In my travels around Washington this past week, that’s a word I heard everywhere and in a number of different contexts. The budget screws are being tightened, and the Executive Branch is taking it very seriously. While all official Washington knows that they have to deal with entitlements to really dent our dangerous course of national borrowing, there is recognition and the political expectation that we cut non-entitlement government spending as well. And there’s plenty to be cut.

The consolidation that is underway in the Executive Branch involves an examination of which agencies to consolidate with one another and which functions within and between agencies to consolidate. Some of our cabinet departments are vast bureaucracies with massive duplication of administration. The Department of Energy, for example, has well over a hundred components, each with its own contracting staff. There are literally hundreds of different systems that agencies deploy for financial reporting purposes. The federal government is in some sense like a state with hundreds of small towns, each with its own trash collection, mayor, school system, etc, resulting in massive duplication in administration. There’s no doubt that there is significant savings to be had by consolidating functions. The challenge will be in cutting with a surgical knife, not a cleaver. It’s important to set a tone of savings, but it’s equally important to look at deploying resources in a manner that most effectively serves the taxpayers. Some agencies, for example, make money for the government, and if you cut their budgets you seriously harm their ability to generate revenue. So not taking a one size fits all approach is absolutely key to getting this right. There is room to save billions. Now is the time. But these cuts (this consolidation) has to be very thoughtfully considered and then very effectively executed.

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For many businesses, nothing seems more remote than the maneuvering of Beltway insiders. But what happens in Washington and in state and local government is critically important to your company and your industry. With government more involved in business than at any time since the 1930s, organizations that can negotiate the government labyrinth of politics, policy, and process will come out on top.
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