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The Perils of the Wrong Budget Cuts

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As our nation confronts historic deficits, federal leaders are being asked to dramatically slash budgets and shrink government. There are no easy or painless ways to make the deep spending cuts on the horizon, but there are many bad ways that will damage government's ability to effectively serve the American people.

Today's political debate focuses almost exclusively on saving money, and while that might seem appropriate given the dire fiscal climate, the effort will ultimately fail if our leaders do not first consider how we can best achieve the mission of government and closely examine the long term consequences of the decisions being made.

The danger is that this rush for savings and the need to claim political victory will lead to a less capable and a less responsive government, and all of us will be poorer for it.

If not done thoughtfully and strategically, the belt-tightening could make our nation less secure, weaken our economic competitiveness and global leadership, lead to the loss of important services and consumer protections, and eviscerate the social safety net. It could reduce the ability of the government to adequately respond to emergencies, hurt businesses needing assistance, put off important investments and deplete workforce expertise and capacity in many important arenas.

As Congress and the White House struggle with the hard political decisions, it will be crucial for those managing government agencies to clarify their missions and priorities, consider multiple strategies for reaching budget targets and avoid, as best they can, weakening government's effectiveness. This will mean making smart decisions -- investing in what is working and eliminating what is not, as well as reorganizing and restructuring operations and programs to try and improve service delivery and maintain critical functions even with fewer resources available.

The process will be difficult, imperfect and not always satisfactory, but our leaders should keep some basic management principles in mind as they follow the mandate to downsize the national institution that serves us all.

  • Avoid across-the-board cutbacks in programs, services and staffing that might save money in the short term, but may do great damage in the long run. Such an approach may seem equitable, but it will delay tough decisions on priorities and penalize well-run agencies that don't have any fat to cut. Congress should set the cost-reduction targets and let agencies decide the best way to achieve the goals, not remove flexibility and preempt strategic decision-making.
  • Managers should focus on building a workforce that has the skills and competencies needed for the new and changing work environment if they find that personnel reductions are required. Shedding staff can contribute significant savings, but there is a danger of losing valued and experienced employees, lowered productivity and other adverse consequences. During the government downsizing of the 1990s, for example, the Pentagon hollowed out its acquisition workforce in part to save money, only to find the loss of professional staff contributed to billions of dollars in cost overruns, delays in the delivery of weapons systems, and mismanagement when the Iraq and Afghanistan wars prompted a huge surge in defense contracting.
  • Be extremely cautious about cutting administrative costs such as human resources, employee training, staff development, financial management and information technology. These items may appear to be low hanging fruit and cutting them will reduce overhead, but it also could lead to a weakening of managerial capacity and critical support functions. The de-emphasis of the HR function during the 1990s, for example, left agency leaders ill-prepared to meet the strategic hiring, performance and retention challenges that have been plaguing government.
  • Use the budget crisis as an opportunity to implement changes that were not politically palatable or possible in normal times. This may involve streamlining processes, making better use of technology, dropping less effective programs, consolidating those that overlap and centralizing some operations and services. At the Department of Housing and Urban Development, for example, employee Ann Marie Oliva last year created data systems that shortened the time it takes to award homeless grants from 213 to 61 days, greatly reduced administrative costs and provided information to better evaluate homeless programs. Such efficiencies are possible throughout government, and are now more essential than ever. The scope of the retrenchment and the realignment of government operations represent uncharted territory for most agency executives, who will have to make unpleasant choices, find ways to identify and eliminate wasteful spending and do better and do more with much less. If their hands are tied by Congress or if arbitrary and shortsighted decisions are made, we will all pay the price and possibly lose the future.

Max Stier is president and CEO of the nonprofit, nonpartisan Partnership for Public Service.

This was originally published as an exclusive to POLITICO.