgic time. The era saw one spectacular achievement after another: from winning World War II, to building the interstate highway system, to landing on the moon. At its high point, trust in the federal government…

Read more

a year ago · 76 likes · 9 comments · Kevin Hawickhorst

Work Simplification and Process Charting

Kevin Hawickhorst:  So the story behind process charting was this. During World War II, the government was critically short of manpower. Almost all of the experienced people had gone to the military to be drafted or just to work in some way or another on the war effort. So there was a constant revolving door of new people, shortages of every which thing, and this led to problems with management for two reasons.

First, a lot of the managers were new and needed to get brought up to speed quickly, and that wasn't happening. And second, then as now, there was bad management in the government. It became a huge problem during World War II because if you're the manager in charge of getting approvals out for contracts to build bridges, you might be the person holding up the infrastructure needed for a new war plant.

So there were endless complaints about the bad management in the government. The Bureau of the Budget, which works for the president and is now called OMB, the Office of Management and Budget... Anyway, back then the Bureau of the Budget decided to do something about it. They decided that there needed to be a training program for managers. They looked around and tried to find the best approach. They ended up adapting the process that was used to train new workers in the new war industries.

When they set up a new munitions factory, nobody knew how to do that work. They had to train all of them. The Bureau of the Budget said, we can take this idea and adapt it for training government managers. This was their bigger picture "work simplification" initiative, as they called it.

The goal was to teach managers to think critically about the processes in their office in the government and think about how to make them a little bit simpler each and every day. They tried to get rid of red tape, to try to get rid of excessive procedural burdens, or just to find better ways of doing the same thing with more modern technology or better office organization or something like that.

Dave Deek: So that's actually a very familiar story. You heard the concept of total quality management, so you also know it's a similar story especially with the way Edward Deming had described it.

Kevin Hawickhorst: Mhm. Yeah. It's even more similar than you think. This didn't quite make it into the article, but the Bureau of the Budget hired management consultants to help them figure out their strategy. Deming actually was a long-term adviser to the Bureau of the Budget in the 1940s. So, some of his ideas were part of work simplification initiatives, but not the process charting itself.

Let me give you a few examples. There was an agency, the General Accounting Office, the GAO. The General Accounting Office used to process each and every transaction that the government did. They would allegedly look at every single one.

But this was such a mammoth undertaking that it was just a very cursory examination of the documents. They would send things back for minor typos or quibbling over the way it was filled out. But they didn't do any real review looking for fraud, and everything they did was hopelessly late because they tried to look at absolutely everything and couldn't possibly do it.

So Deming's contribution to management was statistical control. He said that instead of trying to look at absolutely everything, the government should figure out a good randomized way to spot check the work of the agencies. It could then relax those controls and tell the agencies, "You need to go figure out good management yourself, but we're going to audit you on a statistical basis to see if you're managing your own work effectively or not."

Subscribe To Kevin's State Capacitance

The Origins of Modern Management Practices

All of these ideas were in play in the government's training initiatives in the '40s. Similarly, the approach of work simplification was adapted from something called Training Within Industry. I said it was adapted from the training for factories. TWI was the factory training. It died out in the US after the war but it became popular in Japan where Toyota adapted it and called it lean.

So this is all to say that the ironic thing is the government in the 1940s and '50s—their management actually looks pretty modern. It had ideas that were very much the immediate precursors of total quality management and lean, and the actual founders of these disciplines were consulting for the government.

Then in the '60s and '70s they said we need to adopt more modern practices from industry. But those were the practices of the very cumbersome corporations that got destroyed by Japanese competition. So the biggest irony of all of this research is that the government was actually much more modern before it was reformed than after.

Dave Deek: [pauses] You're talking about Gulick is that correct?

Kevin Hawickhorst: There were a lot of people who reformed the government in a direction that was not very productive. I think the '60s were the worst period for that.

Dave Deek: Okay... could you tell me more about that?

Kevin Hawickhorst: This is actually what the article I wrote will be about—a significant section. But I'll give you the gist of it here. In the '60s, corporations embraced "long-run planning." That was the buzzword that they loved. They said, "We're going to have the planners around the executive, and we're going to set out the high-level goals of the organization..."

Dave Deek: Mhm.

Kevin Hawickhorst: "...and then we're going to have some generalist managers underneath them who translate the plan into specific actions, and then the workers on the shop floor go out and do whatever they say." The theory was this would allow them to prioritize better and have more of a long-run focus. The reality was it became much more top-down and tied down with much more red tape. So it was actually a pretty bad process.

However, the US was just so dominant at the time that that wasn't clear. People said, "If General Motors and DuPont do it, then it must be modern management."

Dave Deek: But there were a lot of critics, especially from the old school managers. You were talking about Deming and Juran who were both very critical of that process.

Kevin Hawickhorst: Sure, they were extremely critical, but how much influence did they have at the time? They were so critical just because they thought so many corporations were making such a big mistake.

The government thought that it should adopt modern practices like this. And in particular, it was pushed during the Kennedy and Johnson administrations, particularly by their defense secretary, Robert McNamara. He had been the CEO of Ford and was keen to get the government to adopt these modern management practices, as he saw them.

Dave Deek: So McNamara was the guy who essentially was a snake who convinced Eve to bite the apple so to speak.

Kevin Hawickhorst: He is the villain of my piece to the extent there is one. Mhm.

Dave Deek: That's actually very good to know because I would have thought it was like Jack Welch in the late 70s and 80s when he was proponent of a lot of bad management practices that became so rampant in America today. I did not know it was so early in the 60s.

Kevin Hawickhorst: Yeah. The rot goes kind of deep and it's especially very disappointing because management during World War II had been so good. We had this approach to progressive operational improvement, to rapid iteration, to investing in the workforce and upskilling them, and then it died completely out in industry after the war. Then people assumed it must be an outdated practice,and they actively went toget rid of it at the federal level.

Dave Deek: That is interesting. Before we move on, what made you even talk about this topic in the first place?

Kevin Hawickhorst: Good question. So, at the bigger picture level, the reason I care about all of this in the first place is the debate over state capacity. Particularly in the early days, you had some people say the government used to be more competent in the past. I thought okay there's a prima facie plausibility. We put a man on the moon and built the interstate highway system and won World War II and we don't do very much of that today, so it could be true. I wanted to know if the government was more effective, and I was neutral at first.

What was it that it actually did to be more effective? People can talk at a high level: They hired more expert people, or they had better leadership. But that's not actionable. I wanted to know questions like: how did they write job descriptions and decide about promotions? How did they budget for their projects? And in this case, how did they train their managers?

And there's surprisingly very little written about it. So that was the background for me being interested in this question. And then the actual way that I stumbled into the knowledge of this, was I was just looking through a catalog of documents. I saw something that said "the work simplification initiative of the Bureau of the Budget" and I thought, “that's one of the most boring titles I've ever heard” and I kept going on.

However, two or three minutes after that,I had this thought occur to me.I said, "Wait a minute, that sounds so boring that maybe nobody has ever looked at it before, so I should go skim it to see if there's something for me to discover." And in fact, there was. It wasthis very interesting document about how the government hada brilliant approach to training managers in the 40s and 50s.

Dave Deek: When I was reading it, thanks to your article, by the way. I was reading I was actually shocked in how semi-structured it is, the best way I could describe it here. It's a lot more structured than how we do things in the developing world with Scrum and waterfall. You have this weird mix between super structured waterfall and not very structured scrum so it's basically doesn't actually tell people how to think about processes or how to implement processes. I thought it was a bit refreshing on my end.

Kevin Hawickhorst: Mhm. Right. That's what struck me too. There's maybe this idea that only bureaucracy can defeat bureaucracy. What I mean by that is: you have the constant complaint about government employees that they always just want to follow the process and check the boxes. Maybe that's just an inherent issue with government.

So in the '40s they wrote the process and the boxes to check, but the process they wrote was "go through everything your agency does step by step and eliminate red tape." So it was a process for getting rid of process. It takes the bad instincts of government and tries to channel it in a productive direction. In my eyes it is more useful than just yelling at the government to try to be different,or bringing in a bunch of consultants to fix things up and immediately they start becoming worse as soon as they leave.

Dave Deek: Despite the fact that it was management consultants of the 40s in the first place responsible for a lot of these programs. [chuckles]

Kevin Hawickhorst: Sorry. What do you mean by that?

Dave Deek: [clarifying] It was a bad attempt at a joke. I'm not complaining about consultants, but the consultants of the '40s were the ones responsible for work simplification, Deming's statistical controls and stuff like that.

Kevin Hawickhorst: No, that's an insightful point. So even in the 40s and 50s they did bring on consultants for certain projects. It was much more limited. But for the Bureau of the Budget their consultants were often individual people brought in on a contract basis. So it wasn't like they hired the McKinsey Corporation, which existed back then even and was a consultant even then.

They didn't hire McKinsey to write up their approach to management. They took the people who they thought were talented and said, "Hey, we're going to pay you to come join our staff for a year or two." And that was the status that Deming had. I think he might have been working for the census and detailed to the Bureau of the Budget, but the gist of it was they brought on individual people who they thought could contribute, rather than just hired a consultant with a vague goal and an indefinite timeline.

