Saturday, January 2, 2016

As Efficiently and Effectively as Possible

Sean made a very logical and reasonable comment in the Congress post.
"The government has roles and responsibilities to fill, and it should be funded as such to fill those roles and responsibilities, making sure that the programs that do exist are running as efficiently and effectively as possible."
Now instead of focusing on his lack of specifics and that this seems like giving the bureaucrats and politicians a blank checkbook.  Let's instead discuss what in our current system encourages government personnel to strive to attain the underlined portion.

You know my view that there is very little in the system that encourages this behavior.  I mean:

  • many politicians get votes by providing programs and services that their constituents appreciate, whether they are effective or efficient
  • most bureaucrats and public employees desire better compensation and benefits for themselves, even if it reduces the number of people available to provide the program or service
  • it is much easier to ask for more money than to cut programs and services
  • with the ability to deficit spend, current citizens can get more benefits and services than the need to pay for

So what is the other side of the story?

51 comments:

jerrye92002 said...

How about starting with the fact that government prosecutes monopolies-- because they do not provide the best product for the best cost-- UNLESS government is operating them! Outside certain "natural monopolies" like police, fire and national defense, why should government be doing anything at all in some of these areas, let alone as a monopoly?

Anonymous said...

Do we want government to operate efficiently? Or do we instead want Saturday mail delivery, to places Federal Express finds it inefficient to go?

--Hiram

John said...

Hiram,
Though off topic it is a good example of where the following goes astray... "The government has roles and responsibilities to fill". It seems the Postal Union has some pull with Congress.

NPR Link

Anonymous said...

Lots of people have pull with Congress, particularly constituents who live in the west which is very under populated, and who like their local post offices.

Efficiency is a complex issue. The private sector amazingly inefficient, but there can be a lot of money made from inefficiency, particularly where markets are illiquid. The reason why CEO's make so much money is that they don't have to bid for their jobs on eBay.

--Hiram

Anonymous said...

Monopoly policy is difficult for among other reasons, there are different ways to look at monopolies, and different kinds of monopolies. Various anti monopoly policies protect different sets of interests who can have conflicts of their own.

Competition can be very wasteful and inefficient, and what mergers are designed to do is achieve efficiency by eliminating competitive duplications.

--Hiram

John said...

I am pretty sure folks "Out West" could make due without their Saturday mail deliveries. We ar not discussing stopping their service.

I am not sure who else was against dropping Saturday delivery, however I am pretty certain that the Union spoke loudest. Imagine the weekend working hours and head count they would lose... ~1/6 or ~17%...

Thank you again for the example.

John said...

Now as for CEO's and EBay. The CEO finder market may not be EBay, however those folks certainly need to put themselves out there and sell their personal capabilities.

I mean look at the Mpls Supt search, those candidates have many people working to determine if the candidate is the best one for the job. And many people looking for skeletons in the candidates closet. The CEO search process is less transparent, however just as rigorous in most cases.

John said...

"different ways to look at monopolies"

Please provide some examples of "effective and efficient" monopolies that strive for the good of their customer. I am hard pressed to think of one, though a case can be made for public utilities and infrastructure that require a great deal of capital investment and space. (ie electricity, water, sewer, roads, rail, etc)

Otherwise I think history repeatedly shows that customers get better products, services, etc when the providers need to compete for their business.

GM, Ford and Chrysler had a near monopoly in the 1950's and 1960's, which led to overpaid employees, overpaid management, poor product and customers that were paying too much for questionable product. Then true competition occurred and miracles happened for the good of the customers. I wonder what our cars would look like today if we had continued to protect the Big 3.

Anonymous said...


Please provide some examples of "effective and efficient" monopolies that strive for the good of their customer

Businesses work for their owners and managers, not their customers. But take the airline industry. It has monopolies, and it has become efficient and at long last profitable. Newspapers and other media businesses are prime examples of the efficiencies of monopolization. Historically, you can look at monopolies like Standard Oil, AT&T. As for car companies, could the industry really have thrived if it had remained a collection of ma and par car companies working out of garages strewn throughout the country? Didn't it only begin to become effective when those companies went out of business or merged into the monopoly that became General Motors?

