Monday, June 29, 2009

Other People's Big Government

We humans are a funny lot. Most of us can see the flaws in others and miss our own; "do as I say, not as I do" generally being the rule of the day. For my part, I am publishing this blog to attempt reasonable discussion of political issues in spite of my own tendencies towards well, being unreasonable.

Taxes and "Big Government" are my two favorite examples of what my wife tenderly calls, "what's mine is mine, and what's yours is mine". Everyone, and that means you Mr. and Mrs. John Q. Conservative, wants big ticket programs from your governments, federal, state and local. Everyone, and now I am writing of you Mr. and Mrs. John Q. Liberal, despises the notion of paying ANY tax. And so, one of the fundamental obstacles of our democracy is the endless attempt to win the argument over what we the people buy and who pays for it.

Living in rural Illinois has helped to make this problem clear to me. The area in which I reside is among the most conservative in the country, even while it maintains a bewildering array of local governments. By way of comparison, my home state of Nevada has perhaps 15% of the sum total of government of Illinois. As an experienced practitioner of, and student of business, the dilution of responsibility and effort represents a shocking violation of the rules of scale economics and a monumental waste of money. The irony of course is that the conservative residents wouldn't have it any other way. Despite the additional cost, the citizens largely fight for the arrangement because it is how they maintain their voice in the democracy.

The rational middle believes that the final point is the critical issue, that the cost or tax must serve a fundamental purpose to the participants in the democracy. Restated as a question, is your government giving you value for money? When we allow ourselves and our representatives to get away from that question and get lost in the contradictions, we do a disservice to the democracy. The current debate that involves health care, energy/climate change, bailout, and stimulus devolved quickly into a battle of contradictions. If we could get the politicians to put their collective slogans down, we might solve some problems..

The first issue they have to get past is debt. I can almost guarantee you that there is not a single financial advisor or guru in this country who will advice you to delay purchasing your home until you can afford to pay for it in cash. Most homeowners have a mortgage with a value 2 or 3 times (or greater) than their household income, and will pay substantially more than that in interest over the term of the loan. We as a nation borrow money at a rate that would make we the individuals jump for joy. Countries like China buy our debt, not because they want to own us, but because the act of buying our debt helps to keep their currency undervalued. A lower value currency helps them export more goods to us. If they stopped buying our debt, our currency would fall in relation to theirs and their export-oriented economy would suffer (and our manufacturers would be able to send more to China; kind of like "fire hydrant pees on dog"). The critical issue for debt is twofold; that the interest payments servicing said debt remains manageable, and that the nation either improves its productive capacity or protects its citizens and property.

To illustrate that point, I will point to a pair of Republican presidents in contrast. Ronald Reagan's budgets dramatically increased the federal debt, as did President George W. Bush's. Considering Reagan first, there is a good argument that the dismantling of the large top marginal tax rate helped to stimulate growth, and the military spending served two purposes; combined with the diplomacy of Reagan's second term it helped democratic forces in the Soviet Union open that nation to economic reforms, and the scale of the spending (done mostly within the borders of the U.S.) served as a Keynesian stimulus to the economy. President Bush's efforts were decidedly less focused. His tax cuts cost $1.8 trillion, and focused as they were on the top tier of American earners contributed little to the economy while falling short of the Laffer Curve (the theory that a substantial tax cut will spur an economy such that tax revenues end up staying even despite the lower rate). The war in Iraq damaged U.S. security and will cost more than $3 trillion by the time its done.

The current debate surrounds President Obama's agenda and its affect on U.S. stability, financial and otherwise. To this point, the debate between right and left has looked much like a duel between two blind snipers; both sides expertly firing their weapons in the general direction of what they think is their opponent. The right yells about size while the left yells about need, with neither adequately making a case that pairs purpose with value. The initial steps towards health care reform were a good start, then the lobbies got into the fray. What began as productive discourse degenerated into dueling ad campaigns about the uninsured poor and the importance of insurance companies in our daily lives (irony intended). The climate change/energy independence mess should be a discussion on how to make this country the leaders in 21st century energy and business efficiency; it has become a struggle between two competing sets of unrealistic and narrowly focused numbers regarding household cost. Is the number $15 per month or $70 over the 20 year period? Nobody is referencing the historical fact that household energy costs rose $41 per month in the period between 1981 and 2001, or the reality that current fossil fuel sources will become more expensive as they get more scarce.