The IRS Modernization: A Digital Transformation Success

Dave Deek: Okay... let's get moving because I want to make sure that we get the hour out of the way. Let's focus on the world's only successful case of digital transformation, the Snyder cuts and the digitalization of the IRS.

Kevin Hawickhorst: Mhm. Right. We're talking about very very early digitalization, like punch card computing equipment and maybe the very early vacuum tube stuff in the later years of it.

Dave Deek: You take the lead. [gestures]

Kevin Hawickhorst: All right. So, earlier I talked about how the federal government had rapid turnover and was losing most of its expertise. This was also true in the IRS, which then was called the Bureau of Internal Revenue, but I'm just going to call it IRS.

So, the IRS not only had rapid turnover in its accountants, but they had a lot of political appointees, too, which was a very negative combination for reasons I'll explain. The way IRS used to work was very very surprising by modern standards: the regional collector of revenue used to be a political appointee.

So when you paid your taxes, you would send your taxes off to a political appointee who would be like a donor or something, a party bigwig. He would look through the taxes and say, "I know for a fact that this guy actually has a lot more money that he's not reporting because I'm involved in all of the fundraising and I know all of the businessmen around here."

The theory of it was that bringing on local knowledge would spur people to pay their taxes. And the reality of it is that filling your tax agency with political appointees actually led to a ton of corruption. Which was actually a very predictable consequence.

Dave Deek: I mean, it's a redux of the same problem since the time of the Roman Republic.

Kevin Hawickhorst: Absolutely. So I said that the wartime was a very negative combination of factors because the experienced accountants who could catch fraud were leaving, and nobody ever learned the ropes. So the revenue officials realized they could embezzle money with little chance of getting caught, which they did.

And further, all of the work that the IRS did was running hopelessly late, to the point where it took more than a year to get your income tax refund. So, if you paid your taxes and were going to get a refund, you would have paid next year's taxes before you got the refund for the previous year. So it was a pretty dire state of affairs—corruption all around, which was a secret at first, and IRS running hopelessly late, which everyone knew about and complained about. All right, so that's setting the stage there, right?

Dave Deek: [nods] How did we get out of this mess of corruption? Because usually once corruption sets in, it just keeps on spreading.

Kevin Hawickhorst: Luckily Truman appointed a very strong Secretary of the Treasury named John Snyder, who was a businessman, I think maybe from Missouri, don't quote me on that, but longtime friend of Truman and a rather personally conservative businessman.

So he got in at the Treasury Department and he surveyed their problems and concluded that there were a lot of problems, and he wanted to set things right. But he had a much more solid understanding of management than lots of people have today. What he thought was this: The IRS running hopelessly late and the corruption are two sides of the same coin, which is poor procedure and bad management, because all of these confusing procedures are what causes everything to be running late. And also, it gives cover to the corrupt officials.

If nobody really understands the way things ought to work and nobody can make sense of the records and the books, then you're not going to be able to catch the corrupt people. So Snyder said, "These are two sides of the same coin. We've got to get to improving the agency and its management and we're not just going to crack the whip on corruption," although he wanted to do that too, and did. But he said, "We're not just going to throw a lot of new process and new investigations at the problem. We're going to get to the root causes of it," which again was the fact that the organization of the agency didn't make any sense, the documents it used were confusing to fill out, the process for processing tax returns on the IRS side was very outdated.

So you had all of these issues. Snyder said, "We're going to try to clean up the IRS by making the IRS function better across the board."

Dave Deek: That's very rare because most management I'm aware of usually will just try and implement a brand new system while letting all the systemic causes just go to fester.

Kevin Hawickhorst: Mhm. Right. And so Snyder wanted to iteratively improve the existing system.This was actually one of the largest uses of work simplification in the federal government.

So he started trying to get just pretty low ranking managers to start improving office procedures and making experiments with improving technology to process the returns better, at a very small trial-run scale. He and the treasury leadership started making further improvements to medium-scale issues at IRS.

So, for example, they reworked the tax forms that people filled out to be much more legible and straightforward. They were previously just completely inscrutable government documents. He started combining related documents where previously people had to fill out the same information multiple times. So there was improvement for the way that the IRS worked with the public. They started trying to process claims in a more efficient way and they started streamlining the way that the office worked.

What's more, he was trying to change the culture, to get people thinking about the fact that the IRS had problems and they were responsible for fixing them. He started with the small problems with the aim of quickly working up to tackling the big problems, after he had won some successes and got people invested in reform.

The upshot of all of this was he laid the groundwork for big picture reforms. So when the corruption scandals really broke, Congress of course called the IRS people in and tried to rake them over the coals. But Snyder had a pretty good response to them. He said, "Shame on you. I've been working to make the IRS much better and here's my successes. It's you who've filled the IRS with political appointees who've been corrupt. And you should go fix that."

And he was a little bit more collaborative than what I've said. But Congress had to admit that he made a good point because he brought to them proof that he had been fixing as much as he could. So, Congress approved his reorganization plans that got rid of most of the patronage at IRS and it also streamlined the way the office was organized, which hadn't made any sense before.

Those were the tools that Snyder used to invest in further transformation. He had started by just doing pilot projects in individual offices. My article gives the exact answer but—I want to say the Cincinnati office—pioneered a lot of these things. He started working with them, starting very small, saying “All I want to do is take a single tax form and see if you can automatically add up the numbers that it contains instead of tallying numbers by hand. You're just going to do it with automated equipment and you don't even need to produce the records in punch card format. It's just a single step for a single form. We're going to see if we can automate that.”

And that paid off. So he spread the word around and other local offices got to trying this out too. Eventually they said, "Okay, we're going to automate many procedures for many forms." And eventually they said, "This is working well enough that we're going to start producing the records on punch cards. We're going to start having our punch-card systems interact with the Treasury's punch-card systems in Washington."

And so they built it up bit by bit. They started with as unambitious a goal as possible. They took a single task: adding stuff up on a single form. I think it was personal income tax returns in a single office in Cincinnati. When they thought they had figured that out, they started to iterate, ramp up Also, they had a long run plan. So it wasn't just a lot of individual offices flailing about, but more like a lot of controlled experiments.

So his digitization initiative was... he had figured out the problems with waterfall and the benefits of agile decades in advance. [sounds impressed]

Dave Deek: That is very interesting. Have you heard the concept of Shadow IT? It's basically when local offices basically buy their own IT software or they build their own custom apps or use a bunch of networked spreadsheets. So it sounds like to me that Snyder essentially... hey instead of trying to centrally control that he said "Hey this is the big picture here, you guys are allowed to have your own shadow IT services but we're going to test this stuff," right? I mean, there's a lot of differences between now and...

Kevin Hawickhorst: [interrupting] That's more or less how it did work. I think that's another premise of my work is in many cases these ways of thinking and...

Dave Deek: [interrupting] But I...

Kevin Hawickhorst: ...these methods of management have been invented before ,and in some sense the 1940s are a better model for us than the 1990s or whatever, because that was the previous era of really radical transformation. From the paperwork era to the early computer era might be a more appropriate model for reform in the AI era than anything else.

The USDA: Reform Gone Wrong

Dave Deek: But let's switch from the success case to the problem child. And I'm guessing which problem child I want to bring up.

Kevin Hawickhorst: I'll go ahead and bring it up.

Dave Deek: The USDA. [nods]

Kevin Hawickhorst: Mhm. Right. So, this really ties into what I've said was the enthusiasm for bad management ideas across the 1900s. The early US Department of Agriculture was extraordinarily good and people used to bring it up as the best department in the United States, the most competent. The organization of it was reformed several times throughout the 1900s and I think practically every reform made it worse.

The classic USDA, which means USDA in the 1900s and 1910s,was composed of many agencies that each had a technical focus. So there was the Forest Service—which still exists_concentrated on forestry. There was the Bureau of Entomology which concentrated on insects. There was the Bureau of Soils which, obviously, concentrated on soils.

Each of those agencies had a technical focus. They did a little bit of program administration, like giving out grants to farmers to insect proof their crops or whatever. They also would do a little bit of regulation, like condemning diseased crops.

Each of these agencies had a narrow technical focus and they were able to attract pretty good people. If you're an entomologist, the Bureau of Entomology could say, "Hey, this is the only place in the United States where you're going to see such a breadth of issues in yourcareer." You can go do some regulation, you can oversee long-term research studies, you can talk to farmers about good practices, you can do a little bit of everything.

Dave Deek: This is like a... [gestures for Kevin to continue]

Kevin Hawickhorst: And there were lots of PhD scientists orotherwise experienced people who said, sign me up for that, right? So that was the organization of classic USDA.

Moving forward, people increasingly felt that it lacked a sort of integrated focus, that each agency was off doing its own thing. They also thought that the org chart looked messy because the secretary of agriculture had always more than 10 people directly reporting to him, and it got close to 20 on a couple of occasions.

What they said was, we need to reorganize the department into a smaller number of major purposes. Then it will be more thoroughly directed and coordinated and rationalized. So, I won't give the details here, but from the 20s to the 50s USDA was reorganized to take all of their science and put it in one agency over here. So now there weren't the entomologists and the soil scientists and so forth. They were taken from their original agencies, picked up, and they were all put together in the agency that does scientific research.

