The thing is… there is a ton that could be done in regards to cutting, apart from just cutting taxes, that could have a huge impact. Overhead cuts, anti-competitive regulation cuts, and re-prioritization of services could make a huge difference… but sadly, folks want the status quo, of more and more and more government, rather than to say “hey, wait a minute, this is stupid, and has to go”.

Overhead is often a killer. Just look at the massive layers in education…. case in point, actual classroom expenses, ie teacher + classroom + supplies are dwarfed by overhead. Or in other cases, some cities are finding its cheaper to use private contractors. In the future, I would guess many of these contractors will likely employ the same folks who used to do the same job as a government employee for a fraction of the cost.

MN is averse in anti-competitive and barriers to entry regulation. Politicians seem deathly afraid of a new entity coming in and doing the same work for 20% less for fear that it might cut into old entrenched businesses, the jobs such businesses create, and of course the resulting political contributions as well. They also seem to fear progress too… horrors that buggy whips might evolve, and something totally new replace them. I almost wonder had MN been more startup friendly, on all fronts, perhaps we wouldn’t have had the mass technical exodus post the CDC glory days.

Re-prioritization could be a huge deal too… Its like the Federal MMS on a small scale, or a Van Halen concert on a large scale. Writing up BS stuff for light bulbs being out, or improperly labeled buckets on the Deepwater Horizon, all the while major process issues go along unchecked and unregulated is a huge mistake. Granted, anyone can count light bulbs, and bucket labels or sort Van Halen’s M&M’s… it does take skill and expertise to understand the drilling process, or the rigging of a stage.

Trivial BS checksum methods (bucket inspectors)are mostly cross checks for attention to detail… with the philosophy that if attention is given to minor things, the feeling is that the major items are subject to the same attention, if not more so. The problem is… both on the fed, and state level… making sure that the bowl of M&M’s doesnt have any brown ones has become the greater priority, than the integrity of the stage rigging and floor.

Excessive overhead, the anticompetitive stance, and the prevalence of bucket inspectors are firmly entrenched… Its going to take a whole ton of folks crying uncle before any of that changes. We could cut our way to greatness… but instead, we talk about cutting key services, and cutting taxes, rather than cutting policies and procedures that could likely cut both taxes, and improve/expand valuable services to the citizens of MN.

Beginning consultants often are enticed to pick up contracts via job shops and or recruiters, rather than totally running their own show. Yet, they often get a major wakeup call when they find out, they are billed out at $100/hr, yet only get $35 in their pocket… with the recruiting/marketing firm skimming a huge amount off the top. Many have remarked, “this is greed to the max, but what do I do, I cant be out selling if I’m working….”

Obviously overhead and profit have to be covered or a firm would go out of business, but getting 65% cut off right from the get go bugs the new guy a lot… until of course they do run their own show at some point, and find out that there is a lot of overhead that someone has to pay.

Its the same deal when a govt contract comes up which will employ say 100 people… the bid is going to be for a whole lot more than just the salary paid to those hundred people. The question then becomes, what is reasonable… beyond the salary, especially when the taxpayers money is at stake.

As such, I decided to take a look at a few different firms to see what they had as far as revenue per employee. Its quite interesting.

• Halliburton $285,000
• IBM $241,000
• Microsoft $640,000
• Starbucks $74,000

All of a sudden, the $260,000 cost per job doesnt seem so bad…

The truth

The ultimate truth is the following. There are no easy answers, and there are 50 kazillion unknowns. There are tons of theories, and thousands of people working on answers and there are still kazillions of unknowns, and answers are going to take time, and some may never be known. In addition, solutions are going to require widespread failures and massive numbers of iterations. No matter how the legal, the managerial, the political, the agendized folks want to spin it… the laws of nature are immovable, and they reign supreme.

Human Fear

Then add in the fact that fear is running rampant, whether it be those who see the writing on the wall that everything will change as the spill is right in front of them, and others, who see that things might change, and their current lifestyle may no longer be sustainable, even if the oil spill is thousands of miles away.

