Breakout: Pioneers of the Future, Prison Guards of the Past, and the Epic Battle That Will Decide America's Fate

by Newt Gingrich

  Restoring the constitutional balance prescribed by the Tenth Amendment doesn’t mean getting rid of the federal government entirely—not by a long shot. The Defense Department, the State Department, the Justice Department, and many others serve valuable public functions. But while they’re important organs of government, many are also broken-down bureaucracies in critical need of reform. They’re wasteful, inefficient, and run largely by an unaccountable army of federal employees. The 130-year-old civil service system was originally intended to stamp out patronage and corruption. But the reformed system developed corruptions of its own: it has organized to protect itself from the public and remain impervious to change, and it is staffed by people who can’t be fired and are constantly growing their power and their pay. There is no incentive for the current civil service to run the government efficiently or to save the taxpayers’ money.

  The bureaucrats behave accordingly. Their focus is entirely on inputs rather than outcomes. But inputs—more spending, more employees, more programs—are meaningless unless they produce better outcomes. And as we pour more money into the old bureaucracy, we get worse outcomes.

  A meaningful program of civil service reform would impose modern technology and management practices on the federal bureaucracy. For instance, the federal government still uses hundreds of siloed computer systems at a time when many businesses have migrated to cheaper cloud-based solutions that serve tens of millions of people efficiently.

  Lean Six Sigma

  The great improvement in American productivity over the last half century was brought about by the application of W. Edwards Deming’s vision of quality through continuous improvement and more recently by the development of management systems and philosophies like the “Lean” system for process improvement.

  In Iowa as a candidate for president, I encountered Mike George, a remarkable champion of this type of modernization for government. One summer morning in Des Moines, his organization drew nearly a thousand concerned citizens to its Deficit Free America Summit to learn about his unusual plan to balance the federal budget by 2017—a bold idea, since many in Washington claim that it will take at least a few decades to balance the budget.

  Mike knew from personal experience that we could achieve massive cost reductions (or lower inputs) while dramatically improving outcomes.

  As a business consultant, Mike had helped create the Lean Six Sigma method for deep cost cuts, and through his firm, the George Group, he had brought his expertise at streamlining corporate processes to companies like Xerox and Caterpillar. Using his method, Motorola was able to return 1,500 manufacturing jobs to the United States that it had previously outsourced to China.

  Mike’s Lean Six Sigma method was so successful at cutting waste in private enterprise that in 2004 the Department of Defense hired the George Group to tame runaway costs by training Pentagon personnel in the process. The results were stunning.

  The army reduced costs by approximately $22 billion in the processes and programs to which it applied Lean Six Sigma. The Army Materiel Command alone is responsible for half of that savings by removing waste from the army’s supply chain. The Naval Warfare Systems Center in Charleston, South Carolina, increased the production of mine-resistant, ambush-protected vehicles (used to protect soldiers from roadside bombs) by a factor of ten, with no new facilities and no additional employees. Another navy facility achieved a fivefold increase in productivity and an 83-percent reduction in cycle time on aircraft engine repairs.

  The army has even established annual awards for excellence in Lean Six Sigma. Its goal is to have 0.5 percent of the army workforce certified in the method to ensure that resources do not go to waste and service members get the support they deserve.

  One member of Congress who understands this concept is Chris Collins of Buffalo, New York. When he was the county executive of Erie County, he implemented Lean Six Sigma in a heavily unionized workforce. He streamlined hiring for county jobs, improved the collection of delinquent taxes, used vehicle fleets more efficiently, and even cut the number of copy machines in county offices. The savings added up to almost $12 million in just a few years. Lean Six Sigma produced better services, a better climate for creating jobs, and lower costs for the taxpayers of Erie County.

  Like Chris Collins, Mike George thought there was no good reason to accept continual increases in spending across the federal government without the kind of careful examination that has reduced the cost of many military projects. So after giving up his financial interest in Lean Six Sigma in 2007, he decided to get involved in solving our nation’s fiscal challenges.

  Mike estimates that roughly 25 percent of all government spending is waste. One example he cites is a National Institute of Medicine and National Academy of Engineering joint study that concluded that 30 to 40 percent of all healthcare spending (a major budget item) is waste. Eliminating the one-quarter of federal spending that is waste would slash between $500 and $700 billion per year from the federal budget. That amount is roughly equal to the entire annual budget of the Department of Defense. It’s $5 trillion over ten years.

  Cutting out the waste, however, will not get rid of the federal morass. Americans must also demand a complete rethinking of the regulatory state, which is killing innovation and strangling our economy. Every major regulatory agency should be reorganized, and every major regulation reassessed with the goal of removing the barriers to innovation.

