We Welcome All Lively Debate.

Tuesday, November 23, 2010

United States & Co.

Profits are the fire that drives private sector industry. Whether you're selling health plans or lead filled toys, your decisions are generally guide by the desire to increase your bottom line. That's why you see companies maximizing revenues while reducing costs, and all without a commission to tell them to do so. The problem for the government is there is no profit motive. Believe me, if you offered Obama 5% of whatever he cut from the budget, we'd be writing him a $50 billion check by the end of next year. So, I propose we start adopting some common sense private sector cost cutting ideas.

Performance based pay. I love teachers. I've had some great ones and I've also terrorized some. However, I turned out OK. (that might be an overstatement) They certainly should be paid a fair wage, when they perform. An idea has been circulating around, and is even backed by Obama, about linking the pay of teachers to the long term success of their students. This would help us weed out the shitty teachers and produce a better generation of people to replace the one retiring now. Not that it will be very hard to replace a generation marked by free love, LSD, draft dodging, and an overall decline in worker productivity but I might still hold my breath. Also, bonuses for department heads who come in under budget with the promise their budget will not be slashed the following year. Think about it, every year they spend less than we apportion its a budget cut in the sense that it saves us money. You better believe we could probably shave $100 billion off the budget that way.

Video and eConferencing. There is no need for offices anymore. The internet has made every meeting a possible virtual meeting, full with desktop sharing, audio, video, and even firm handshakes according to one of the scientists at the TED Conference. NATO Summits would be a lot cheaper if we didn't need to deploy Air Force 1 and advanced secret service teams. The military already uses this technology heavily. Applying it across the board would cut down on the expenses we incur funding travel to other countries and would save the environment.

Strict Budgets. If a contractor tells you something will cost $40 billion, then we better have whatever new whale shaped submarine drone we're developing once the $40 billion runs out. Once the budget is spent, the project is done and we never use that contractor again. After doing this once, I bet you won't see any military contractors going over again. We have this terrible mentality that we've already spent $40 billion so what's another 10. Well it's $10 billion dollars, that's what it is. This would curb defense spending significantly without affecting the majority of programs.

Our finances are a mess, it's time to start doing something.


  1. Couple of points to consider:

    1. Having the public sector adopt more profit/merit-driven methods of compensation can be tricky because the government doesn't always do things that are profitable. Running and maintaining national parks is not a huge loss but I doubt it's amazingly profitable either. Regardless, most people appreciate having beautiful landscapes and retreats. I'm sure there are better examples but that's just one. I would be wary of blending too much private sector mentality into the public sector.

    2. As for teachers, we have to break the unions. I still haven't figured out when/how these unions gained so much power aside from being an important group for Democrats. A recent Friedman article looked at the education systems in Finland and a couple of other top performers. One of the things I found surprising/useful is that these countries require that people wishing to be teachers come from the top of their graduate classes. This clearly isn't the case in the U.S. By taking power away from unions and attracting talent with prestige and money, we might have a shot at educational reform.

  2. Lifetime - I think you're absolutely spot on with the public sector issue of profitability. However, I think it would be very easy to quantify what you are considering a social benefit. So parks provide an aesthetic, we can certainly quantify that in some capacity - utility or other such method. I think it's an issue that could be tackled if we had enough concerned citizens in the upper echelon.

    As to the issue of unions. There is perhaps no more egregious group in the country right now than the unions. Legalized and I both come from RI, 4th highest paid teachers, statistically in the bottom 5 of most standardized tests. This, no matter how it's sliced, is an utter failure of incentive. No Child Left Behind was an complete failure, but logically a step in the right direction. We need to start implementing incentives for quality education and reducing the power of the unions in contract negotiation. I think a recession is the perfect time to implement this. At 9.6% unemployment (and the Fed recently cutting its 2011 outlook), there is no shortage of educators willing to take a pay cut outside of union influence for a job.

    I think the overall issue Legalized and I have discussed on occasion is the perception that personal finance is somehow different than public finance, and it isn't.