The fact that businesses struggle is not limited to monopolies. For one thing, monopolies tend to lose their monopoly status as things change. Media companies used to monopolies simply because the technology changed and for other reasons. Monopolism is an inherently unstable business model.


--Hiram

John said...

I would change that slightly. "Businesses work for their owners, managers and employees, not their customers." Just like government entities do.

I mean if our Public employees were all doing their job exclusively for the good of us citizens, they would not have Unions fighting to maximize their compensation, benefits and job security. They would be happy taking a bit less so that more people could be hired to do the job, the most experienced would be happy working with the most challenged students and families, etc.

Please remember that Public Workers are not Saints... They are just people striving to support their families just like us.

Now you make a good point, all monopolies are broken up or fail in this country. EXCEPT public monopolies. The same people who complain about AT&T, Std Oil, Microsoft, etc are the first one in line to support maintaining the Public School near monopoly, the welfare system, big government in general, etc. It is ironic.

jerrye92002 said...

"...all monopolies are broken up or fail in this country. EXCEPT public monopolies." I believe that was the first point I made.

That said, Hiram is correct that there are different kinds of monopolies. There are the kinds of private monopolies like Bell Telephone or Standard Oil that the government breaks up. There are the "natural monopolies" like police, fire, and national defense, where efficiency derives from the natural monopoly itself. That is, it would be inefficient to coordinate multiple private police forces, for example. Then there are the natural monopolies like utilities, that are privately owned and operated but rigidly regulated by government entities. Efficiency doesn't enter into the equation, apparently, because government can directly drive up costs with things like renewable fuel mandates, and yet refuse to allow rate hikes to reflect those costs. Finally we have the pure government monopolies, like the Post Office. Even they have competition, to the point where they are now minor player – about 8% – in the package delivery market, yet they have a legal monopoly on first-class mail. Because of email and online substitutes competing even with that, the USPS has been in financial trouble for years. I don't think we can say one way or the other whether eliminating that legal monopoly would result in private enterprise picking up all of that business, or not. Regardless, I don't see that this "unnatural monopoly" can be maintained much longer.

Laurie said...

I don't think my attitude or effort would change one bit if I worked in a school that needs to compete for students such as a charter or if I worked in a monopoly such as MPS. Either way I give my best effort for for the the sense of satisfaction of doing the job to the best of my ability. It seems private sector or public sector can be managed well or poorly. In the public sector I think it takes more work to terminate a poorly performing employee. a private company will not be profitable or may go out of business if it is poorly managed. I think both public and private sectors do some foolish things in how they do performance reviews for employees by being to focused on things that are easily measured.

John said...

Laurie,
Please remember that we just want fair competition.

Your charter school should be receiving the same funding as a MPLS school with a similar student demographic. Imagine what your school could accomplish if that was the case.

jerrye92002 said...

Laurie, what you are pointing out is that, in a monopoly, efficiency and quality are dependent on people competing with their own ideals. Absent REAL competition that might do things differently, it cannot go far and, as I have pointed out before, the SYSTEM in which these great people work will still prevent them from achieving all they might otherwise. I simply do not know why we cannot do schools the same way we do roads, where government sets the requirements and private entities bid competitively to deliver the product/service.

Sean said...

"Now instead of focusing on his lack of specifics"

That's rich, coming from you -- who rarely offers any specifics.

"that this seems like giving the bureaucrats and politicians a blank checkbook"

No, that's the opposite of a blank checkbook approach, actually -- which I suspect you know, but choose to make up your own little story anyway.

"there is very little in the system that encourages this behavior."

I would agree on this point.

"So what is the other side of the story?"

The reality is that it is a difficult management challenge, just as it is in the private sector.

Sean said...

"The CEO finder market may not be EBay, however those folks certainly need to put themselves out there and sell their personal capabilities."