Room for debate exists aplenty, but discussion would be more productive. This is, after all, our government, big or small. Our engagement in rational discourse, and our demand that politicians follow our example will define the effectiveness of our democracy.

The rational middle wants to hear your opinion......

Thursday, June 25, 2009

Cap and Trade ism

Don't you love how politicians (Democrat or Republican) are able to create new dirty words out of just about anything! While the environmental left screams about the evils of big business, the right is on a mission to turn "Cap and Trade" into one of Carlin's "seven words you can't say on television". Now that the House has passed a Cap and Trade bill, you can be sure that "socialist, communist, and big government" are soon to follow.

The rational middle says to both sides, "Put down your slogans, step away from the slogans!"

The CBO, the independent auditing arm of Congress that last week released a partial review of health care reform (a review that conservatives have been pointing to and underlining), has estimated that the bill that passed the House will cost American families $14.58 per month in increased energy costs.

$14.58 per month.

Predictably, conservatives are saying (this week) that the CBO is flawed and that number is wrong. Folks, if your teenager tried that logic on you domestic warfare would ensue. You can't have it both ways, but politicians who came of age before internet search engines came into wide use still haven't figured out that their b.s. will be caught.

So Cap and Trade is relatively inexpensive, will limit CO2 pollution, and probably force some companies to turn towards alternative energy sources. I still don't like it. Oh I know that it is the best solution going in Congress and that the problem cries out for solutions; but I still don't like it. My dislike has nothing to do with the notion of government action. We live in a democracy. Flawed as it may be (as anything run by humans will always be), this democracy gives the people a voice in the marketplace. If we the people can't effect change in the marketplace, then why have a democracy? My problem is with the mentality of Cap and Trade.

Cap and Trade is part of a family of strategies known as "end of the pipe" or mitigation strategies. It is the act of putting toothpaste back in the tube. The work that should be done involves keeping the pollution(waste) from happening in the first place. This is not revolutionary thinking. Thousands of companies around the world, from a small local dairy in Brazil, to Proctor & Gamble, to huge industrial polluters like Alcoa, have executed successful case studies in Total Quality Environmental Management (TQEM). TQEM and other strategies involving resource management aim to stop pollution before it happens.

Let me put it in a "pro-business" format. If your business buys 100 units of resources and turns them into 80 units of product and 20 units of waste, you have an opportunity. The opportunity is the 20 units of waste, which you could turn into product or not buy in the first place. The various projects that have been done on that subject; finding economical ways to eliminate heat loss, reduce water use, reduce waste water discharge, produce more with less scrap or sludge, and generally be more efficient. The problem is perception; if a manager sees a five year project that has a big price tag and might break even, that manager might take the inefficient but less expensive short term option and by a pollution license (Cap and Trade). In other words, nothing gets done; the business doesn't improve and the environment suffers. If that manager is bombarded daily by commentators and politicians screaming about climate and polar bears, costs and communism, he/she might just bury their head in the sand.

That is the reason that the people, through their voice in the marketplace (government), have pushed most of the reforms on pollution seen in this country. From limiting acid rain that destroys valuable hunting ground, to stopping water pollution that keeps you from eating the fish you catch in a river, to banning visible smoke pollution from cars and factories, none of these steps were taken voluntarily by industry; not because industry is evil, but because they have to make a living.

The major problem with all of this is the adversarial relationship that has developed between government (us) and business. This is counterproductive, and must be changed. Energy reform and climate change is an excellent topic to try out some change strategies. Time for one of those plan things...
  1. Adopt Environmental Managerial Accounting standards to support TQEM and Total Resource Management practises
  2. Use the government as a support/resource for business; pooling best practises and supporting business in their implementation
  3. Provide financial assistance to companies for large TRM and TQEM projects; tax credits are a business and provide specific financing for a specific action plan
  4. Spend tax dollars (yes I know, I don't like them any more than you do, but it is an investment) to rebuild our infrastructure to support alternative energy
  5. Provide direct assistance to large metro areas to effect their transition to alternative energy sources

There! The rational middle is on the record, but I am sure that there are better plans out there than the one sketched out above. If your plan looks at all of the problems in balance, and addresses them in a reasonable way, then it is probably better than what we have been listening to on TV!