I also think there is a synergistic multiplier effect between fear and uncertainty, combined with failure after failure leading to despair and resignation which will likely have profound and long lasting effects on society at large.

As a tech guy… Its easy to discount this fear aspect, but I think such will play out in technical and political judgment calls for many years to come… and that then plays back into the technical realm. Case in point, nuclear paranoia is incredibly strong post three mile island. Industrial contamination is a much greater danger, but short of highly localized arenas, most consider it a non-issue, and economics/finance/jobs are more important. It leads to a question of where will petro end up in 10 years.

Vested Interests Abound on all Sides

Then to add insult to injury, there are those with vested financial and political interests of one type, who wish to down play any and all downsides. Likewise, there are those with different ideological, and political interests, who wish to play up any and all downsides. Lastly, there are those who see such the spill as being so distant, it will have no effect on them whatsoever, and is nothing to be excited about.

If one chooses to play down potential issues, or ignore them completely, the obvious danger is if they are wrong the costs could be extreme, ie death and destruction. By the same token, over playing such could create un-necessary fear (already on top of the current fears), it shoots holes in future credibility of the messenger, and it runs the risk of potential economic hardship.

Such vested interests often end up muddying the waters from a technical solution point of view. Even from a political point of view, its really muddy… just look at the FCC, more lawyers than engineers… and they are to address technical issues? Go figure

The solution?

The next generation will have a much clearer view and armchair quarterbacking likely will present a multitude of solutions. In the short term… some of the next gen is already here, in grade school. Dead animals, dead beaches and the like will start to color their thought processes in short order. No matter how much they are sheltered or are attempted to be led one way or another… images engrained early on will play a huge role in the development of their thought processes, their morality, and their hope. In other words, these youngsters will see through the BS, the spin, the garbage of today. They likely will see the truth long before the rest of us.

This plays out in nearly every risk/benefit decision made, whether it be the purchase of a family car. Ie do you buy a clone of Cadillac One or a used Hyundai? Obviously the chances of an encountering an IED, or a sniper in a family car are low, so armor plating and bulletproof glass would be overkill. Yet, an encounter with an out of control semi is much much greater in the Hyundai than Cadillac One, or even spinning out of control on ice, but such events are virtually never considered when it comes to car buying.

It plays out in the regulatory arena too…. case in point, the experience requirements for being an airline pilot make great financial sense, from a hiring perspective. However, when the chips are down…. not so well, case in point Colgan 3407, where in both pilots had thousands of hours, said hours were not of the quality needed to prevent the tragic loss of life.

A similar deal in oil regulation, ie if multiple relief wells were required for deep water drilling, oil companies would make less money, there would be less profit, less taxes to government, and ultimately higher consumer costs and fewer jobs. On the other hand, we (the taxpayers) will likely have $50billion+ to pay in cleanup costs, society will have untold amounts of human suffering, and the environment in some areas may take generations to recover, due to extended time needed to drill them now. Even now… one relief well is being drilled, one is on hold… and what if both fail? We then start on well #3 in September?

Future blog posts, which will be hotlinked as I get to them

Justification due to Operating in Deficiency Mode

Money is Almost Always Available After the Fact

Changes in Safety are Usually Short Lived

Second Guessing will Haunt many for Years

Can anything be done?