Ah, executive pay. A crisis that no one is willing to talk about. From 1978-2014, CEO pay rose 997%, twice as fast as the stock market, 90x as fast as the average workers' wages, and 6x faster than the rest of the top 0.1% of wage earners. This indicates not that CEOs are "getting better" at running their companies, but rather that they are getting better at extracting extravagant compensation deals from BoDs -- which, coincidentally enough, are populated by the very same group of executives who would love for their BoD to increase their pay.

John said...

Now I think I have been pretty specific.

The total cost of government should be less than 33% of our GDP. That leaves 67% for citizens to control and use as they will.(ie personal freedom)

The government can then create the plan to optimize the use of this funding between Defense, Education, Social Services, Infrastructure, etc while striving to make the USA "great".

Please explain how saying "gov't needs to do what they choose to and we must pay for it" is not giving them a blank checkbook?

Now your wording is a bit different, but pretty close since the roles and responsibilities are pretty much defined by the politicians. If you doubt this, remember that in 1900 we had a small fraction of the government we have today and they were operating under the same constitution.

"The government has roles and responsibilities to fill, and it should be funded as such to fill those roles and responsibilities,"

Sean said...

"Please explain how saying "gov't needs to do what they choose to and we must pay for it" is not giving them a blank checkbook?

Now your wording is a bit different, but pretty close..."

Um, no, for the bazillionth time, it's not. If you don't understand what I'm saying, please say so instead of making up your fantasyland version of it. It's a lot less frustrating that way.

John said...

Then please clarify your position beyond this absolutely open ended statement.

"The government has roles and responsibilities to fill, and it should be funded as such to fill those roles and responsibilities,"

What exactly are these "roles and responsibilities"?
Where are they documented and quantified?
Does government need to seize control of ever more of our economy and reduce our personal freedoms to fulfill these "role and responsibilities"?
Other?

Please remember that the government is seizing ~15.5% of our paychecks because they figure they can do a better job of saving and investing it than we citizens can.

And the government seizes $500 Billion to $1 Trillion each year because they believe they know better which charities should be supported better than we citizens do.

And if the Single Payer folks get their way, then the government will seize another ~$800 Billion each year because they will believe they can choose our healthcare and benefits better than us individual citizens.

On the upside... Life will be simpler with no personal decisions to make and be responsible for.

jerrye92002 said...

"Does government need to seize control of ever more of our economy and reduce our personal freedoms to fulfill these "role and responsibilities"?

So, if you "limit" government to an arbitrary 33% of GDP, then who gets to decide what gets cut and what stays (since it is currently higher than that)? And once that is achieved, why would we pass up good ideas that might reduce it even further?

The problem is that money taken by governments WILL be spent, and I am hard pressed to think of any strictures to require it be spent wisely and well. The only way to cut spending is to not give them the money in the first place-- tax cuts.

John said...

Jerry,
Now that is why we have politicians. They should be prioritizing and living within a budget. Not dreaming of new things to justify taxing and spending more.

As for going below 33%, the reality is that many citizens are incapable or unwilling to make good life choices and we as a society will not let them or their children live with the harsh consequences of their choices. And though I am a fan of charity, the reality is most Americans are not charitable enough to care for the needy. We are a culture of self centered Capitalists who mostly see tithing as unrealistic. (the Liberals are as bad or worse than the Conservatives in this area, look at the foreign cars they drive :-) )

By the way, the recovery brought us back down to ~35%, so the big question is how do we eliminate that huge interest payment and more wisely use the money the government already collects?

Optional
Pensions 20%
Healthcare 21%
Welfare 8%
Interest 6%
Total 55%

Necessary
Education 14%
Defense 13%
Protection 4%
Transport'n 4%
Other 10%
Total 45%

jerrye92002 said...

First off, I don't think it is government's job to decide how many citizens are "incapable or unwilling" to make good choices until we permit them to MAKE those choices and enjoy the natural consequences of them. Hunger is a powerful motivator, and free food is the opposite. Likewise, if we didn't send so much to government to do "charity" for us (in a totally inefficient, ineffective and counterproductive way), we would have enough of our own wealth to care for those truly needy through private charity. And the private charities' limited means require that we serve only those trying to help themselves, and only until they do not need the help anymore. That is the profound difference.