Similarly, the administration of aid to farmers was all bundled together and put in one or two agencies in a different part of the department. And finally, regulation was combined mostly in one or two offices and it was put together in still a third spot. And then on paper, this looks much more logical. It looks much cleaner. You know what I mean?

Dave Deek: [nodding] Yes, I remember this pattern of organization and I'm guessing we all know the end results, right?

Kevin Hawickhorst: The end results, the org chart looked much nicer on paper, but the culture of the agencies greatly changed. It used to be that each agency had a technical focus and a mix of perspectives on it. They did a little bit of regulation, a little bit of grant administration, a little bit of research. So they had both a strong sense of mission and a mix of perspectives in there.

But once you put all of the different types of experts, each in their own agency, these agencies didn't have the mix of perspectives, for one thing. So if you have the agency that's just scientific research, it was no longer working with farmers. It didn't care that much about the usefulness of its research. Its research rapidly became much less applied and it appealed only to what people cared about in universities, and not so much what was useful research in practice.

Similarly, when you put all of the farmer's aid in one agency, it became completely and totally captured by the farm lobby. The agency did absolutely nothing except hand out money to the farmers. And the more money it handed out, the more powerful it was going to be. So, it was an advocate. If the farmers tell it to jump, it asks how high.

So the reorganization looked nice but it got rid of the mix of perspectives and the sense of mission.The department, I think ,has really stagnated since then. USDA is a fine department today, but who would say it's the exemplar of what the government ought to be? I don't think very many people would say that.

Dave Deek: Okay, so the USDA classic was pretty much organized how Apple is sort of organized now, right? You have these product lines or research lines as you like to call it where it's pretty much self-contained and they can over have redundancy or overstep on each other as long the final end product was which is regulation and agricultural security I think that USDA classic would call themselves as well but that it's constantly growing and it's constantly improving.

USDA modern or new USDA, let's just call it new USDA is like any other corporation where you have all the research and development in one main organization and it's removed from everything else and it's not a problem until it becomes a problem. Is that a good comparison?

Kevin Hawickhorst: Yeah, that's exactly right, I think.

Dave Deek: So the same narrative of 1940s and before having figured out all a lot of this management stuff that we just sort of rediscovering now.

Kevin Hawickhorst: [thoughtfully] Yeah, that's definitely the case. And in fairness to them, I will say that the government up through the 50s had many enormous problems. You'd get a skewed conception if all you do is read my work, because I'm only talking about the highlights that are very impressive by modern standards.

There were many things that were completely incompetent and there were many agencies that werevisiblyincompetent, leaning corrupt. So the average member of the public or the average businessman had a reason to think that the government needed serious reform. But they threw the baby out with the bathwater. There were many management practices that they thought were outdated, but actually these practices were ahead of their time.

Future Research and Conclusion

Dave Deek: So let's how about this here, is there any upcoming papers I know you already talked about one of your papers, but there's any other upcoming papers that you're planning to write about?

Kevin Hawickhorst: Yeah, there are a couple of experiences that I want to write about. So I'm doing two that are upcoming. One is about how Congress did oversight during the New Deal, and that's the big magazine article.

Dave Deek: Mhm.

Kevin Hawickhorst: And another is going to be about how agencies managed their paperwork and tried to improve the design of their paperwork and things like that. So, both of those should be out within a month or so. We'll see. So, that's what's immediately in the pipeline. But then we have this question, what other things do I want to write about? Right?

So, there are a couple of buckets of things. I want to write more detailed analyses of a couple of procedural areas. So, one of them would be budgeting for projects. There was one agency, it was USDA in fact, but they had a really brilliant approach to figuring out how to fund projects in a flexible manner that still provided for oversight from Congress. So, that would be a case study in how to have Congress work productively with agencies, so that both could be satisfied that there's both flexibility and rigorous oversight.

I also hope to write more about how research was done in the past because it used to be far more applied. As I said, there were these technical agencies that had ties to industries and universities and local regulators. Therefore, these agencies produced very applied research. They cared a lot about making sure they did things that were useful for the relevant parties in the American public.

So I'd like to write some case studies about that, and alsopresent an overall vision that this was a desirable model of research. We should try to incorporate more of that.

Dave Deek: Have you, on that topic here, have you heard there's this Dutch university and Dutch agricultural policy up until the early 2000s was actually based on what you're describing here, right? You have this massive world-class agricultural research that works heavily with the farmers and but this university also work with Dutch regulators and what made one of the biggest exporters of agricultural products in the European Union. Have you heard about that? Let me...

Kevin Hawickhorst: I haven't, what's the name of that? How can I learn more about it?

Dave Deek: Let me just try figure out how to pronounce it. It is Wageningen University and Research. Let me just spell this out, forgive me. It's responsible... it's one of the responsible reasons why the Dutch became such agricultural powerhouse especially as they were getting more land because the Dutch are great at getting land back from the sea, cleaning up there and turning that land into farmland mostly for cattle but also other agricultural products.

Kevin Hawickhorst: I mean, good models are good models, whether it's from the past or from the present. So certainly some people have accused me of thinking that if the government did something in the 1920s or 30s, therefore I think it should have to do it that way today. which I can see where they're coming from, but I think the truth of the matter is, you want to look at success and figure out what you can learn from that.

I'm very much in favor of people presenting foreign models. I just happen to think that my comparative advantage is very much the historical case studies, and that's why I personally focus on that. However, I'm equally in favor of other people writing up how other countries do things.

Dave Deek: That is good to know. I think this is a great time to leave off. Does that work for you?

Kevin Hawickhorst: Yep, sounds great.

Dave Deek: All right, just let me stop recording. Okay. For any and all readers who made it till the end, If you enjoyed the transcript, please subscribe to Kevin’s State Capacitance

Happy April Fool’s, but frankly we are all (well almost all) business today with a neat little update.

Kevin Hawickhorst’s article talked about Eisenhower-era process improvement tools that transformed federal efficiency during the 1940s-1960s, when government trust reached 80% and major national projects succeeded. You know what? Why keep such a gem hidden away in old dusty books and digital pdf scans? We should create a documentation site with the intent of fully recreating, updating, and creating alternative versions of the Work Simplification program and the artifacts (training materials, art, etc)—not just for governments but for civic organizations, political campaigns, and businesses. The idea is to make it easier for today's organizations (or at least the common political actor local government employee) identify unnecessary procedural steps and eliminate bottlenecks that waste resources, maybe even spot loopholes and poison pills in bills and plans to spot for.

Right now we converted the associated manuals into a docs site called Standards, with our end of April plans is recreate the other materials like Process Chart forms and the such

Standards - Fork of Work Simplification

Why Does This Matter?

Process improvement isn't intuitive for most people. As stated in earlier articles, even big boy corporations with dedicated resources often struggle to implement it effectively (don’t believe me, ask McKinsey who is less trustworthy than I am but for some reason, you trust these guys). And while think tanks occasionally tackle implementation issues, they're typically far removed from the ground-level reality where policies succeed or fail.

We need to make process improvement accessible to ordinary people in local groups who have the most direct experience with broken processes. They don't need MBA jargon or complex methodologies—just practical tools to document what's happening in their communities. Practical tools like what the Work Simplification Program has to offer.

A hypothetical example is a local YIMBY volunteer who's helped ten homeowners navigate ADU permits and has invaluable knowledge that no policy expert in Sacramento possesses (which is a good idea in its own right, instead of an accounting student helping people file taxes, law or real estate students helping people navigate ADU permits with the understanding they are not real estate lawyers). Adjusting Work Simplification’s Process Charting (making a list of all the steps one by one and making them like a more verbose flowchart), so that volunteer with basic process mapping skills increases the chances that the volunteer might spot something everyone else overlooks!

Unlike corporate “process improvement” which focuses on short-term cost-cutting or (in very rare cases since Deming’s death) efficiency, the WW2-era political process improvement focuses on effectiveness—making the government deliver what laws promise just like what happened during the 40s and 50s. This distinction matters because it centers on citizen experience rather than administrative convenience.

Even something as esoteric as increasing fertility rates, there is a growing mountain of research and case studies showcasing the value of better implementation or even better local government can provide, let’s say “booming” results (*sounds of crickets chirping* yes I want to make that joke again).

Recreating Work Simplification will help us deal with failures aren't about policy intent but process implementation.

On That Note

The consolidated training manual is called “Work Simplification as Exemplified by the Work Simplification Program of the U. S. Bureau of the Budget.” It is online on Hathitrust. To read it, you have to be located in the US. To download it, you have to have an institutional subscription. Or, you can reach out to me and I be glad to give you a digital pdf.

W. Edwards Deming, namesake of Japan’s Deming Award for reasons I let you guess, had a simple (painfully so) insight about customer satisfaction: "It will not suffice to have customers that are merely satisfied." Even satisfied customers might switch, he warned, "on the theory that he could not lose much, and might gain."

This principle—that loyalty must be earned through exceptional service, not merely adequate (or frankly terrible but you have no choice) performance—offers a powerful lens for understanding why people keep on swinging between the two parties.

As polls show declining trust in government and institutions across the political spectrum, Deming's warning about customer loyalty feels less like business advice and more like political prophecy.