The world is listening....

Wednesday, June 24, 2009

The Performance Enhanced Culture

I love my Dodgers. Vin Scully still calls the games, the uniforms are timeless, the stadium is privately financed (not to mention functional, beautiful, and stocked with great food!), and the team is playing as well as it has in my lifetime.

And Manny Ramirez is coming back....

When the team acquired Ramirez last year (for MY birthday, of course), I was optimistic. Manny would be playing for a contract and his reputation, and the Dodgers were only on the hook for a small "cost of living adjustment" (no, seriously). I figured that he would rock, and he didn't disappoint. He legged out infield hits, stole a base or two, cut off balls in the gap, inspired his talented young teammates, and flat out raked at the dish.

And then he went away......

The rational middle is populated by ardent sports fans who are quite capable of losing their perspective. Whether we are getting into a fistfight at the park, screaming over beers, or ruining our children's playtime by showing up and being stupid at their little league games, we have the capacity to cross the line.

The stakes should not be this high for sports, but they are, and people like Manny and thousands (yes thousands) of other professional athletes like him are ready to "take the competitive edge" and go chemical. Honestly though, I could not care less about Manny and his fellow cheats; he got his punishment, and he has to bear the burden of lost respect and a diminished reputation.

The rational middle is concerned about those kids we were embarrassing at the local park two paragraphs ago. The problem of steroids and other chemical enhancements runs deep; go to a freshman football game this fall, and you will likely see at least one child who is a user, and that child will have received his steroids from a close male authority figure. The justifications for use are legion; personal choice, parental rights, "they are not really as bad as advertised", you name it. The problem is that concerned folks are not fighting the right people, and are using the wrong tactics.

Manny, Sammy, Mark, and the Commish are not the real villains in this play, and neither are the providers and purveyors. That sorry cast of characters are just the rats that collect on a mountain of trash; you wouldn't scramble around the pile trying to kill rats would you? You would remove the pile of debris. The real problem here is our collective perception of what is important in sport, and how that affects our actions. The real problem is us. Unless we go back to our earlier, better values of fair play, respect, and clean competition, the problems that plague our sports will remain. I am not advocating against winning; I believe that has relevance all the way down to the lowest levels of youth sports (after all, kids on losing teams quickly lose interest as well). I just believe that we should adhere to the old Mills Lane instruction, "let's have a good clean fight and come out swinging!".

My second point relates to the tactics we use to fight the battle. I believe that we lie to our children. We tell them nursery rhymes when they are young, then sell them on the notion that sex is bad, drugs are dangerous, and steroids are for the lazy. When our kids get a little older, they realize that there is no troll under the bridge, that sex is fun, that many of their peers have used drugs and loved them, and that getting any results from steroid use requires lots of hard work.

The good parents out there, and there are a lot of you, know that the trick is getting your kids to think about consequences. Pregnancy, venereal disease, hangover, car crashes, and really bad web casts are the critical pieces of information that teens need to know. In our battle with performance enhancers, we need to show teenagers the consequences of this type of drug use. None of the kids today can remember Lyle Alzado. The health consequences have to be restated in today's terms and the illegality of these drugs in this context must be restated to parents and coaches in unequivocal terms.

If I had a small child at home, I am not sure how I would explain Manny. I am less sure of how I will feel when he hits his first home run. At least he has been punished; others were able to live the lie long enough to get the privilege of "misremembering" things in front of Congress. What I do know is that I will never coach another young athlete without talking with them about PED's.

Maybe in a few years we will be able to watch the games without wondering....

Foreign Politics?

A quick post today on Iran and North Korea and notions of an "appropriate response".