And of course, government control and regulation means we spend FAR more on things like education and healthcare (and interest on the debt) than is necessary.

Sean said...

"By the way, the recovery brought us back down to ~35%, so the big question is how do we eliminate that huge interest payment and more wisely use the money the government already collects?

Optional
Pensions 20%
Healthcare 21%
Welfare 8%
Interest 6%
Total 55%

Necessary
Education 14%
Defense 13%
Protection 4%
Transport'n 4%
Other 10%
Total 45%"

So, let's recap: we're at 35% today instead of 33%, and you favor a distribution of government spending that is almost identical to how it breaks out today. What, exactly, is the crisis here?

jerrye92002 said...

Sean, I like your take on this. I think it raises my earlier point that 33% is an arbitrary and far too elevated number. Government should be trying to deliver the necessary services as efficiently as possible, and leave the rest alone. I once tried to decide what was the "optimum" level of spending, things that government should be doing and can do well, and I came up with a number like 30% of what they are now doing, or roughly 10% of GDP. I suppose a more reasonable number, allowing for some inefficiencies or "targeted incentives" might be 1/2 of 33%.

John said...

Sean,
That is the current distribution, not my preferred. I have never asked for a big change, I have asked to reduce spending to match current revenues. This should then get us down to 33%, especially if the GDP increases somewhat.

It is the more Liberal folks that want to increase spending and are upset that the GOP is typically resistant to doing so. Please remember all their requests for more welfare, college funding, single payer healthcare, etc. And the gnashing of teeth when the GOP was hesitant to comply.

So the question is... The government controls as much or more of our economy than they ever have and the GOP at best is trying to keep it from growing even further. As noted often, they suggest no significant true cuts. What is this crisis that the Liberals keep complaining about where the GOP are so irrationally Conservative and unwilling to spend?

John said...

Ok Jerry, Since we are currently at ~35% of GDP. You need to cut 60% from the list below to get down to 15% of GDP. Where are you going to take it from?

Optional
Pensions 20%
Healthcare 21%
Welfare 8%
Interest 6%
Total 55%

Necessary
Education 14%
Defense 13%
Protection 4%
Transport'n 4%
Other 10%
Total 45%

Sean said...

Here's the problem: before too long, you can't have a ceiling of 33% of GDP without whacking Social Security and Medicare for current and soon-to-be retirees. Unless you're essentially willing to have a government that just does SS, Medicare, and national defense. What specific tradeoffs are you advocating we make in order to keep spending at 33% of GDP or less?

John said...

Simplest solution is stop paying SS, Medicare, Disability, Survivor, etc benefits to anyone with a net worth greater than $50K.

Better yet, kill the programs and have them use Medicaid and Welfare.

The problem of course... will people be willing to pay payroll taxes after that.

Anonymous said...

Simplest solution is stop paying SS, Medicare, Disability, Survivor, etc benefits to anyone with a net worth greater than $50K.

Not all that simple, really, and that would be punishing the prosperous by taking away entitlements which they earned and to which they are entitled.

--Hiram

John said...

The Supreme Court has made it pretty clear that we are not entitled to anything based on the payroll taxes we paid. We have no ownership rights and the politicians can change the law at anytime.

They sure would not be popular though...

The Liberals already have cut or taxed the benefits for people with money. And they want to eliminate the payroll tax cap without increasing benefits. All of this is pushing the excellent programs from an earned benefits closer to a wealth transfer technique. My proposal just makes it clear what it is.

As Jerry said... A way to care for the old, widows and orphans...

jerrye92002 said...

John, that's a meat-axe approach. These things can be done sensibly, and should have been done years ago but that's no excuse to keep kicking this rusty old can down the road further. The problem with cries to "preserve Social Security" or "protect Medicare" are pure fantasies because these programs MUST change or collapse.