When political parties and public institutions take their constituents for granted, they invite defection and anger—playing out from Congress to town halls, with increasingly predictable results.

The Disney World Metaphor: A Case Study in Customer Abandonment

Before examining today's Disney World as a metaphor for why everything seems to get worse (at least with customer service), it's worth noting the company's troubling history with management consultants.

In 1996, Disney hired McKinsey & Company to evaluate park operations, resulting in what journalists Walt Bogdanich and Michael Forsythe describe as a “delightful” (by delightful I mean deadly) shift in safety protocols.

The consulting firm's recommendations included reducing ride maintenance after noticing that lap bars on roller coasters were inspected daily "when records show they never fail." As ride maintenance worker Bob Klostreich noted at the time, "The reason they don't fail is because we check them every night."

The results were tragic. In September 2000, four-year-old Brandon Zucker fell out of the Roger Rabbit ride and was crushed by the following car, suffering catastrophic brain injuries that led to his death at age 13.

This incident, along with other injuries and deaths, eventually forced the Californian government to intervene in 2003. While Disney paid millions in damages, McKinsey walked away with their consulting fees intact and repeat business from Disney.

This pattern—prioritizing extraction over quality—represents a fundamental breakdown in the relationship between provider and customer that extends far beyond theme parks.

The Three-Tiered Society

In his analysis "Our Mickey Mouse Economy," Oren Cass, executive director of American Compass and former domestic policy director for Mitt Romney's presidential campaign, shows how today's Disney World has become a perfect microcosm of our parasitic service economy.

Cass describes three families at Disney World:

1. A management consultant who pays extra to game the system with carefully timed app reservations

2. A private equity executive who simply buys the premium pass to skip all lines

3. A teacher and nurse who pay base admission to spend their day watching others breeze past them through the "Lightning Lane"

The Wall Street Journal notes the model assumes the top 20% will buy the premium pass, making it "the single most expensive part of the vacation."

"This is gross," writes Cass, and "emblematic of our deformed socioeconomic structure." The system is designed to "best serve and satisfy professional-managerial class types," while adding "a money-solves-your-problems option for the rich who can't be bothered to figure things out for themselves."

This three-tiered system—with special accommodations for the wealthy, a complex bureaucracy navigable by the professional class, and long waits for everyone else—has become the template for everything from airport security to healthcare access.

The National Political Failure: Bipartisan Customer Abandonment

The Republican Betrayal

What makes Oren Cass's analysis particularly compelling is that it comes from within the Republican establishment while providing a framework that transcends partisan divides. As executive director of American Compass and former domestic policy director for Mitt Romney's presidential campaign, Cass has developed a multi-faceted critique of how our institutions fail ordinary Americans.

His "Mickey Mouse Economy" analysis shows how Disney World has become a microcosm of America's stratified service model: the wealthy buy premium passes to skip lines, the professional-managerial class leverages technical knowledge to game reservation systems, and everyone else pays standard admission to wait in increasingly longer lines.

This same tiered approach appears in Republican tax policy, which Cass argues increasingly caters to donors and corporations at the expense of working-class voters. As Republicans passed a budget resolution with $4.5 trillion in tax cuts and spending increases, Cass sees his party abandoning its base. The resolution includes:

• $4.5 trillion allocated to the Ways and Means Committee for tax cuts

• At least $880 billion in cuts from Energy and Commerce (targeting Medicaid)

• At least $230 billion in cuts from Agriculture (targeting SNAP)

• At least $330 billion in cuts from Education and Workforce

"The tax cuts were made temporary so that they could be sold as less expensive in 2017. When are we supposed to count the cost of extending them or making them permanent? Not in 2017? Not in 2025? Just never?" — Oren Cass

While Republicans push for $4.5 trillion in tax cut extensions, only 1% of Americans say tax reform should be Trump's top priority. "If Republicans spend the next year fighting over a tax bill that is a low priority outside the Beltway," Cass warns, "they will expose themselves as badly disconnected from the interests of the working class that put them in power."

In a recent article for Unherd, Cass extends this analysis using the metaphor of a chainsaw to explain why so many government reform efforts fail:

"The thing about a chainsaw is that it's really great for some tasks — say, chopping up a tree — and really bad for others — say, performing surgery. We don't 'support' or 'oppose' chainsaws, we try to ensure that they are used appropriately."

Cass distinguishes between "easy problems" and "hard problems" in governance:

• Easy problems can be solved by straightforward policy changes (stopping certain programs, redirecting funding)

• Hard problems require reforming processes, developing expertise, and facing painful tradeoffs (reducing improper payments, making agencies more efficient)

When reformers fail to distinguish between these types of challenges, the results can be disastrous. As Cass notes regarding Elon Musk's Department of Government Efficiency (DOGE) efforts, they have been "haphazardly cutting expenditures without even knowing what they are," including canceling critical legal research tools at the SEC and firing staff with AI expertise.

"Many of the most intractable problems in government are hard problems. They aren't just a matter of choosing policy, but depend upon reforming process or grappling with painful tradeoffs." — Oren Cass

While Musk fetishized chainsaws and talked about how the “fundamental weakness of Western civilization is empathy” (ketamine is, apparently, a hell of a drug!), this approach to governance appears across (in a far less extreme but still obscene form) the political spectrum. Just as DOGE, lead by an addict who thinks using cheap glue to attach metal panels to a truck is a great way to save money, indiscriminately cuts federal employees regardless of their value, the more “measured” Clinton and Gore who loved Deming’s Total Quality Management, then spit on Deming’s body of work with the “National Performance Review” (based on a failed Texas cost-cutting program!) while hyping up Deming’s Total Quality Control, which sharply rejects the very idea of layoffs for mock “efficiency”.

What these approaches share is a fundamental disregard for actual service quality and user experience (my bias is that I prefer Lexus over Tesla, or sticking with EVs then it’s BYD over Tesla), people would argue that winning elections is what counts. Well, like Cass worried, the Republicans are losing special election after special election and their town halls have become something *delightful*.

The Democratic Collapse

While Cass critiques Republican abandonment of working-class interests, Stephen Semler, co-founder of the Security Policy Reform Institute, provides an equally devastating analysis of how Democrats lost their way.

The numbers tell the story: In 2020, 56% of voters with household incomes less than $100,000 voted for Biden, while only 43% chose Trump. By 2024, those numbers had dramatically shifted—Harris secured only 47% of these votes while Trump captured 51%.

Among voters making under $50,000, the shift was even more dramatic, marking the first time since the 1960s that Republicans won this income bracket.

But as Semler carefully documents, this wasn't a massive rightward shift in ideology. Rather, it represented a collapse in Democratic turnout. Overall voter participation fell from 65% in 2020 to 62% in 2024.

"If Harris had maintained Biden's share of the eligible vote," Semler notes, "she would have won the popular vote by 5.9 million. Instead, Harris lost by 2.3 million."

The roots of this collapse lie in the Biden administration's systematic dismantling of pandemic-era social programs despite ongoing need. Under Biden's watch:

• Over 25 million people lost Medicaid coverage

• SNAP benefits were cut by $90 per person monthly

• Additional food assistance that kept 4.2 million out of poverty was eliminated

• Student loan payments resumed despite 61% of borrowers reporting financial distress

• Total student debt grew by $72 billion despite $189 billion in forgiveness

"While Republicans are leading the current attack on the social safety net," Semler writes, "the broader war on welfare is bipartisan."

This stuff translates into broader economic impacts, yes the unemployment rate was under 5%, but job searches stretch to six months before the end of Biden’s term, a month longer than in the post-2008 era. Not only that

• 51% of employed workers actively seeking new positions, creating intense competition

• Recent graduates facing 5.3% unemployment, higher than the national average

• The hiring rate remains at recession levels (3.3%) despite "good" unemployment numbers, which are made even worse by longer and longer job searches.

• 1.7 million and growing people have been searching for work for at least 27 weeks

That doesn’t come into the fact poverty, homelessness, and a number of other metrics have deteriorated! While a lot of people love to save it’s the vibes, remember that Musk and Trump’s popularity have dramatically declined over the last few months due to their own actions.

Especially as Semler’s notes how the Biden administration's 2023 budget, supported by all but one Democrat (Rep. Ocasio-Cortez), directed two-thirds of its $1.7 trillion toward military and law enforcement while triggering "historic reductions in food assistance and public health insurance coverage."

The progressive YIMBY governor of Minnesota and Harris’s running mate, Tim Walz, offers a remarkably candid assessment that aligns with Semler's analysis. In Walz's view, Democrats played it too safe and failed to present a bold vision that would inspire voters.

"We shouldn't have been playing this thing so safe," Walz told POLITICO. "I think we probably should have just rolled the dice and done the town halls, where [voters] may say, 'you're full of shit, I don't believe in you.' I think there could have been more of that." This risk-averse approach, Walz believes, put Democrats "in a prevent defense to not lose when we never had anything to lose because I don't think we were ever ahead."

"When we get back, which we will – we'll fight – I'll tell you what people are going to expect is they're not going to expect us to tinker around the edge with the ACA [Affordable Care Act]. They're going to expect universal health care." — Tim Walz

Walz's critique goes beyond campaign tactics to the substance of Democratic policy offerings. Rather than incrementalism, he argues that when Democrats return to power, they need to deliver transformative policies that directly address voters' needs. His assessment perfectly aligns with Deming's principle that "merely satisfied" customers aren't enough – Democrats need to focus on delivering exceptional service through bold policy that tangibly improves people's lives.