some background bits
from http://www.theoildrum.com/node/6524#comment-633217

Judgement calls

from Rockman

IF I suddenly thought I could use the RW BOP to deal with the leak and IF I felt the other RW was doing OK I would delatch and move to the blow out. And my two prime motives: to do the BOP move as fast as possible and to pinch pennies. I’m VP Operations and there are times when I make such decisions on an almost daily basis. And sometimes I make decisions based on a minimal (but never zero) risk vs. costs. I don’t always take the most expensive route to minimize risk. So yes, there are times when I accept a certain risk to the environment, the rig and the lives of the hands working for me as well as myself. As yes, I’m still on crutches after my double knee surgery so I would always be the last one to get away from a rig if something goes wrong. It’s a judgment call. No different than when everyone here bought his or her last car. Did you spend the most money possible for the safest car available? No in most cases. Then you must value your money more than your life or the lives of your loved ones. Right? More than 30 years ago I had to help the company carry off the body of a dead floor hand in a tarp. As I said once before I can still easy remember how that tarp felt in my hands. I’ve never made a decision that hurt a hand let alone killed one. Right now I’ve the ultimate authority in my drilling ops…anything goes wrong…someone gets hurt or killed…it’s on me…no one else. So I make those judgment calls. And monetary considerations will always be a factor. But when I make those calls I literally always ask myself that one question last: is saving money going to cause any “real” increased risk? Each one of has to decide how we define “real”.

Scale of Consequences

from greenish

In choosing a car for one’s family, one weighs risks and costs. When choosing a car for the president, likewise. That’s why I have a beat-up Hyundai Accent and the president travels in a car-shaped tank within a convoy with traffic shut down. Because the scale of consequence is different.

from Rockman

greenish — A little friendly picking on you: so the life of the president is more important than that of you and your loved ones? So you’re willing to save a little money to not maximize their safety?

There really isn’t a proper answer to my question. But those decisions are made every day. Do you cancel every flight out of NYC because there’s a bad thunder storm predicted? I would offer that killing 300 folks in an airplane crash is as significant, if not more so, as the POTUS being killed in an auto accident. Heck… that’s why we have vice-presidents.

It’s all about choices. A bad choice is always a bad choice even if it doesn’t cause an accident. It appears the folks at BP made a bad choice and it bit them hard. But sometimes the proper choice can kill you too. But do you base your choices on the magnitude of a worse case scenario? I fully understand your “scale of consequence”. Killing your baby in a car accident would be considered a rather significant conseqence of scale by most IMHO.

What I offered earlier wasn’t as much a justification for anyone’s judgment calls. Just laying out how it works in the oil patch (as well as the rest of life IMHO).

Real Moral Hazard

from pbnj

One issue though that petroleum industry (and any industry that could mess up the environment) must deal with that my industry doesn’t have to.. is moral hazard. If I misjudge risk, it messes up my customers and my own company. If Petroleum industry misjudges risk and screws up (or nuke, or coal, or chemical or etc) then the mistake messes up OUR world and our raw natural resources. This places petroleum industry in a position not well suited to corporations because they must be stewards of shared resources as well as for-profit corporations. Some of that stewardship may be offloaded to government agencies, but regardless, the performer (the oil industry) still must work in good faith with the agencies. That is a tough position that I am glad that I am not in. Unfortunately the government (enforcer of stewardship) only really has one or two hammers against a misbehaving actor. Nationalization (nuclear option) and regulation/fines. So I ask you (in this philosophical discussion) do you think that the “corporation” concept is appropriate for an organization that has such a high moral hazard?

Granted, such occurs daily, whether it be an average Joe who defaults on loans, or a big business that puts the squeeze on their creditors and/or vendors. Strategically, if your business has the bank or vendor by a hangman’s noose, it can make sense to do so. Ie, if you squeeze their cashflow to the point that get concerned whether they will remain a going concern, almost always they will re-negotiate for better terms (better for you, not so good for them). This is not rocket science, its just negotiation 101. By the same token, if you dont have your vendors or creditors in a noose… then will put the screws on you to try and collect.

Thus, the state has the schools by the noose… and as a result, many schools are going to have to take out loans to cover their operations, which then proceeds to put the schools in a worse financial bind. On the other hand, Pawlenty wins via no new taxes, and the DFL wins because they didnt have to make massive cuts. The banks win, as they get to write new loans. And of course, the taxpayer looses, as they will have to pay interest on such loans… and yet,few if any see any problems with this.

Some yahoos have told me to run for office… lol, its not going to happen. However if I did, I’d propose legislation to end this BS of accounting gamesmanship. Few legislators like paygo, or tabor, as they hamstring the ability to play games (both parties), limit lobbyist influence, and they often force all the cards on the table. Despite the dangers of such, I think MN is in much greater danger with the status quo of doing the same thing over and over, all the while hoping the budget miraculously fixes itself.