So, what can we do:
-- begin a transition to SS private accounts. Mandate contributions and allow only "safe" investments if you must. (the first is probably a must)
-- Repeal Obamacare AND Medicaid, and transition to a private insurance "marketplace" with federal premium support. When costs come down, as they will, phase out the premium support.
-- slowly transition Medicare to a combination of premium support for those retired and HSA contributions for younger workers.
-- Replace ALL means-tested welfare systems in exchange for a graduated negative income tax, requiring only that a "social worker" sign off that people are making appropriate efforts to support themselves. Better yet, pass a FAIR tax and get rid of all the government meddling entirely. Let charities (funded by tax-free dollars) take on the job of finding food, housing, pointing to training, child care, etc., etc.
** That's over 50% of the budget right there. Now, the combined savings in the federal budget will create a sizable surplus down the road, to pay off the national debt and lower our interest payments. A balanced budget amendment is a good idea now, and would prevent government from spending outside its means in the future.
-- Rein in the EPA; get rid of its armed agents. Strip back the Dept. of Ed. to just its basic function of collecting "best practice" information from the states and passing it around. Eliminate the Tea Tasting Board if that hasn't been done yet.

These are suggestions counting for about 2/3 of federal spending, and a much higher percent of future federal spending. Some spending would remain in many categories, but it would be far less and far more efficacious.

jerrye92002 said...

One thing that always fascinates and angers me is why so many Democrats oppose a federal balanced budget amendment. It sure seems like common sense.

Sean said...

"The Liberals already have cut or taxed the benefits for people with money."

Taxation of SS benefits was signed into law by Reagan, just FYI.

Anonymous said...

One thing that always fascinates and angers me is why so many Democrats oppose a federal balanced budget amendment. It sure seems like common sense.

Think of it in household economy terms. Would a householder want to limit each year's spending by the amount he earns? Or would he instead want to do things like buy a house?

If we don't expect families to balance their budgets, why should we expect governments to balance their budgets?

--Hiram

Laurie said...

I think that we should maintain the safety net (and being a solid liberal I woud not be opposed to expanding it as research shows it is quite effective in reducing poverty)

Safety Net’s Anti-Poverty Effectiveness Has Grown Nearly Ten-Fold Since 1967

John said...

Man... According to this we could eliminate poverty totally by just arbitrarily taking money from successful citizens and giving it to unsuccessful citizens...

"The safety net was nearly ten times more effective at reducing poverty in 2014 as in 1967, new data show. That is, safety net programs reduced the number of otherwise-poor people by 42 percent in 2014. In sharp contrast, safety net programs cut the number of otherwise-poor people by just a little more than 4 percent in 1967, the first year for which this data is available."

This has got to be one of the stupidest articles I have ever read!!!

Now the question is did this enable more people to become responsible hard working and/or self sufficient? Or did it promote more people to become irresponsible lazy and/or dependent. Food for Thought

Anonymous said...

According to this we could eliminate poverty totally by just arbitrarily taking money from successful citizens and giving it to unsuccessful citizens...

Our policy of doing the reverse hasn't seem to help...

--Hiram

John said...

Hiram,

What exactly is this government policy that "arbitrarily takes money from unsuccessful citizens and gives it to successful citizens..."? Please expand on your thought.

Anonymous said...

Capitalism.

Anonymous said...


What exactly is this government policy that "arbitrarily takes money from unsuccessful citizens and gives it to successful citizens..."?

That was the effect of the Bush tax cuts.

--Hiram

jerrye92002 said...

Hiram, that is just plain wrong. People at the bottom of the income ladder got a 100% tax cut, while people at the top got only a few percent, yet ended up paying a higher total share of the taxes.

And the notion that capitalism is "government taking money from unsuccessful citizens and giving it to successful citizens" simply turns the definition on its head. Capitalism works best, whether for good or ill, when government isn't involved at all. And it would work rather poorly trying to take money from the poor since they have none.

jerrye92002 said...

Here is an interesting question: if our poverty programs are "lifting people out of poverty" at such successful rates, why doesn't the number of people in poverty seem to go DOWN? Isn't the correct measure of welfare programs the number of people who no longer need it?