Pointing to his experience in Minnesota, Walz demonstrates that political courage can succeed even with narrow margins: "We had a one-vote majority in Minnesota when we moved clean energy, we moved reproductive rights, we moved a whole slew of progressive, very popular, including things around guns and gun safety, very popular things." His governing philosophy – "You lead with good policy and good politics will follow" – represents a direct challenge to the risk-averse approach that has dominated Democratic politics.

Special Interest Capture: How Both Parties Abandoned Their Base

Cass and Semler identify how their respective parties have become captured by “niche” interests that no longer represent their nominal voter base.

On the Republican side, organizations like Americans for Tax Reform, Club for Growth, and Americans for Prosperity have made it "their mission to cut taxes continuously, regardless of what most voters prioritize or the federal budget can bear."

As Cass notes in The New York Times, "They preach tax cuts with the same desperate zeal as climate activists demanding a near-total elimination of carbon emissions." These groups, he argues, are "as toxic to the governing aspirations of conservatives as the Left's so-called 'groups' are to aspirations on the other side."

"Young voters do not look at our politics and see any good guys. They see a dying empire led by bad people." — Pollster quoted by Semler

The Harris campaign provides a perfect case study in ignoring Deming's wisdom about customer loyalty. As Semler documents, Harris faced a clear choice: embrace the successful social welfare agenda of 2021 that had dramatically improved economic well-being or continue Biden's rightward drift. The data was clear:

• The cost-of-living crisis remained voters' top concern since July 2022

• Majorities in both parties wanted to avoid foreign wars

• All measures of economic well-being showed deterioration since 2019

Instead of addressing these concerns, Harris, like the Republican establishment Cass criticizes, chose to ignore them. Her economic platform was inadequate to the moment, and her foreign policy remained hawkish despite widespread opposition. “Look, I own this. We wouldn’t be in this mess if we had won the election, and we didn’t,” Walz said in an interview Wednesday on MSNBC’s “All In” with Chris Hayes. All those numbers have *gotten* worse under the Trump administration, and with those numbers, Trump’s own presidency is suffering from the “bad vibes”

The Service Failure Cascade: How National Neglect Affects Daily Life

The national crisis of political customer service isn't just an abstract phenomenon playing out in Washington—it cascades down to shape the daily experiences of Americans at every level. Just as Harris and Trump competed for voters while ignoring their needs, local institutions increasingly operate with a similar disconnect from their users.

Author of the Right of Way, Angie Schmitt in her analysis of public services "Stop Gaslighting People Who Complain about Public Services" makes a provocative observation: "I am suspicious of people that are constantly loudly praising public services. Whether it's transit, or libraries, or public schools."

As a library user working on her second book, she encounters constant friction with inflexible systems. Despite requesting extensions for academic books that haven't been checked out in 25 years, she faces rigid return policies that seem to prioritize rules over service.

"Here's my suspicion about all these people who are always memeing about how ideal and magical libraries are: I think they don't use them," she writes. "When I go to the library, a lot of times it's sorta deserted. Everyone's at home on their computer talking about how they love libraries, presumably."

Transit Troubles

The disconnect between institutional priorities and user needs becomes even more stark in public transit. Just as the Biden-Harris administration dismantled effective pandemic-era programs despite clear public need, local transit authorities often make decisions that seem to deliberately ignore user experiences.

"You can tell who really rides transit and tries to rely on it. I know these people! They are pissed off all the time! They have stories!"

Schmitt describes her own station's unexplained entrance closure, which forces a detour with no timeline for resolution. The station has become "sort of a homeless shelter and marijuana smoking hot box for high school kids, to the point where if you show up these days and you're just like a normal person who came there to ride the train, everyone does a double take."

The Education Predicament

The public education system perhaps best exemplifies how national political failures manifest at the local level. Just as Cass identifies Republicans' fixation on tax cuts while ignoring working-class priorities, and Semler documents Democrats' abandonment of effective social programs, Schmitt observes how education debates have become consumed by ideological battles while basic service delivery deteriorates.

As a parent, she observes how schools have become increasingly unreliable services: "My kids rarely have a five day week anymore. For some reason, we only have school during the height of cold and flu season and even then only on random days when the 'wind chill' isn't something the weather people are trying to use to boost ratings."

While conservatives focus on curriculum battles and liberals critique parental involvement, Schmitt argues that most parents simply want reliable, quality education: "I could care less about curriculum... As long as they come back reading and mathing with passable competence, I am happy."

I recognize I'm taking a very “scenic” route to my point here—as you might be kindly thinking, 'GET TO THE POINT YOU CHEESE OBSESSED DWEEB.' Fair critique. My “verbose” style might (I swear this is coincidental) mirrors how our political leaders approach problems: circling the core issues while citizens just want basic services fixed. So directly to the point: let's talk about why city services keep declining regardless of whether 'combative centrist' or 'progressive' leaders are in charge.

The Pendulum Swings, Even in Inter-party Factions

Few political figures embody this dynamic better than former Chicago Mayor Rahm Emanuel (well maybe Andrew Cuomo, but then pundits say he brings LEADERSHIP! Those same pundits are worried about the cost of Social Security and Medicare, not to mention the cost of keeping grandma alive in a nursing home), who left office in 2019 after two terms marked by significant failures hidden beneath polished messaging.

Emanuel, who served as President Obama's first chief of staff, positioned himself as a pragmatic leader who could transcend ideological battles and deliver results.

After leaving Chicago's City Hall, he quickly secured media platforms in The Atlantic and on cable news, where he dispensed advice about how Democrats should focus on winning over Trump voters and warned against "21st Century progressivism."

But the reality of Emanuel's mayoral tenure reveals how failing to improve actual services creates a vacuum that only hastens political backlash:

• He closed half the city's mental health clinics, primarily in underserved South Side neighborhoods, something so outrageous that Governing Magazine condemned him for it.

• He eliminated the city's Department of Environment, causing environmental inspections to plummet by 50-90%.

• He presided over devastating cuts to neighborhood schools while expanding charter schools. With parents forced to go into a 34 day hunger strike to save one of their schools.

• What’s worse, it turns out that graduation rates were constantly and consistently wrong.

• He fought police reform at every step, resisting federal oversight. This was before the lunatic madness of “Defund The Police” by the way.

• Not to mention Rahm’s corruption scandals

Emanuel's governing approach perfectly illustrates the fundamental problem with much of American politics today—it prioritizes messaging and positioning over solving actual problems. The result is governance that frustrates citizens across the political spectrum while improving nothing.

"The political pendulum swings ever more wildly when each administration fails to apply basic continuous improvement principles to governance."

This cycle of political whiplash—from Emanuel's administration to Lightfoot's failed reform promises to Brandon Johnson's struggling (and matching Rahm in levels of incompetence) progressive administration—perfectly illustrates how the pendulum swings ever more wildly when each coalition fails to apply basic service improvement principles to governance.

Chicago residents have experienced progressively worse service delivery through each swing while politicians of all stripes focus on winning rhetorical battles rather than implementing the methodical improvements to education, public safety, and infrastructure that communities desperately need (my goodness, this is a mouthful).

Deming's Continuous Improvement Over Political Posturing

The convergence of these critiques—from a conservative policy expert, a progressive analyst, and a transit journalist—suggests a deeper crisis in American governance. At all levels, our political and public service systems have created structures that:

• Prioritize donor satisfaction over constituent needs

• Build complex bureaucracies that benefit the professional class

• Maintain special carve-outs for the wealthy

• Take working and middle-class users for granted

The solution transcends (as much of a cliche as the word is) traditional political divides. It's not about conservatism, progressivism, or the technocratic (but not really) centrism championed by pundits. Rather, it lies in continuous improvement applied to governance.

Schmitt's advocacy for public services, despite their current failures, underscores this approach: "I genuinely like public services, in theory anyway! I want a nice park where I can run into neighbors."

She argues that maintaining effective services "takes a lot of difficult civic work... Hyping them is not enough. We need to roll up our sleeves and do the difficult work of reforming them."

This insight applies equally to our national politics. Continuous improvement requires taking user complaints seriously as feedback mechanisms rather than dismissing them as ideological resistance.

The fundamental flaw in consultant-driven and pundit-approved governance is assuming systems work well by accident rather than through consistent attention to service quality.

“Shut Up About Egg Prices”

America faces a choice between two visions: political positioning and service delivery. The first, exemplified by figures like Emanuel and the technocratic pundit class, seeks the perfect ideological triangulation while neglecting user experience. This produces Cass's "Mickey Mouse Economy," in which most citizens wait in line while elites access express lanes.

The alternative, rooted in Deming's principles, focuses on continuous improvement in service quality. It measures success not by ideological purity or finding the perfect midpoint between competing positions but by tangible improvements in citizens' lives.

When Emanuel closed mental health clinics or Democrats dismantled effective pandemic-era programs, they prioritized abstract fiscal values over service outcomes. A Deming approach would instead ask: How can we maintain or improve services while addressing constraints? Which programs deliver the most value? How can we preserve what works?

