White House Chronicle

News Analysis With a Sense of Humor

Sorry, but There Are Areas Where We Need More Government

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Who is going to finance advanced drugs? Who is going to guarantee the electric supply in 30 years? Whisper this: It will be the government.
 
In these two areas and others, the risks are now so large that private enterprise — so beloved in so many quarters — can't shoulder the risk alone. When development risks run into the billions of dollars, the market won't sanction private companies taking those risks.
 
Drug companies, among the richest of corporations, are running up against the the realities of risk. To develop a new drug, the pharmaceutical industry — known collectively as Big Pharma — has to commit well over a billion dollars.
 
It is a long and risky road. A need for the drug has to be established; a compound developed, after maybe thousands of failed efforts. Tests have to be conducted on animals, then in controlled human trials. If the drug works, the developers have to get it certified by the Food and Drug Administration. Then they have to market it and buy hugely expensive insurance — if they can get it — because it is almost a rite of passage that they will be sued.
 
Under this regime complex diseases, that may require multiple drugs, get short shrift not because the developers of drugs are greedy, but because they honestly cannot afford that kind of research.
 
The result is that the pharmaceutical companies increasingly look to universities and individual researchers — sometimes in teaching hospitals — to find new therapies; research that is paid for by the government through grants from the National Institutes of Health (NIH), the Centers for Disease Control, even from the Department of Defense. Even so, drug research is lagging and NIH is turning down eight out of 10 grant requests.
 
In electricity supply, too, there is trouble ahead.
 
The electric utilities, since deregulation, have become risk averse. Only two utilities, the Southern Company of Georgia and Scana Corporation of South Carolina are building new base-load nuclear power plants. These may be the last of the large nuclear power plants to be built in the United States. They are both located in states where electric utilities are regulated and where they can anticipate their costs being recovered in the rates, even during construction. The states are taking some of the risk.
 
For the rest of the country, and particularly the Northern and Western states, deregulation has had an unintended result: It has increased the risk of new construction and in so doing has set the utilities down the path of least resistance. They have turned to natural gas and — because of subsidies and tax breaks — to wind power, which has meant more gas power has to be installed to compensate for variance in the wind.
 
Coal is being edged out of the market for environmental reasons. So the electric utility industry is being pushed into a strategic position it has always said it wanted avoid: over-reliance on too few sources of power.
 
A kind of gas euphoria has gripped the nation as supplies from horizontal drilling and hydraulic fracturing have shot up. When the 99 reactors now operating go out of service, as they get to the end of their lives, there will be nothing comparable to replace them.
 
Many companies, some of them small, are working on new reactor designs that would put the United States back into world leadership in nuclear, while answering criticism of the big light water plants of today. Most of them would even burn nuclear waste.
 
In a time of deficits, the government tends, both with new electrical generating systems and in medical research, to scatter money in the hope that this will lead to the huge private commitments that are needed.
 
Sadly, this creates a dynamic in which companies rush in to consume the seed money without being able to bring the product to to fruition. It is a push rather than a pull dynamic.
 
Government works well, even efficiently, when it establishes a pull dynamic, as in the space program and in supercomputers, or most military procurement. The Pentagon does not issue funds for companies to experiment with weapons systems: It commissions them.
 
The government may have to commission new drugs and new power technologies in the high-risk future. — For the Hearst-New York Times Syndicate



 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Government Isn’t as Bad as We Think

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Here’s a dirty little secret: The Post Office isn’t so bad.

Although it’s the rhetorical emblem of all that’s wrong with government, the postal service is surprisingly dependable and efficient. Letters get delivered by the millions and very few are lost.

Where the Post Office fails, as most government enterprises fail, is that its dynamic is antithetical to creativity, invention and risk-taking. Government enterprises seldom innovate, except those in the defense arena and collateral endeavors like space exploration. The Bonneville Power Administration, a federal agency, does its job well enough, as does the FAA in controlling aircraft. It just wasn’t in the Post Office to create FedEx.

In Washington, and across the nation, politicians repeat often and loudly that the worst outcome of any new endeavor would be for the government to run it. To hear Rep. Louis Gohmert, R-Texas, tell it, the government is a vast anti-American conspiracy. Recently, he took to the House floor to protest against a government role in health care and claimed that anything government-run means socialism to him. And socialism, according to Gohmert, is the slippery slope to totalitarianism.

In Washington, there’s a more ambivalent attitude toward the bureaucracy. It’s not an abstraction to Washingtonians; government workers are neighbors, commuting companions, friends and family.

But that doesn’t mean that Washingtonians are taken in by it, or that they believe the government should grow more.

If you know enough government workers, you know that they’re not created equal; neither are their departments and agencies.

The Department of Defense is an archipelago of islands of success in a sea of contradiction and confusion. But the agencies, like Housing and Urban Development and Labor, are resigned to a level of ineffectiveness, often doubtful of the virtue of their own missions.

The challenge is to know what is best left to government or to the private sector.

Attempts to privatize support sectors of the U.S. military (base maintenance, security, fuel, etc.) have led to scandals at every level for companies like Blackwater (now known as Xe Services) and KBR, denounced in Congress and the media. Privatizing war is a questionable undertaking.

As often as not, government is lumbered with failing or failed businesses for political or social reasons. Amtrak is front-and-center among these and General Motors may join the group of government orphans — too important to fail and too rickety to succeed.

Finally, there is no political will to tackle the thorny issue of productivity in the bureaucracy. Politicians complain of government in the abstract and praise “hard-working men and women” in specific agencies.

Sadly, it boils down to hiring and firing. It’s hard to get hired in the government because of rules and rigidities and even harder to get fired.

The reverse applies in the private sector. Business operates on incentives, but also on fear. Fear is missing in government employment and it shows.

Government is not as inept as conservative politicians like to say, any more than CitiBank and AIG were models of corporate governance.

Some things organically belong in the government’s sphere and others far from it. Today’s question is: Where does health care fit?  –For the Hearst-New York Times Syndicate