The other puzzlement here is why we insist on adding in all of the welfare benefits before declaring people out of poverty? After receiving all of those benefits, they are STILL in poverty, because they did not make that on their own and will need another big check next month and forever. Heck, if government spent much more they could claim poverty had been eliminated when all that would achieve is to thoroughly cover it up by throwing money – money taken from the successful – at the problem.

Anonymous said...

Person A is taxed on their $1M income at 35%.
Person B is taxed on their $11,770 poverty level income at 0%.

Tell me, is it easier to survive on $650K or $11,770?

It takes a lot of nerve to suggest that Person A is suffering any sort of inconvenience or is being held down by the heavy hand of government.

John said...

The other way to look at it is that.

Person A is paying $350,000 per year for our schools, roads, bridges, law enforcement, defense, welfare system, etc.

Person B may pay $2,000 in taxes and fees for these things, however they receive that or more back in credits, welfare, medicaid, etc.

Both live in America and have access to free K-12 education, secure neighborhoods, transportation, etc. Now which one is paying their fair share?

It is one of my favorite questions since fair is such a flexible word.

jerrye92002 said...

I thought we were talking about fairness? The question isn't who has what, but what burden government places on them. From the view of government burden, somebody paying $0 in taxes is better off than someone paying $350,000 in taxes. Infinitely better off.

And since the Bush tax cuts created this situation, it is pretty hard to argue that government is taking 0$ from the poor and somehow "rewarding" the rich with it.

John said...

Now to answer your question... What would Person A have done with that $350K if government had not taken it?

The answer is that they would have invested or spent it. Of course spending goes directly into the economy and pays salaries of many other citizens. Investing it would provide capital that is used by companies to expand and improve.

My point is that government taking money out of the Private economy so they can just spend it in different areas does have good and bad consequences. If one thinks the government can spend one's money more wisely then maybe we should all pay more taxes.

John said...

Jerry,
I think Hiram's point based on his past comments is that all American wealth belongs to our society. The concept of Private vs Public wealth has caused us many disagreements over the years.

So if I come up with that "better mouse trap" that people value and are willing to pay me for to benefit themselves... Or if I work harder than others, save, invest and people freely give me more money because they value my efforts, capabilities or capital. This leads to an unequal distribution of "society's wealth" and folks like Hiram see this as a system that "arbitrarily takes money from unsuccessful citizens and gives it to successful citizens..."

Where in reality there is nothing arbitrary about it... It is just Capitalism at work. People complain about Walmart as they shop there to save themselves money. People complain about jobs being moved over seas while they buy their products from overseas suppliers to save themselves money or to get what they perceive as a better value for themselves.

It seems pretty simple to me. Wealth naturally moves from those who offer less perceived value to those who offer more perceived value. (ie unsuccessful to successful)

jerrye92002 said...

Did you ever notice when rich liberals have a choice about paying taxes, they don't? Again, Bill Gates and Warren Buffet, while claiming to favor higher taxes on the rich, took the bulk of their combined fortunes and donated to a charitable foundation where THEY decide where the money goes. John Kerry puts his boat in Rhode Island to avoid the extra tax in Massachusetts, and does NOT pay the optional (yes, that's correct) higher income tax rate there.

Not even liberals believe that government spends wisely and well, but they're OK with it so long as it is Other People's Money. (OPM is addictive, you know.)

John said...

I guess that this means that one role of government in their view is to take money from those who have added more value and redistribute it back to those who have added less value.

Seems about correct from the Liberals I dialogue with.

An example I guess would be that: Obama worked hard to get himself out of poverty and to become very successful by working harder and offering value to others. Therefore we should charge him large taxes so that people who do not follow his example can receive money, benefits, services, etc at his expense.

Does this seem like a good policy for encouraging American citizens to work hard, learn, improve, save, invest, etc?

John said...

Ok. Time for my favorite video. Based on my example, they really are lined up for Obama Bucks...

jerrye92002 said...

The classic liberal conceit is embodied in the home-grown Minnesota Democrat line "Happy to pay for a Better Minnesota." They seem to think that people will happily pay more in taxes anytime they're raised, rather than actively working to avoid them. They think they can repeal the laws of human nature.