The political movement that embraces Deming's wisdom—treating citizens as valued customers deserving of excellent service rather than ideological abstractions—will discover a competitive advantage that transcends traditional political categories.

Before you start talking about the “vibes”, remember this. People still kept talking about the egg prices, so much so, that Donald Trump said “SHUT UP ABOUT EGG PRICES”.

As Deming knew, even satisfied customers might switch if they believe they have nothing to lose—and increasingly, that's how American voters feel about institutions meant to serve them. The party that embraces continuous improvement rather than ideological positioning could reshape American politics for a generation to come.

Questions For The Audience

1. What's your most frustrating "customer service" experience with government or public institutions?

2. Do you see evidence of the three-tiered service model (special access for the wealthy, complex systems for professionals, and long waits for everyone else) in your community?

3. What's one change you would make to improve public service in your community?

   Leave a comment

On a crisp morning in early 2024, deep in traditionally Democratic strongholds like the Bronx and Queens, voters shifted rightward—not out of newfound conservative conviction, but from frustration with government effectiveness. The same citizens who supported minimum wage increases and worker protections were demanding fundamental changes in how their government operated. This pattern reveals a crucial truth: the debate about government effectiveness can’t be solved by punching left or ignoring some of the recommendations of the more eccentric fellows of the right, or else Hegel’s pendulum wouldn’t be swinging. Long time readers know that I talked about taking inventory of local government successes, and we are in the middle of doing so, but it is a good idea to keep in mind some history of government reform.

America's Forgotten Excellence: The Bureau of the Budget's Management Revolution

Before discussing Clinton's reforms, we must understand a transformative but forgotten chapter in American governance: the Bureau of the Budget's Work Simplification program. In the 1940s, as World War II strained federal resources, poor management wasn't just an inconvenience—it actively impeded the war effort. The Bureau of the Budget responded with an innovation that would help drive government effectiveness for the next two decades.

Their approach, termed "Work Simplification," represented a sophisticated understanding of organizational improvement that modern reformers would do well to study (please also subscribe to State Capacitance, they are a goldmine on historical government reforms). Instead of targeting top leadership or implementing sweeping reorganizations, they focused on training first-line supervisors—the managers closest to actual operations. Their philosophy was simple: implementation and policy were inseparable, and therefore managers needed systematic training in procedure improvement to achieve policy goals.

The program's cornerstone was process charting (i.e. flowcharting)—a systematic method for analyzing workflow. Managers learned to create detailed charts tracking how documents moved through their agencies, categorizing each step as creation/modification, transportation, storage, or verification. But this wasn't just about documentation. The crucial innovation was requiring managers to justify each step's purpose, challenging the common pattern where executives knew how processes worked but not why each step existed (something different from modern consultants’ flowcharting as they document the process, but not the reason nine times out of ten).

This approach achieved remarkable results. At its peak in the 1950s, public trust in the federal government reached almost 80%—a stark contrast to today's 20%. The same "stodgy" bureaucrats who mastered process charting would oversee achievements from the Interstate Highway System to the successful administration of the GI Bill.

What made this program work? Several key elements stand out:

1. Systematic Training: The Bureau developed clear, teachable methods that managers of average competence could master.

2. Ground-Level Focus: They equipped front-line supervisors with analytical tools rather than targeting top leadership.

3. Practical Application: Training wasn't complete until managers had successfully improved an actual process in their unit.

4. Long-term Perspective: The program aimed to build sustained analytical capability rather than achieve quick wins.

The contrast with modern reform efforts is striking. Where Work Simplification taught managers to systematically analyze and improve processes, contemporary initiatives often rely on consultants and top-down directives. Where the Bureau built sustained improvement capability, modern reforms frequently seek dramatic transformations.

This wasn't unique to the government. During the same period, W. Edwards Deming was teaching similar principles to American industry during the war effort, training thousands in statistical process control methods. These approaches helped "Rosie the Riveter" outperform her male predecessors, contributing significantly to the Allied victory. Yet after the war, both industry and government largely abandoned these systematic approaches—only to watch in amazement as Japan adopted them to achieve its economic miracle.

The Path Not Taken: Deming's System of Profound Knowledge

What America forgot—and what Japan eagerly learned—was more than just statistical techniques. Through his work in Japan, Deming developed what he would later call the System of Profound Knowledge, comprising four fundamental elements:

1. A Theory of Knowledge: How do we know what we believe we know?

2. A Theory of Variation: How do we analyze and understand what we know?

3. A Theory of Psychology: How do we account for human behavior?

4. An Appreciation of Systems: Are we seeing the bigger picture?

These principles weren't abstract theory—they were practical tools for transformation. In Japan, they helped turn "Made in Japan" from a joke into a mark of excellence. In America's post-war government, similar principles, applied through the Bureau of the Budget's Work Simplification program, achieved remarkable results.

The program's success stemmed from its alignment with Deming's principles. Process charting taught managers to understand variation in their workflows. The focus on understanding why each step existed reflected a theory of knowledge. The emphasis on front-line worker involvement showed an appreciation for psychology. And the requirement to analyze entire processes demonstrated systems thinking.

The Clinton Era: A Missed Opportunity

Before entering national politics, Bill Clinton had established himself as a pioneer of government reform, building on this historical foundation. In Arkansas, his administration embraced Total Quality Management principles, creating a systematic approach to improving state services. This wasn't just management theory—it was practical governance that delivered results. State agencies developed clear metrics, engaged front-line workers in improvement efforts, and built sustainable processes for the continuous enhancement of public services.

This success wasn't unprecedented. America had a rich history of effective government management, particularly in the post-war period. As we saw with Presidents Truman and Eisenhower, the Bureau of the Budget's Work Simplification program achieved remarkable improvements in government operations. Through systematic training of front-line supervisors, process analysis tools, and a focus on sustained improvement, the federal government achieved public trust levels above 80% in the 1950s.

These successes shared common elements: systematic training programs, worker involvement in improvement efforts, and a focus on long-term capability building rather than quick wins. They aligned closely with the quality management principles developed by W. Edwards Deming and Joseph Juran, who would later help transform the Japanese industry. Even Clinton understood the front-line perspective, stating 'No one is more frustrated by bureaucracy than the workers who deal with it every day and know better than anyone how to fix it. Employees at the front lines know how to make government work if someone will listen.'

Yet this worker-centric vision was undermined when Clinton launched a six-month government performance review led by Vice President Al Gore, modeled after Texas Controller John Sharp's cost-cutting initiatives. While the rhetoric emphasized system optimization, worker empowerment, and continuous improvement, the reality proved quite different. Sharp's approach in Texas, which Gore explicitly emulated, focused on quick wins and theatrical gestures - from Gore’s hammering ashtrays on Letterman to Sharp publicly shaming agencies with 'Silver Snout' awards for wasteful spending.

While these tactics generated headlines and political capital, they often relied on accounting maneuvers rather than genuine process improvements. As Richard Murray, a political scientist at the University of Houston, noted about Sharp's program: 'But whether he's really been able to reinvent government or set a plan for it, since Texas has a remarkably decentralized system, that's much more arguable.'

Even Sharp's celebrated cost savings often came from accounting shifts, like transferring Medicaid costs to federal taxpayers or accelerating sales tax collection - exactly the kind of short-term thinking that would later plague Gore's initiative. This approach fundamentally misaligned with true worker empowerment and systematic improvement, instead setting the stage for workforce reductions and an emphasis on visible but superficial changes over lasting reform.

The Siren Song of Corporate Transformation

When Gore's NPR team began their work, they faced a choice: build on Clinton's successful experience with systematic improvement or embrace the corporate transformation practices then sweeping American business. They chose the latter, aligning themselves with what Gore termed the "Atari Democrat" vision—a performative technocratic, market-oriented approach that prioritized dramatic change over systematic improvement.

This choice reflected both the political moment and Gore's ideological leanings. The Atari Democrats championed a vision of government that embraced private sector methods, sought market-based alternatives to traditional regulation, and viewed conventional bureaucracy as hopelessly outdated. This ideology found its perfect complement in the corporate transformation methods of the era, particularly Jack Welch's approach at General Electric.

Welch's GE had become the model of corporate transformation, achieving dramatic results through aggressive workforce reduction, structural reorganization, and metrics-driven management. All of these failed completely and utterly, along with helping accelerate the decline of American manufacturing. The appeal was obvious: quick, visible wins that could demonstrate commitment to change. But this approach carried hidden (but extremely predictable) costs that would only become apparent over time.

The Fatal Compromise: Quality Management in Name Only

The NPR's September 1993 report revealed the fundamental contradiction at the heart of the initiative. While it spoke the language of quality management—customer focus, employee empowerment, continuous improvement—its actions reflected a fundamentally different philosophy. The initiative targeted 250,000 positions for elimination while simultaneously preaching quality management principles.

This wasn't just a tactical error; it represented a fundamental misunderstanding of quality management theory. Both Deming and Juran had explicitly warned against such approaches. Deming's famous 14 Points emphasized driving out fear and eliminating numerical quotas—precisely what the NPR's workforce reduction targets created. Juran's Quality Trilogy focused on building capability rather than cutting costs. By ignoring these principles, the NPR set itself up for failure.

