flASHback: The Tao of budgeting

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January 22, 2010 :: Permalink

Aloha ~
The other day we joked about ending up on the same side of an issue. This is the beauty of our American democracy ... we're more similar than different and this forms the glue that binds our nation. And, here again, we agree ... government enterprise is inefficient.

Whether one starts from the Right or the Left, we admit government is a complex and inherently inefficient machine. This is not revolutionary.

Take a look at one of the primary endeavors of the private sector - the restaurant. An ambitious entrepreneur finds a good cook, develops a short list of pupus, ten main entrees and a couple desserts. She's in business for herself.

This is a relatively easy proposition. She throws up a sign, runs some advertising and customers give her venture a try. They vote with their dollars - providing immediate feedback about the product and presentation.

You and I come in for pau hana. The place is packed and we witness a well-oiled private enterprise in action. We stop by earlier the next day - about 2pm - and the wait staff is clowning around in the back, sipping sodas and talking story. Lazy?

Maybe or maybe not ... one might argue this is the feast or famine cycle of the restaurant business.

What about inefficient government? Why have a public sector at all? Decades ago as Americans began to concentrate in urban areas there was increasing need for utilities, such as electricity or gas, for example.

The private sector model would require Company A to run their gas lines throughout each neighborhood. For Company B to compete they also would need to run gas lines throughout neighborhoods. New competitors would likewise need to run lines.

You can quickly see how inefficient this would be. In fact such a model is impossible for the private sector. The massive start-up costs would obstruct entry into the market from all except the largest and wealthiest of companies. These structural obstacles would prevent competition. We would see monopolies rather than market capitalism.

There are solutions to this challenge. People could form co-operatives, which we have done. They pool their money and cover long-term costs. Another option is to create a government entity. Costs are supported through taxation and decision-making is make in open or semi-open forums. Both are non-private operations in nature and regardless how one slices and dices the terminology this is a form of socialism.

Yet neither option offers immediate consumer feedback as eloquently as the simple restaurant model. If a customer doesn't enjoy the taste of the food, its quality or price, the restauranteur hears immediately - through word of mouth or the consumer's vote with their dollar.

The simplicity of this private model helps the manager determine how much staff to have on hand; how much food to pre-order, etc. Yet how many linesmen are needed for our cooperative utility venture? How often do lines break? How often do we expect an emergency, such as an earthquake or hurricane?

While the restauranteur is able to learn her customer's habits and expectations relatively quickly the public sector initiative may take years to determine just the right balance.

Ms. Linda Kato is an example of this. Public managers have tracked unemployment figures for years - this is why government work is dominated by endless efforts to create databases, analyze behavior and provide summary reports.

Ms. Kato's managers have determined it is reasonable to assign her about 100 cases per day. Since reasonable is a subjective term how do we know what is fair? Taxpayers may prefer Ms. Kato process 300 claims per day - to save taxpayer dollars. Ms. Kato would quit. Years of training would be lost - creating an inefficiency with labor.

This is one reason why society sees more unionization in the public sector. Work assignments are matters of negotiation more than the precise benefit/cost analysis available to the restauranteur.

While all this makes rational sense when discussing generalities our world isn't this smooth. The restaurant manager will plan for 150 evening diners on average - yet some nights there will be a surge and 300 people will show up. The manager will post a sign saying NO FOOD and customers will select an alternative location for dining.

Ms. Kato, on the other hand, cannot put up a sign saying, NO MORE EMPLOYMENT BENEFITS. She must adapt and handle the higher quota - 2.5 times the level considered reasonable in her case.

Ms. Kato will not be paid extra for her extra work. Society expects her to find a way to meet this higher demand. Due to the complex training requirements of her job the agency will not be able to hire more staff to meet this short-term increase in demand. Ms. Kato simply must suffer. Not only is she working under greater stress but to save money the agency has cut the A/C and she now works in somewhat inhumane conditions.

When society faces a downturn our restaurateur is affected. Fewer people patronize her facility and she lays off staff to compensate. She may wait tables, assist in the kitchen and do all the cleaning to keep her business afloat ... yet it is her enterprise. She hopes her additional sweat equity will pay off down the road as she is investing in her future - and the future of her enterprise. This is the beauty and promise of capitalism.

Conversely, public sector workers, when society faces a downturn and tax revenues drop, must frequently do more work. The public refuses to increase their taxes to support this work. They demand services while clamoring for pay cuts of people like Ms. Kato or public school teachers.

Their workload remains the same or greater - yet we punish them with lower pay. There is no offer or promise of greater reward in the future. School teachers currently suffer a 8% reduction in pay. Society would prefer they continued their 180-day education program. Due to their strong union, teachers were able to negotiate furloughs. No pay - no work!

You argue too many public workers are lazy. Had you visited Ms. Kato two years ago on Wednesday afternoon, you might have found her at the water cooler chatting with a co-worker. Lazy?

On that day she had received only 50 unemployment claims - she completed all. Yet Tuesday she entered 140 and Thursday she will finish 110. Thus on average she manages the reasonable number of 100 per day. As we witnessed with the restaurant industry this is the feast or famine in her flow of work.

Public sector work is complex. It's not a simple proposition of grilling a hamburger for 150 hungry consumers during the lunch hour. Teachers are assigned the task of furthering the education of about 160 Keiki per day.

The consumer demands the burger; most Keiki would prefer to be at the beach. If a customer acts up in the burger joint the owner quickly asks them to leave. If a student misbehaves in class parents and principal say, find a way.

A football coach can get in the face or send an errant linebacker running laps when a tackle is missed. A public school teacher would be terminated for taking such action if a student failed to turn in an assignment.

We know the goal of the restauranteur; we know the objective of the football coach. What is Ms. Kato's mission? What is the mission of a public school teacher?

You will not hear this complex discussion on Fox News. Hannity does not delve into such elaborate conversations. Lower taxes they will echo - simple, sophomoric and selfish - and incomplete.

Ms. Maddow and my brother Keith will challenge Americans to think. Rushing into Iraq seemed like such a simple proposition. Remove Saddam, the public cried!

Yet creating a lasting peace is a complex mission. We need more than bumper sticker slogans to accomplish the really heavy lifting in society - and it is government that shoulders this burden.

Try thanking your public workers today.