Case in point… Republican Gov Candidates Dual over Tax Votes

“I voted to fill the hole. I didn’t do any new spending. Nothing,” Emmer said. “Our city stayed right where it was. Whether you want to say they were paying it into the state and then hoping to get it back, or they were paying it into the city to pay for those services. I made the vote to keep our budget right where it was, because it was very lean at the time.”

and

“Is Marty suggesting that somehow his signing a tax pledge, breaking a tax pledge, vowing he’ll never sign a tax pledge and then signing a tax pledge again, and my saying, ‘Look, I give you my word that we don’t have to raise taxes on a state level,’ which is what I said consistently,” Emmer said.

Instead… they might want to think of the following… my arms length summary of what I think the tea party folks would like to see.

Look, we wont raise taxes on a state level, nor will we play accounting games to shift tax increases to the local level, nor will we shift them into the future, nor will we shift them around via delaying payments here or there. We will not increase our debt ceiling. If we dont have the revenue, and we are at our debt ceiling… we WILL shrink government as needed. If federal funds are used, and they require state increased state spending, we WILL shrink government as needed, or we WILL decline said federal funds. The only exception to the above is voter referendum, and potentially an index to inflation, both positive and negative.

In effect, such a stance would be an integration of paygo, and TABOR… it would truly result in smaller less intrusive government, greater liberty, and static, or perhaps even future tax reductions depending upon economic growth. On the other hand, such a stance would be political suicide, and might not even be feasible, since so much of state government spending is far beyond the control of current state government to do much of anything about…. But it most certainly would put at least some action behind BS rhetoric, trivial arguments, and weasel words.

Liberals say greater government involvement will prevent such… they are right, if we really had full universal coverage for anyone, even non-citizens, there would be no way a young child would be denied life saving meds over a software/data entry/whacked social worker bug etc. Conservatives say government meddling is dangerous as its often misguided at best, and corrupt at worst. I think they are correct as well… Idealism alone doesnt prevent loss of life, and in government, compromise with lobbyists is the name of the game.

By the same token, having your insurance cancelled when you finally need it, or being locked into an abusive marriage due to the inavailability of health insurance on ones own, or even being denied careers in some sectors is not freedom either. Most certainly the issues of insurance company recision practices, pre-existing condition exclusions due to job changes or family status infringe substantially on individual freedom and liberty. The problem is, the former are idealistically easy, but the costs are insanity cubed. Thus, the insurance companies needed to be bought off, and todays stock market performance most certainly shows a causal effect. They will come out ahead.

Medicare part D donut holes are not a problem for folks with a $5 million dollar war chest upon retirement… The problem is few seniors have that size of a war chest, and thus the donut hole puts far too many in the food vs med decision matrix. Our seniors deserve better… but the last medicare payroll tax hike occurred on President Reagan’s watch. It doesn’t take a rocket scientist to see the problems of increasing costs of care, and inflationary pressures, combined with a static source of revenue to predict a problem. Is food vs meds freedom, or is it better to be politically unpopular and raise revenue to provide some level of freedom for all the folks who paid into medicare for years, only to find out life saving meds are not available when they need them. HCR addresses this, albeit over a ten year period for the donut hole fix, and still for most folks, the medicare payroll tax will not increase for them. Ultimately, pharma had to pay for the donut fixes, and again in looking at todays stock market, a 12 year exclusion deal on biosimilars sets them up to more than make up for their costs in the donut hole.