The timing proved particularly unfortunate. Business Process Reengineering (BPR) was challenging quality management's dominance in the corporate world, launched by Michael Hammer's provocative Harvard Business Review article "Reengineer Work: Don't Automate-Obliterate." BPR advocated discarding continuous improvement as too slow and incremental, instead pushing for radical process redesign. This philosophy would significantly influence the NPR's approach, leading to an emphasis on dramatic change over systematic improvement.

The Implementation Challenge: Structure Without Substance

The NPR's implementation approach revealed fundamental misunderstandings about organizational change. The initiative relied on a rotating staff of federal employees, which dwindled from 250 to about 40 after the initial effort. This structure violated basic principles of effective change management: stable leadership, consistent focus, and built-in sustainability mechanisms.

The initiative's achievements were real but ultimately fragile. Electronic tax filing evolved from concept to reality, FirstGov.gov (now USA.gov) emerged as a crucial digital portal, and new institutional structures like the President's Management Council took shape. Yet these successes couldn't compensate for the fundamental weakness in the NPR's approach: its failure to build sustainable improvement capability within agencies.

The contrast with earlier government management successes is striking. Eisenhower's Work Simplification program had created lasting capability through systematic training and process improvement. The NPR, in contrast, relied on "champions" and rotating teams, creating changes that proved vulnerable to shifting political winds.

The Legacy: Capability Lost, Lessons Unlearned

The NPR's legacy extends beyond its immediate impact on federal agencies. It marked a crucial moment when American institutions—both public and private—chose dramatic transformation over systematic improvement. This choice would have lasting consequences for institutional effectiveness.

The initiative achieved its numerical targets, eliminating 426,200 federal positions over seven years. But this "success" came at a heavy cost: lost institutional knowledge, weakened process capabilities, and a reduced ability to tackle complex challenges. Subsequent administrations discovered that rebuilding these capabilities would prove far more difficult than cutting them.

More broadly, the NPR's experience offers crucial lessons about the relationship between management philosophy and institutional effectiveness. The initiative's failure wasn't just in its specific choices but in its fundamental approach to organizational change. By prioritizing dramatic transformation over systematic improvement, technology over process understanding, and quick wins over capability building, it sacrificed long-term effectiveness for short-term visibility.

The Lost Art of Government Management: Then and Now

The contrast between the Bureau of the Budget's approach and contemporary reform efforts is stark and instructive. In the 1950s, federal management development meant two-week residential training programs where supervisors learned detailed process analysis methods, statistical thinking, and systematic improvement techniques. Today, management development often means half-day seminars on leadership styles or brief workshops on the latest management trends.

Consider how each era approached process improvement:

Under the Bureau of the Budget's system, supervisors spent days creating detailed process charts of their operations. They mapped every step, measured time and motion, and systematically analyzed opportunities for improvement. Workers participated directly in this analysis, contributing their front-line knowledge to improvement efforts. Changes were implemented methodically, with careful attention to sustaining improvements over time.

Contemporary approaches often rely on outside consultants conducting brief assessments and proposing dramatic changes. Workers are "surveyed" rather than engaged, and improvements are measured in cost reductions rather than enhanced capabilities. The focus is on quick wins rather than sustainable change.

The differences extend to how each era understood management itself:

The Bureau's approach treated management as a systematic discipline requiring specific technical skills. Supervisors learned statistical methods, process analysis techniques, and systematic problem-solving approaches. They were expected to master detailed analytical tools and apply them rigorously to their work.

Today's reforms often treat management as primarily about leadership style or organizational culture. While these factors matter, the loss of technical management skills has reduced agencies' ability to analyze and improve their operations systematically.

Even the definition of "results" differs markedly:

In the Bureau's era, results meant sustainable improvements in government operations, measured through detailed process metrics and capability assessments. Success was evaluated over years, not quarters, and improvements were expected to compound over time.

Contemporary reforms often focus on dramatic short-term changes, such as headcount reductions, budget cuts, or restructuring efforts. These changes produce impressive immediate metrics but often prove unsustainable or even counterproductive over time.

The implications of these differences become clear in times of crisis. When COVID-19 struck, agencies struggled to adapt their operations quickly and effectively—precisely the kind of capability that systematic process understanding and improvement would have facilitated. The same patterns emerged during the 2008 financial crisis and Hurricane Katrina response.

The Way Forward: Rediscovering Systematic Improvement

As we confront contemporary challenges in government effectiveness, the NPR's experience offers crucial lessons. Effective reform requires:

1. A sophisticated understanding of organizations as complex systems, not mechanical structures to be re-engineered

2. Recognition that quality improvement is a systematic endeavor requiring sustained effort, not a series of dramatic gestures

3. Understanding that transformation requires profound changes in thinking and practice, not just structural reorganization

The NPR's fundamental error was abandoning proven systematic improvement methods in favor of politically expedient cost-cutting that aimed to appease fiscal hawks and frankly bad faith actors, something that we seem to refuse to learn from. While NPR made some valid contributions to technology adoption and customer service orientation, these gains were undermined by its core betrayal of quality management work developed during WW2, the work of Demings and Juran, and the Bureau of Budget's proven methods. The lesson isn't about finding the middle ground between transformation and bureaucracy or punching left in favor of "moderates"—it's about recommitting to the systematic, worker-centered improvement approaches that delivered results in the past.

The Truth About Rebuilding

The hard truth is that we don't know how to fully rebuild the capabilities we've lost, or what we are going to lose because of Hegel's swinging pendulum. During WW2 and the post-war era, America built extraordinary capabilities—from the Bureau of Budget's systematic training programs to the quality management systems that helped 'Rosie the Riveter' outperform her predecessors. These weren't just policies—they were complex organizational capabilities built over decades through systematic training, detailed workflow analysis, and genuine worker engagement. We can't simply dust off old manuals or recreate training programs from the 1950s (and trust me, I am trying).

What we can do, however, is take careful inventory of what works, both past and present. As the recent shifts in traditionally Democratic strongholds show, voters aren't seeking ideological solutions; they want a government that works. And while we can't immediately recreate the capabilities we've lost, we can start by systematically documenting what works, learning from both our past achievements and current successes.

In the late 1980s, Wang Huning wrote about his experiences visiting the United States in "America Against America" - a work so shocking in its predictions that reading it today feels less like historical analysis and more like a prediction of our current crisis. Wang's crucial insight that for some reason escape American pundits that "the public does not judge the merits of society from the point of view of institutions, structures, ideas, spirituality, human nature, etc., but from their own daily life, or from the gut, not from the brain."

Wang's journey from a curious young political scientist to one of China's most influential political theorists (and now a top member of the CCP's Politburo Standing Committee - you know, the kind of strong government leadership that Elon only seems to respect) began with a six-month tour of America in the 1980s. While Western observers fixated on America's apparent strengths - military might, economic power, technological edge - Wang focused instead on a more "holistic" approach, taking an interest in how ordinary citizens experienced democracy day-to-day.

This ground-level approach, combined with his expertise in both Eastern and Western political thought, led him to spot cracks in the system that most American experts completely missed but understand if issues in the 80s were left unchecked, along with the help of severe recessions, radicals will gain support and Americans will be increasingly unable to handle matters.

Election Clichés

As the 2024 election unfolds, the smug little line that 'elections have consequences' rings hollow for voters who see no change in their daily lives or, in many cases, a deterioration since the 2022 midterms. Before you take issue, Huning would point out that this has been an issue since the 80s and even before. Heck, personally, it feels almost Hegelian, i.e., failure only leads to swings in the pendulum. Sometimes, you must accept historical facts rather than cling to smug lines with long track records of failure.

Fat-sharing

Huning described American democracy as a "fat-sharing system" - a complex network of political patronage and interest groups that maintained legitimacy by delivering concrete benefits to citizens (which I am going to use throughout the article). When people saw their children climb the economic ladder or their communities prosper, they tolerated the system's inefficiencies.

Deming's Customer Satisfaction Paradox

This insight into systemic legitimacy finds a powerful parallel in the business principles of W. Edwards Deming, who revolutionized thinking about quality and customer satisfaction. Deming observed, "It will not suffice to have customers that are merely satisfied. An unhappy customer will switch. Unfortunately, a satisfied customer may also switch, on the theory that he could not lose much, and might gain. Profit in business comes from repeat customers, customers that boast about your product and service, and that bring friends with them."

Just as businesses cannot survive on mere adequacy—they must delight customers enough to create loyal advocates—democratic systems cannot maintain legitimacy through minimal functionality alone. When Deming warned that "a satisfied customer may switch, thinking they could not lose much," he unknowingly described the current crisis in democratic governance: Citizens who are merely "satisfied" with system performance have little reason to defend it against radical alternatives.

The Core Truth

Together, Wang's analysis of systemic legitimacy and Deming's principles of quality management reveals a crucial truth: the sustainability of democratic governance depends not on abstract metrics of progress but on its ability to consistently deliver experiences that transform citizens from passive participants into active defenders of the system. When this connection breaks down - when daily experience contradicts official narratives of success - the foundation of democratic legitimacy begins to crack.

