How Not to Reorganize the Government

It would be hard to find anyone who would disagree with him.

But the reorganization plan that the President presented yesterday is at best a goal in search of a purpose.

The consolidation that the Administration proposes will not reduce “redundancy and inefficiency.” It is very unlikely that the changes will provide any meaningful help to small businesses. Indeed, upon closer inspection, the President’s proposal raises the specter that after three years in charge, the Administration fundamentally does not understand the functions of the government that it heads.

According to the Administration, there are currently six major departments and agencies that focus primarily on business and trade in the federal government: U.S. Department of Commerce’s core business and trade functions, the Small Business Administration (SBA), the Office of the U.S. Trade Representative (USTR), the Export-Import Bank (EXIM) , the Overseas Private Investment Corporation (OPIC), and the U.S. Trade and Development Agency(USTDA).

The Administration considers this division redundant and inefficient, and proposes instead to consolidate the six departments and agencies into one department; ostensibly to help US businesses to succeed.

But in fact, the Administration’s reasoning and rationale for the consolidation is deeply flawed, grouping very distinct, high performing independent agencies, in a fashion that will ultimately marginalize their unique missions, hobble their efficiency and dilute their operational effectiveness.

Of the six, no agency better defines this disconnect between goals and plans than OPIC.

At first glance, it might appear that OPIC would fit well with the President’s plan.

OPIC helps mobilize US private capital for social and economic development in over 150 countries. Over its history, the agency has supported more than $200 billion in investment in 4,000 projects worldwide.

But the crucial difference here is that OPIC is not simply some form of government-supported bank, but an independent US development finance agency, that, operating under guidance of the Secretary of State, is a indispensible tool of US foreign policy.

OPIC’s unique mission and structure allows the agency to create financially sound  projects that mitigate risk and  leverage private sector investment capital in emerging markets in a time sensitive manner.

OPIC accomplishes this through public-private partnerships which are beneficial both to the US investors, as well as the US government, as they advance US development goals, in environmental, worker rights, and human rights standards, and support overall US foreign policy.

Indeed, OPIC is a vital portal for foreign policy.

Nimble and flexible, OPIC has the ability to respond to dynamic foreign policy changes in real-time with tangible support that creates jobs and economic growth.

During the Clinton administration, OPIC was instrumental in supporting US private sector economic development in eastern Europe, helping those countries to make the transition from communism to free market economies, and eventually graduate into the EU.

During the Bush administration, OPIC returned to its founding development mission and was at the forefront of mobilizing private sector economic support in the War on Terror.

Tangible OPIC-supported projects created jobs and “soft power” opportunity in Afghanistan, Pakistan and Iraq. If you find your way to Afghanistan, the only Western-standard hotel in Kabul was made possible through OPIC financing.

In addition, OPIC private equity funds deployed billions in capital in sub-Saharan Africa to drive economic activity, job creation and growth. OPIC was the first to marshal private sector investment in Liberia after democratic elections elevated Nobel Prize winner Ellen Johnson Sirleaf, as president. OPIC’s program provided concrete proof of US support for a new African democracy, when other agencies could simply not provide assistance quickly enough.

When Russia invaded Georgia in 2008, OPIC was at the forefront of a US government team that assessed the damage and put together a plan to drive private sector investment into Georgia, again to demonstrate US resolve.

During the Obama administration, OPIC has responded quickly to the developments of the “Arab Spring” making a $3 billion commitment to support private enterprise in the Middle East and North Africa.

Simply put, no other agency has the resources and authority to enable such large-scale deployments of private capital in so many diverse regions of the world, so quickly. Indeed, it is a glaring oversight that the President’s reorganization largely ignores the unique space OPIC  inhabits at the crossroads of development policy, private sector led economic growth and foreign policy.

 Key to OPIC’s success is its unique management structure as an independent agency, with a President/CEO who responsible for the day-to-day management, and a 15 member Board of Directors, divided between senior government officials for various departments, and directors selected for their private sector experience by the President and confirmed by the Senate.

That structure, complemented by a highly skilled and motivated staff, allows the agency to operate quickly, but with channels to both coordinate government policy and maintain the financial accountability and outlook of the private sector.

In terms of operations, perhaps, most impressive in an age of deficits and debt is the fact that OPIC operates at no net cost to taxpayers. The original seed funding provided by Congress was paid back in 1986 in an East Room ceremony attended by President Reagan.  Since then, OPIC has run a surplus every year, returning money to the US Treasury.

In 2011, OPIC returned a record $269 million.

So in summary, we have an independent US agency that creates public-private partnerships to promote economic growth abroad and has historically supported 275,000 US jobs at home by leveraging private sector capital.

An agency that conditions its project support on measurable, evolving best practices for social and economic development, including worker rights, human rights and environmental protection, creating incubators of future economic growth with modern standards.

An agency that as a critical tool of US foreign policy, which can quickly deploy capital , directly and tangibly, to support US national interests.

An agency that does all this with only 200 people, while supporting between $2-4 billion in project commitments annually, and which returns hundreds of millions to the Treasury each year for 34 straight years.

President Obama believes that this agency would be more efficient and effective if it were subsumed in a larger bureaucracy, with new layers of authority, new regulations of process and policy; more restrictions, delays and red tape?

Preposterous.

Indeed, the Administration’s proposal is good government in reverse; reorganizing operational excellence in favor gray, bureaucratic conformity.

This is not to say the government shouldn’t be downsized or reorganized.  It is simply unfathomable that these agencies would be the best place for the President to start.

Consider that OPIC and EXIM are self-funded, and thus revenue-neutral, with OPIC returning millions in profit to the taxpayers. Together these agencies have supported hundreds of thousands of US jobs.

TDA and USTR between them cost a little more than $100 million – roughly 20 minutes of government spending in a year. Between them, OPIC, EXIM, USTR and USTDA employ a total of 900 people out of a federal work force of 2.1 million.

If you add in the SBA, which achieved Cabinet status yesterday in the President’s announcement, you end up with .002 percent of the federal work force and a total of three hours of federal spending in a year.

A less suitable or meaingful reorganization, whose self described goal is rationalize service and reduce expenditures, is hard to conjure.

What is even more puzzling is that the Government Accountability Office (GAO) has already investigated duplication and overlap in the federal government and published a report detailing real savings that could be achieved with administrative changes.

To pick just one, the federal government has 47 job training programs (all but three overlap) that GAO stated provided “no measurable benefit.” According to the Wall Street Journal, the Administration won’t touch these.

Tellingly, the GAO did not include among its recommendations those that the President’s presented yesterday.

OPIC, EXIM, USTR and USTDA are the gems of the US government, providing an exception to the urban legend that all government is incompetent.

The President’s ill-conceived plan to consolidate these agencies sadly proves the legend.

A sober and realistic Congress will see through this election year posturing and rhetoric, and circular file this particular proposal.

* NOTE: I served as Vice President of External Affairs at OPIC from 2001-2009.  In that role, I worked will all the agencies that President has chosen for integration.