The individual and state mandates… yep, freedom is decreased. But then again, just ask any state government how many bills currently up for vote take freedom away, and if they are honest, pretty much they all do. Every state has become a nanny state it seems…. where did small govt go, Dems get blamed, but Reps seemingly are just as much into nanny statism as the Dems. Does the state of MN really need to regulate the automotive window tinting business??? Esp with the current state budget scenario??? Does every state need boards of this that and the other sort of thing to protect the individual (all the while, the real intent is to protecting the current corps from competition). At least freedom does exist in part, albeit at a cost. Individuals can pay a fine and walk away from insurance companies, just as states can refuse medicaid funding. On the other hand, using unlicensed,examined or other state regulated firms/individuals can put a consumer in a jam, even if such might provide better value.

Ultimately, I think it comes down to personal experience, and whose freedoms are being impinged upon. Getting rid of recision practices will cause insurance rates to rise… Thats a loss of economic freedom, that is until one needs to use their insurance. Only a few fussed over the patriot act, and by far it did way more damage to the constitution, freedom, and liberty, than even going to a fully universal healthcare system would do. The thing is, unlawful search and seizure doesn’t affect 99.99% of folks, nor does recision, nor “junk health insurance”,where as the increased costs involved do affect many.

And perhaps thats the thing, the cost of freedom… my friend Angela presents the following.

Here’s what I want to tell folks who claim to be speaking for freedom, for limited government, for constitutional government:

AFTER we’re free of a census that asks us to tell the government our “race”,
AFTER we don’t have standing armies all over the world,
AFTER we aren’t in a permanent state of war against a vague enemy,
AFTER we aren’t in a “drug war” that results in a higher percentage of Americans being in prison than citizens of any other major country and kills zillions of people each year,
AFTER corporations aren’t treated as people while being protected from the consequences of their actions,
AFTER we no longer have an IRS that’s above the law and ruins lives,
AFTER the P.A.T.R.I.O.T. Act is seen as a horrible, tragic mistake we once made, and could never make again…

AFTER all those things, and after we’ve solved the problem of human beings experiencing horrible suffering for lack of health care while we stand by and do nothing, let’s sit down over a nice cup of coffee and see if we can come up with an even better solution that honors that beautiful thing called liberty.

My comment on Angela’s writing… the above are all about greed and money, even public safety policy is monetarily driven, despite the best of intentions.

My friend Brian had some of the best ideas ever as to how to solve the healthcare mess on his facebook page, but sadly, no way no how would the real freedoms he proposes ever come to pass. There are just too many lobby leeches dependent upon favorable government regs to upend the status quo in insurance, torts, employment / corp law, and medical scope of practice, at least not until market conditions force them to do so. On the other hand, the current HCR bill is just a bandaid on a gushing wound… it may well be the patient will have to finally cry uncle, but at least the HCR bill provides at least a few more years for him to do so.

Most certainly moving to single payer by removing a large chunk of the looter infrastructure would be a massive boost in health care efficiency, if nothing else by forcing a greater percentage of health care costs into the productivity arena. The thing is… what happens too all the people, investors, government programs, who are highly vested in the looting arena. (do be aware, while I think single payer is a good step forward, it is far from an ideal solution, and has a multitude of unintended consequences)

On the other hand… the health insurance industry appears to be going the way of the buggy whip. Their business models dont seems to be sustainable on a micro level, and as health care costs continue to consume  a larger and larger percentage of gdp, sooner or later more than just a few are going to cry uncle on a macro level. Currently we have consumers upset, ie they get dropped when they get sick, or as soon as they need coverage. In time, investors are going to be upset because the insurance companies ROI is not sustainable, and thus once they start bailing, well… it will get interesting. Uncle Sam currently serves as a dumping ground for many, once insurance companies cast injured or seriously ill folks aside. Hospitals and physicians, the actual providers also serve as a dumping ground, in that they absorb the bill when no one can pay (as yes, someone does have to pay at some point). Or perhaps, more appropriately, the looters (ins companies, government, and have stacked the deck against the producers (the docs/health providers) such that they, the looters dont have to pay… all the while somewhat appearing willing to do so. Michael Hiltzik’s column in the LA times last week really hit home on this aspect with an article entitled What do we need health insurers for anyway.