That said, I will be focused on the Democrats right now (else the article will get waayyyyy tooo long). At the same time, the Republicans will have their separate article looking through the same (very critical) lens.

The Erosion of Systemic Legitimacy: From Theory to Daily Experience

The intersection of Wang's "gut-level judgment" and Deming's quality principles becomes starkly visible in today's mounting system failures. Each breakdown demonstrates how institutional inadequacy transforms citizens from system defenders into potential defectors.

Urban Spaces

Consider urban spaces, where the system's inability to address homelessness has created a cascading crisis of legitimacy. With 771,480 Americans experiencing homelessness—more than Seattle's entire population—the failure manifests not just in statistics but in the daily experience of both the unhoused and the broader public. When public spaces become unwelcoming due to increased antisocial behavior, the system loses legitimacy twice: first, by failing to provide basic security for its most vulnerable, and second, by diminishing the quality of shared spaces that once helped build community support for public services.

The cynical response from political figures across the spectrum—from Jesse Watters' demonization to Gavin Newsom's passionate approaches (which he doesn't bring the same pepper to build housing)—only reinforces Wang's observation that the system judges itself through results, not rhetoric.

NIMBYism and Housing Shortages

The housing crisis exemplifies how inadequate solutions erode system legitimacy when New Jersey's Josh Gottheimer promises to "make New Jersey affordable again" through tax cuts while ignoring zoning reform.

In California, Newsom's signing of 30+ housing bills that merely patch loopholes in previous legislation reveals a system more focused on appearing functional than delivering results.

When Katie Hobbs acknowledges Arizona's housing crisis as something wholly different from historical patterns, only to veto bills that would enable more construction, she creates exactly the kind of disconnect between rhetoric and results that Wang identified as fatal to system legitimacy.

Education System

The education system's response to pandemic learning loss provides perhaps the starkest example of this dynamic. Despite a massive $123 billion federal investment, national test scores reveal devastating declines: 5-point drops in reading across both 4th and 8th grades, and math performance plummeting by 3 and 8 points, respectively.

This gap between investment and results exemplifies Deming's warning about the inadequacy of mere satisfaction. When parents see their children falling behind despite unprecedented spending, they lose faith in the system's basic competence.

Congestion Pricing

Even apparent successes often reveal deeper legitimacy problems. New York's congestion pricing implementation demonstrates how the system struggles to deliver improvements. We see that New York Governor Hochul messed around with congestion pricing, and only when it was finally implemented did commute time, jam reductions, and public transit ridership see mass improvements.

Yet, "centrist Democrats" from New Jersey and more progressive entities in New York alike are waging war to ensure that NYC is affordable and accessible, not for New Yorkers but for New Jerseyians. Gonna beat the horse again about Wang's observation of the fat-sharing system's dysfunction: even when solutions exist, the system's inability to implement them effectively undermines its legitimacy.

In each case, we see the same pattern: the system's failure to deliver quality outcomes in daily life creates exactly the kind of legitimacy crisis that both Wang and Deming predicted. Citizens don't just see individual policy failures—they experience a system incapable of meeting their needs. This gap between capability and delivery doesn't just disappoint; it actively delegitimizes the entire governance framework.

Deming's Warning in Action

Deming's warning about customer satisfaction reveals a profound truth about democratic legitimacy: systems that aim for mere adequacy create the conditions for their own replacement. His insight—that "a satisfied customer may switch, thinking they could not lose much"—illuminates why today's political instability runs deeper than partisan shifts.

This dynamic explains why the "fat-sharing system's" strategy of maintaining baseline satisfaction no longer works. Like a once-dominant company that mistakes brand loyalty for permanent customer allegiance, American governance has failed to recognize that transactional contentment cannot sustain institutional legitimacy.

The evidence appears in shifting political allegiances: young voters, who once formed a reliable Democratic base, now show unprecedented disillusionment. Hispanic and Black men, historically anchored to traditional political affiliations, increasingly explore populist alternatives.

The stakes transcend partisan realignment. When citizens conclude that playing by the rules yields nothing but adequacy—or worse, steady deterioration—they don't just switch parties; they question the fundamental promise of democratic governance. The fat-sharing system maintained legitimacy by delivering tangible prosperity.

As that promise breaks down, we face something far more dangerous than vote switching: we risk unraveling the basic social contract that makes democratic governance possible. You know, this sounds really familiar;*snaps fingers* it sounds like what a lot of young folks, especially Gen Z, are complaining about the economy.

The Gut-Level Reality of Systemic Failure: The Youth Perspective

The paradox of America's current labor market crystallizes in the experience of young job seekers, revealing exactly what Wang Huning warned about regarding systemic disappointment. A 24-year-old UCLA graduate known as Femcel captures this disconnect in her viral essay, WHY ARE THERE NO FUCKING JOBS?.

Despite graduating from America's top public university with substantial work experience – including roles as a teacher's assistant, executive assistant to a publisher, and production credits on professional projects – she is trapped in an endless cycle of job hunting, networking, and rejection. Her frustration echoes through a generation: "There are no fucking jobs... The only 'job finding resource' or 'tip' I want at this point is an actual job offer."

This visceral experience reflects a profound market dysfunction hidden behind seemingly positive statistics. Today's job seekers can observe their peers from 2020-2022 who succeeded with identical credentials. When someone watches their slightly older classmate receive multiple offers and signing bonuses while they face a job market similar to what millennials suffered through in the Great Recession, statistical arguments about "overall progress" become actively delegitimizing.

While the unemployment rate hovers around 4%—American economists' consensus on "full employment—the hiring rate has plummeted to levels typically associated with severe recessions. This 3.3% hiring rate, last seen when unemployment was double today's level at 8.2%, creates a peculiar form of economic purgatory: jobs exist, but getting hired feels nearly impossible (and for some, is impossible).

This isn't about failing to see progress—it's about witnessing regression in real-time. Especially as current statistics paint a bleak picture for young job seekers:

• Job searches now stretch to six months, a month longer than in the post-2008 era.

• 51% of employed workers actively seeking new positions, creating intense competition

• Recent graduates facing 5.3% unemployment, higher than the national average

• The hiring rate remains at recession levels (3.3%) despite "good" unemployment numbers, which are made even worse by longer and longer job searches.

• 1.7 million people have been searching for work for at least 27 weeks

This creates exactly the kind of systemic disappointment that Wang Huning warned would destabilize democratic systems. The gap between official statistics showing a "healthy" job market and the lived experience of endless job searches and rejection creates deep cynicism about institutional competence.

When even those with degrees from prestigious universities struggle – as Femcel notes, citing a Brown University engineering graduate's prolonged job search – we see the perfect conditions for what "America Against America" identified as precursors to political instability.

The low hiring rate acts as jet fuel to these frustrations, not to mention an extreme short-term economic threat. As Federal Reserve Chair Jerome Powell admits, with hiring rates this low, any economic shock could rapidly deteriorate conditions, making the system particularly vulnerable to the kind of crisis that breeds radical alternatives.

Femcel's observation that "we are in such late stage capitalism that even the people... who have done everything right... are screwed" captures what Wang Huning warned about (yes, I am going to beat this horse): when daily experience consistently contradicts official narratives about system success, people judge the system "from the gut, not from the brain" – and their gut tells them the system is failing.

The Limits of Progress Narratives: Beyond Statistical Optimism

Critics will inevitably dismiss this analysis as "declinism" - a reflexive focus on systemic failures that overlook genuine progress. They'll cite impressive statistics: historically low unemployment, rising wages, infrastructure investments, and policy achievements. But this defense fundamentally misunderstands both Wang Huning's insight and Deming's principles: system legitimacy depends not on statistical achievements but on delivered experience, especially when there is a ton of variation when it comes to delivered experience.

This misunderstanding creates a dangerous paradox in governance. When officials respond to doubled child poverty rates (from 5.2% to 12.4%) with assertions that "things are getting better," they don't just fail to build trust—they actively signal the system's acceptance of mediocrity.

Progress narratives celebrating mere adequacy inadvertently confirm Deming's warning: systems that don't pursue quality create their own opposition. Citizens who are merely "satisfied" rather than genuinely impressed have little reason to defend existing institutions against radical alternatives.

Beating Dead Horses: The Expanded Child Tax Credit

The Child Tax Credit illustrates this dynamic perfectly. The policy didn't fail—it succeeded spectacularly, achieving the lowest child poverty rate ever recorded. Its discontinuation despite 71% voter support reveals not system limitation but system choice (of indulging in Joe Manchin's fetish at the cost of millions of kids, but certain folks would instead toss every other dem under the bus before Manchin).

This pattern of abandoning proven solutions while maintaining progress narratives breeds the cynicism Wang Huning identified as corrosive to democratic legitimacy. Just as businesses lose customers when they tout "improving metrics" while delivering mediocre experiences, governance systems lose legitimacy when prioritizing statistical optimization over tangible improvement in citizens' lives.

Bottomline

However, while a business risks only its profits, democratic systems risk their foundational legitimacy. As both Wang and Deming understood, when daily experience consistently contradicts official success narratives, those narratives don't just fail to persuade—they actively accelerate system collapse.

Hopefully, people will learn from the mistakes of 2024 and turn things around. *Watches DNC Chair election videos*

Never mind