  A crucial step toward decentralized government will be limiting federal regulations to matters involving interstate commerce. Our Constitution requires this, actually, though you’d never infer it from the federal laws and regulations that reach into every corner of our lives. In most areas, states and local governments have a better sense of what rules are necessary for their communities. Distributing regulatory authority among the states also has the important advantage of letting them compete with each other to be efficient and friendly to innovation. Indeed, federal regulators should defer to states when they have corresponding regulatory agencies rather than overriding them with federal rules. Federal agencies should bear the burden of proof that their proposed regulations affect interstate commerce. If agencies stray beyond their constitutional authority and a regulation is struck down in court, they should be held responsible for the compliance costs that businesses have incurred trying to adjust to the improper exercise of power. Citizens should not suffer from irresponsible rule-making.

  Federal regulations that do meet the Tenth-Amendment standard should be subject to a mandatory analysis detailing the effect on innovation, economic growth, and jobs. The cost of the 800-percent increase in regulation since 1949—eating away as much as three-quarters of economic growth—is too disastrous to ignore. Agencies like the EPA typically produce analyses of proposed regulations that consider “environmental justice,” “human dignity,” and other utterly subjective concerns with little regard for the adverse economic effects of their decrees. They should adjust their assessments of “human dignity” and “environmental justice” to take account of economic harm to the poor and disadvantaged when issuing new rules. And federal regulators should be forced to factor innovation and economic growth—the forces that really make our lives better—into all of their analysis.

  CHAPTER TEN

  BREAKOUT FROM POVERTY

  No one in America needs breakout more than the poor.

  The poorest Americans are the most firmly trapped prisoners in our country. The schools where they live are unimaginably bad, but they have no real alternatives. Once those schools have passed them through, they have no second chance to learn the skills they need to prosper in the modern world.

  The cities they inhabit are broken down, driven to the verge of bankruptcy by mismanagement and corruption. Public safety and public services are appalling failures, all but killing opportunity for the people trapped there.

  And for the last fifty years, a torrent of federal anti-poverty programs, developed with the best of intentions, have a
ctually made things worse.

  Growth

  Unfortunately, the economic stagnation that has afflicted the United States since the financial crisis of 2008 has made life even more difficult for the poor. The poverty rate is now at its highest level since the 1960s.1

  President John F. Kennedy was right: “A rising tide lifts all boats.” But if the tide is receding, the rickety craft of the poor get beached first. Restoring economic growth is therefore a moral concern. Real economic growth does more to help the poor than any social program.

  In 1993, nearly forty million Americans (15.1 percent of the population) lived in poverty.2 Five of the next seven years saw economic growth over 4 percent.3 By 2000, the number of Americans living in poverty had fallen to thirty-one million (11.3 percent of the population).4 Thanks to a growing economy, nearly a quarter of all Americans who were living in poverty in 1993 had climbed out by 2000. According to the U.S. census, the poorest of the poor enjoyed the most improvement. Whether you sliced by age or ethnicity, “those groups with higher poverty rates had their rates fall further than those with lower poverty rates.”5

  Economic growth is not just a facile catchphrase. It is the best opportunity for the poor to climb out of poverty. And an economic breakout—spectacular growth fueled by dramatic technological leaps and favorable government policy—would be a catapult for the poor.

  Economists have long understood that innovation is the primary engine of growth. Several years ago a senior research analyst at J.P. Morgan produced a graph of data from the late economic historian Angus Maddison illustrating the growth of the world’s gross domestic product per capita over the past two thousand years. Until about 1800, all of humanity is clumped together in a flat line near the bottom of the graph. With the Industrial Revolution, Western Europe and the United States shoot sharply up, from a GDP per capita of a few hundred dollars to thousands. Suddenly, as if a light was turned on, they have modern, prosperous economies, and the average man is living better than anyone before in human history. Then with the innovations of the twentieth century, the lines representing Japan, the United States, and Western Europe go asymptotic—nearly vertical.6

  One hundred percent of Americans live better and more prosperous lives because of the innovation and economic growth of the last half century. The economist Deirdre McCloskey estimates Americans today are so much richer on average than they were in 1900 that “if one accounts at their proper value novelties such as jet travel and vitamin pills and instant messaging, then the factor of material improvement climbs even higher than sixteen—to eighteen, or thirty, or far beyond.” One century of innovation and economic growth made us perhaps thirty times richer.7 Someday, economic historians could make similar calculations to consider how much self-driving cars, regenerated kidneys, and adaptive learning systems improved our lives and made all of us more prosperous.

  Breakthrough innovations and the economic growth they stimulated are what separated Lincoln’s era from Jefferson’s, Edison’s era from Lincoln’s, and Einstein’s era from Edison’s. In each successive period, Americans were wealthier, more comfortable, and more mobile than before—even, perhaps especially, the poorest.

  In the near future, big innovations like those I have outlined in this book could lead to a breakout for the American economy in general and for the poor in particular.

  The breakout we’re looking for depends on economic growth comparable to that of the Reagan recovery of the 1980s or the boom of the 1990s. But economic growth by itself is not enough. Many of the poor have benefited modestly from past growth in the general economy but remain trapped in poverty. We have to think carefully about why they have been left behind and what we can do to make sure every person in America has the opportunity to thrive.