So, whats the solution? Do we need them? As an idealistic far left liberal, I say no, we absolutely don’t need them….  plus they are going the way of the buggy whip. The business model is not sustainable, and they are already whining to congress. Its not rocket science to predict the collision path we are on in the healthcare / insurance /economics /govt arena.

As a pragmatist, yep, I think we need them, just as history shows we needed the tobacco companies, and farm subsidies… well up until very recently that is. The question is, will there be an event to start progress down the road to change, just as the lawsuits in the 90′s did for tobacco, or will there be whacked and misguided approaches to prop up failed business models to delay the inevitable as long as possible? And if such is the course of action chosen, what can be done to minimize collateral damage along the way?

Government is likely not going to be the answer… just look at the proposed health care reform bills on both sides… its the same repeated deal over and over again, enrich a connected few over the looses of many… its merely a question of which few are enrichened, not necessarily what is the best for the country, or even the average citizen.  Ultimately, its not the availability of insurance, its the availability of healthcare,and thats a question that far too few are willing to address.

Its not a simple call by any means. GAMC is an incredibly spendy program which likely impacts “the least of these” more so than nearly any other legislation. By the same token, a cursory read seems to indicate it approximates a level of care only enjoyed by key employees at F100 firms, and or politicians. In addition, within the population of folks on GMAC, there may be a few folks whose lives depends upon having said level of care.

Thats the tough part…. as in effect rolling said folks into a transition plan, and finally into a lower level of care may cause injury, and possibly loss of life. It wont be overt by any means, but more so, with change, balls will get dropped, and its almost a surety, a few folks will drop through the cracks.

By the same token, throwing money at a likely very inefficient program which serves a likely much larger population than it was ever intended to serve… well thats not prudent either. Such practices are not long term sustainable, and an orderly wind-down/transition is more prudent than running such programs into the ground due to even greater utilization combined with slowly dwindling funding an care levels as time passes.

And there in lies the problem…an orderly transition. Being the state/county government was unable to timely handle even the simple case of H1N1 vaccine distribution, how on earth are they going to manage a major transition in health care without folks being injured or dieing? Fortunately there is a 6 month transition period, which appears to be mostly a paperwork type thing, but after that…. egads.

What Ronald Reagan said all those years back is all too true.

The nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help.’

It was interesting to note The Today Show’s doctor, Nancy Snyderman, made a suggestion that the best PR route would likely be for the Wall Street firms to donate their vaccine supplies to Hospitals… From a PR point of view, that does make sense. Otoh, by the same token, its not unreasonable to suspect high risk individuals work at those firms, and whether fair or not, to pull vaccine access from a child or pregnant woman at those firms is not cool either. No matter what, the Wall Street firms really have a PR mess and then some to deal with.

I posturoused about the medicine of science, economics, and rationing a bit some weeks ago, and I mentioned a UMN paper dealing with the ethics of rationing during a pandemic. Its interesting to note the 3 big ethical commitments which were recommended.

• Are accountable, transparent and worthy of trust
• Promote solidarity and mutual responsibility
• Respond to needs fairly, effectively and efficiently

Sort of looks like the government blew it in all 3 places with this mess.

Next, lets look at the principles suggested by the UMN paper.

• Protect the population‘s health
• Protect public safety and civil order
• Treat people fairly, recognizing the moral equality of all

It Looks like the govt might have opened the door to blow the civil order aspect based upon reading a comment suggesting Kevlar vests as required apparel for Wall Street employees. Sadly, it does seem that a bad outcome in the civil order arena may occur as time passes as more and more folks are angered at Wall Street. Most certainly, there is no need to add fuel to the fire. As far as public health goes… if someone gets vaccine who is not in a high risk, nor high exposure arena ahead of another person who is… well they sort of blew that too. And morality, well its pretty obvious it was hosed up too.

Of course… a lame and somewhat seedy approach to this, is to view Wall Street as a critical part of National Security. Ie top execs could be viewed as irreplaceable key employees, and as such they must be given a much higher priority than high risk individuals far from Wall Street, such as pregnant woman, or children. I would certainly hope thats not the case…