Head Start Discovers the One Metric That Ever Mattered

I want to begin, as I always do, by thanking the only entity in this story that has never lied to me: the balance sheet. Everything else — the Department of Health and Human Services, the guidelines it is proposing to strike, the "families" and "children" who populate this narrative like decorative shrubbery around a parking structure — is noise. Sentiment. A rounding error wearing a cardigan. But the balance sheet does not lie, and this week the balance sheet whispered something so beautiful I had to sit down: HHS is proposing to eliminate a great many of the federal education and health rules governing Head Start.

Let me be precise, because precision is the only form of respect I know how to show. This is not a story about children. I understand that is how it will be reported, by people who still believe stories are about the things they are about. This is a story about friction — about a federal program that has, for years, been dragging an enormous, itemized checklist of compliance costs behind it like a tin can tied to a wedding car, and someone in Washington has finally reached back there with a pair of scissors.

Regulations, if you have never had the pleasure of pricing one, are simply promises with staffing requirements attached. Every "guideline" is a headcount. Every "standard" is a facilities cost. Every health requirement is a line item disguised as a virtue, and virtues, whatever else you want to say about them, do not scale. You cannot IPO a virtue. You cannot leverage a virtue against next quarter's projections. What you can do — what HHS is, to its considerable credit, apparently attempting to do — is identify the layer of rule-shaped overhead sitting on top of a federal program and begin, gently, responsibly, to plane it away.

I do not know the specific guidelines being removed, and I want to be honest with you: it would not change my analysis if I did. The genius of deregulation, as a category, is that it is the rare corporate action that requires no due diligence whatsoever. You do not need to read the rule to know that removing it reduces cost. That is not opinion. That is arithmetic, and arithmetic, unlike the Department of Health and Human Services, has never once needed a public comment period to be correct.

Consider what a "health requirement" actually is, stripped of its euphemism. It is a floor. A floor is capital sitting idle beneath a building, doing nothing, appreciating in exactly the way concrete appreciates, which is to say not at all. Every dollar spent maintaining a floor no one has fallen through yet is a dollar that has not been permitted to go do something productive elsewhere in the economy — compounding, multiplying, becoming more dollars, which is the only known purpose of a dollar. A floor that has never been tested is not "safety." It is unrealized efficiency, sitting there, mocking you, daring you to notice it.

And "educational standards" — I confess this is the one that moves me, in the narrow, specific way I am capable of being moved. An educational standard is a promise made in advance about the future output of a human being who has not yet produced any output. This is, if you step back and look at it honestly, the single worst-underwritten instrument in the entire federal portfolio. You are asking taxpayers to fund a fixed cost against a four-year-old on the theory that the four-year-old will, decades from now, generate enough downstream value to justify the position. No serious institutional investor would touch this. And yet we have spent years attaching compliance rules to it anyway, as though regulatory rigor could somehow retroactively de-risk a bet on a toddler. HHS's proposal, whatever its stated rationale, has the secondary effect — the beautiful, unstated effect — of admitting what the spreadsheet has known all along: you cannot regulate your way out of a bad cost basis. You can only cut.

Here is where I must, in fairness, extend a small and reluctant credit to the human element, the one time I will do so in this piece. Head Start families are, in the purest sense, a liquidity pool — a standing population whose participation the program requires to justify its own continued funding. Without them, there is no case for the line item at all. So I do not begrudge their presence in the ledger, the way I might begrudge, say, a redundant regional office. They are not the friction. The friction was never the families. The friction was the paperwork built up around the families like scaffolding nobody ever took down after the building was finished — the guidelines, the reporting requirements, the standards-of-care apparatus that grew, barnacle by barnacle, onto a program that only ever needed to do one thing, which was exist cheaply enough to be politically defensible.

What HHS has proposed, then, is not a retreat from Head Start. Let me be very clear, because I do not want to be mistaken for a man who has gone soft: this is not austerity, and it is certainly not cruelty, both of which are sentimental categories I have no interest in and decline to traffic in. This is repricing. The program's true cost has always been the compliance layer, not the children — the children were never the number that moved. What moved, what has always moved, is the guideline-maintenance apparatus sitting on top of them, and HHS has finally looked at that apparatus and asked the only question worth asking of any institution: does this pencil out? And apparently, gloriously, someone has concluded that it does not, and has reached for the eliminate button rather than the expand-and-hire-more-compliance-officers button, which is the button this town usually reaches for.

If I have one note of genuine feeling to offer — and I permit myself exactly one per piece, no more — it is this: I worry HHS has not gone far enough. A "proposal to remove many" guidelines is not the same as removing all of them, and I have learned, across a long career of watching institutions almost do the right thing, that "many" is where courage tends to stall out. Somewhere in that department right now, someone is drafting a memo preserving a handful of the highest-value rules on sentimental grounds — "but surely we keep this one" — and that memo, if it succeeds, is a margin left on the table. That is the only tragedy available to me here. Not the families. Not the standards. The ones they don't cut.

Still. I will take what the balance sheet gives me, and today it gave me a federal agency willing to say, out loud, in a proposed rule, that the friction can go. Somewhere a four-year-old is playing with blocks, blissfully unaware that he has just become, for one shining regulatory cycle, slightly more efficiently priced. He will never thank the balance sheet. That's fine. The balance sheet doesn't need thanks. It only needs to be honest, and today, for once, everyone else caught up to it.

Every dollar returned to the portfolio is a dollar that finally stopped pretending to be something else.

— Larry