The usual lineup of critics on both sides of our artificial political fence have been taking shots at President Obama for his handling of flash points in Iran and North Korea, and to a lesser extent, China. The left wants strong condemnation, appeals to the U.N., sanctions, and support for various human rights groups; the right wants tough talk and an aggressive, military first posture.

The rational middle hopes (and at least for now, believes) that the President has a plan. A plan, of course, is the key. Rational, meticulously constructed tactics in support of a clearly defined strategy that forms our foreign policy. In other words, the antithesis to the foreign politics that is so often practised by our policy-makers.

The first, visceral reaction is not typically the best move in a relationship; be it business or politics. The chess players of the world are well acquainted with the need to look many moves into the future, and foreign policy is no different. You want to condemn China and restrict trade because of Tibet? Fine, list all of the consequences of that action and analyze the net benefit. Think it would be a good idea to shoot down a North Korean missile test? OK, what do we gain if we hit it, and what do we lose if we miss? How much free strategic insight is lost because we haven't carefully watched and recorded the bird's flight profile from beginning to end? Interested in Iranian democracy, and think our President is soft? What is the endgame? Limited military engagement? Full-scale war? Economic sanctions?

The above are all reasonable response scenarios to international crisis. The question asked is, are the right follow-up questions being worked, or is all of the bluster just political posturing?

The rational middle wants to know what you think....

Monday, June 22, 2009

The health care circular firing squad

The debate over health care is fast reaching a fever pitch of sloganeering and circular arguments. A screaming collection of cowboys driving herds of mooing cattle over the landscape have come close to derailing any real action that seemed probable just a few months ago. On the right, a phalanx of insurance companies, big pharma, and the AMA; on the left, a scrum of typically weak Democratic senators. The rational middle is, at the moment, looking for cover in the crossfire. I think it is time to step into the body armor and state a few facts.
  1. Health care costs for working families are climbing faster than real income annually...this is called a "deficit".
  2. Health care costs for small businesses are climbing at the same rate. Most of the pizza parlours, convenience stores, ice cream shops, and even chain retailers are unable to provide coverage to the majority of their workers.
  3. As a matter of record, federal management of health care, in the form of Medicare and Medicaid is frightening. They are slow to pay, pay less than market rates, and are restrictive to those that they cover.
  4. Reverse the argument; if you outlaw insurance today, prices would fall tomorrow. The implication is that medical insurance DRIVES cost increases by allowing scale to pay for the increases. This does not bode well for nations with universal public health coverage. Indeed, European nations face problems with paying for their programs that grow with time.
  5. The medical marketplace is broken. Supply and demand still apply, but the producer/consumer relationship is out of alignment. Simply put, we patients are not the consumers, the insurance companies are. They buy bundles of reasonably positive patient outcomes from medical providers at the point where supply meets demand. We patients (whether individual or commercial) are simply incremental to the equation. We are analogous to the small supplier who spends capital to scale up in response to a Wal-Mart contract. They must continually charge less and less to keep the contract, and are stuck because of the capital commitment. We are stuck because we must have health care, and we must continually pay more and more.

For those of you idealists who cling to the principles of freedom and choice, good for you. But don't believe the myth that you and your doctor have choices in the care of you or your family. Small pseudo-governments (insurance companies) in which we have no voice make the decisions on what care you and yours receive, and when.

Real reform means restructuring the marketplace so that the consumers are not insurance companies. The big insurers, big pharma, and medical facilities must be in a situation where they have to compete on price and quality with each other. For those of you capitalists out there, recognize that currently the insurance providers act as monopolists, and that is NOT free market economics.

Let's hear what you have to say on this...

By way of introduction...

The rational middle is the area occupied by most Americans in the absence of cable news and talk radio of any persuasion. It is my contention that the solutions to most of our problems, and the strategies that allow us to exploit most of our opportunities live in the middle. I will try to avoid the campaign cliche and the political catch phrase as I explore the news of the week, and I will also attempt to cite neutral sources in support of my opinions. As a break from the stress of politics (and as therapy for my sportsfanitis) I will also look at topics in the world of sports. I hope you will join the conversation on a regular basis and add your voices to those of us in the middle who are tired of the left and right.