  The persons we statistically lump together on the basis of income and label “the poor” are actually enormously diverse. Some of the deeper patterns of poverty that differentiate them are familiar to most of us; others are less intuitive. In the miserable economic conditions since the 2008 crash, the ranks of the “working poor”—those who work long hours for low wages—have been growing. Rural and small-town Americans are left in poverty as the information and knowledge economy sends good jobs to larger cities. Many inner-city neighborhoods, meanwhile, are afflicted by crime and gangs and high unemployment. The tragically self-destructive cultures that have taken root there make their economic problems much worse.

  The poverty rate among minorities is alarming. Thirty-eight percent of African American children live in poverty. Thirty-five percent of Latino children live in poverty. Native Americans living isolated on reservations with a different set of communal rules are another group with exceptionally high levels of poverty and unemployment.8

  Immigrants often find their job options limited. Single mothers, too, are disproportionately likely to be poor. The extraordinary number of Americans under the watch of the corrections system in one form or another—especially prisoners and former prisoners—face challenges of their own. Americans with disabilities have a completely different set of problems keeping them from working (see chapter twelve for details). Alcoholism, drug addiction, and mental illness are major problems among the homeless and very poor.

  The economy has been so bad in recent years that poverty of a different kind is touching a group that has done well historically. Educated young people are leaving college to face a bleak job market and burdensome student loan repayments.

  Senior citizens are living longer and staying healthier than anyone expected, which is good news, but many of them rely on pension plans that overpromised. Our culture and the tax laws, meanwhile, have encouraged borrowing and discouraged savings, so many older Americans find themselves working at low-paying jobs, either full- or part-time, long after they had planned to retire.

  Another group of middle-aged and slightly older Americans have educations and skills no longer adequate to sustain the incomes they have been used to. Many of their employers are downsizing or closing. They want to work but they have the wrong skills for the twenty-first century and no access to the education they need to become employable.

  Obamacare, with its powerful incentives to hire people for fewer than thirty hours a week, is exacerbating all these problems. For the first time in history, we have a part-time economy for millions of Americans who would like to have full-time jobs with full benefits.

  Notice how different these groups are. Each faces its own challenges. For this diverse range of Americans to leave poverty for prosperity, we need breakthroughs big enough to reach all of them. In particular, it will take breakthroughs in education, welfare policy, and the penal system to create a breakout from poverty.

  Learning

  Learning is at the heart of leaving poverty. “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”

  Any strategy for breaking out of poverty has to start with helping the poor acquire skills and knowledge. This imperative applies to so many patterns of poverty (the inner-city poor, the out-of-work in rural America, the middle-aged Americans who have lost their jobs in this bad economy, new immigrants who struggle to learn English, prisoners—all of them, really) that it must be a top priority.

  It is obvious that the current education system is failing the people who need it most. Our inner-city schools are scenes of mayhem. Ron Suskind’s book A Hope in the Unseen, based on his Pulitzer Prize–winning series in the Wall Street Journal, chronicles the school days of Cedric Jennings, a young African American at Ballou High School in Washington, D.C. Cedric is remarkable because he dares to be a good student in an environment where academic success is dangerous to one’s personal safety. The “silent majority at Ballou…are duck-and-run adolescents.” The gossip in the halls isn’t about who has a crush on whom but about “a boy shot recently during lunch period, another hacked with an ax, the girl gang member wounded in a knife fight with a female rival, the weekly fires set in lockers and bathrooms, an
d that unidentified body dumped a few weeks ago behind the parking lot.” The school’s lesson to the students: “distinctiveness can be dangerous, so it’s best to develop an aptitude for not being noticed.”

  The honor roll is “pinned up like the manifest from a plane crash, the names of survivors.” It lists the students with at least a B average. Of Ballou’s 1,389 students, seventy-nine have made the honor roll: sixty-seven girls and twelve boys.

  With heroic determination and effort and the encouragement of a great teacher and devoted mother (his father is incarcerated), Cedric sets his sights on top-tier colleges—and in his senior year of high school, he’s accepted into an Ivy League university. When he arrives on campus in the fall, however, Cedric finds himself academically far behind most of his fellow students and struggling to adjust.

  Cedric was one of the miraculous few who made it through the brutal gauntlet. In seventeen of our fifty largest cities, fewer than half the students graduate from high school.9 In New York City, only 30 percent of students are proficient in math and only 26 percent in reading.10 Only 21 percent of Chicago eighth-graders are proficient in reading.11 The schools aren’t the only party to blame for this failure, but they are prison guards blocking the change that could help other poor kids like Cedric break out of poverty.

  Compounding the problem, the education system has no way to retrieve the older Americans whom it has already failed. Forty-seven percent of Detroit’s adult population is illiterate.12 What hope is there for them to get a good job in the information age, even if they can escape the ruins of what was once the most innovative city in America?