On Debt and Deficit: Part IV -- The Solution

In the three previous posts I've demonstrated why the deficits and debt are so harmful. Now, for the solutions.

1. It is quite clear that Washington does not have the discipline to stop wasting more of our money than they already tax. The only way to bring this discipline is a Balanced Budget Amendment.

     a. It is true that if the budget was balanced in one year it would tank the economy. Therefore, and also because there will be no political will to do it immediately, the budget should be balanced gradually over ten years, at 10%/yr. The latest CBO estimate is that the deficit will be $606 billion; over ten years, this would require lowering the deficit by $60.6 billion/yr.

     b. The healthiest way to reduce the deficit is to grow the economy--fewer people living off the economy, more people paying income tax. And the simplest way to do that is to distinguish between government "spending" and government "investment". See below.

     c. The BAA would require that Congress meet the budget goal with any combination of decreased spending and tax increases if economic growth doesn't meet the goal by itgself. The former is much less harmful and much more desirable.

     d. The BBA would also require that two additional years of deficit reduction by achieved, for a total of 12 years. This would generate a surplus of about $121 billion per year. The law would require that half of this be set aside for a "rainy day" fund to be released at times of recession -- plenty of states do this already -- and the other half be used to pay off the debt.

2. In considering what line items to cut or eliminate, Congress should use two criteria:

     a. What spending is "spending" and what spending is "investment"? First, there is plenty of pure waste already, and putting pressure on Congress to balance the budget would force it to actually root out some of the waste. Second, there is spending that yields no (or negative) multiplier effect; defense spending is one well-documented example. It literally subtracts from the economy. On the other hand, unemployment relief (more on that later) is stimulative; 100% of those dollars are returned to the economy and have a multiplier effect estimated to be near 2.0. In a different sense, Head Start is also an investment rather than "spending", even though it has a much lower multiplier rate.

Government appropriations need to be tilted towards "investment" and away from "spending".

     b. What does Washington (as opposed to the states) really need to spend on? Education is one area that where investment is best determined at local levels. Washington has no business spending taxpayer money on a local issue, much less also incorporating the inevitable waste that goes into a bureaucracy.

3. Aside from the non-stimulative effects of defense spending, we simply don't need a "defense" budget nearly equal to that of the rest of the world. In fact, "Defense" isn't defense; it's Offense, perpetuated by the military-industrial complex that Ike warned about 50 years ago. Nearly half of the current deficit could be eliminated by reducing "defense" alone.

4. Unemployment benefits should be capped at 26 weeks. Anyone who can't find a job within 26 weeks doesn't want to work. Extending unemployment benefits beyond that point simply enables people to be non-productive, and costs everyone because they aren't paying taxes. In the short-term, unemployment benefits are stimulative; in the long-term, they kill the economy by providing a disincentive to work. Unemployment benefits were meant to be a helping hand, not a lifestyle.

5. Any surplus generated beyond $121 billion would be devoted 50/50 to building the "rainy day" fund and paying off debt.

6. Medicare and Medicaid costs would be held down if the government simply decided to grow a spine and pay doctors and hospitals a lower price per procedure, and force the health-care industry -- perhaps the least efficient private enterprise in the country, thanks to government largesse -- to cut costs.

These are only the largest items. Social Security is a different issue because it has its own trust fund. There are plenty of other opportunities.

Of course, the odds that Congress will adopt this idea or anything like it are nearly zero. This is because nearly all politicians in Washington have been bribed. That's the subject of the next post.

On Debt and Deficit: Part III

In the previous two posts I looked at the basic facts behind our debt and argued that it is an issue deserving attention. In this post I'll state why I think we need to act to reduce our deficit and debt -- quickly.

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1. We are now paying $360 billion a year just in interest on our debt. There are far better ways to spend taxpayers' money than lining the pockets of people who can afford to invest in (tax free) government bonds.

2. Interest on our debt is now the 4th-largest component of our budget, behind Defense, Medicare, and Medicaid. We spend twice as much paying off debt interest as we do on education.

3. Interest rates are at a historic low. When they rise to normal levels, as they inevitably will, the cost of debt interest will at least double, maybe triple, and that doesn't include interest in the additional debt issued in the meantime. 

4. You can see where this is going. Indeed, the CBO has projected that debt interest and Medicare/Medicaid will chew up 100% of all national tax revenue around 2025. 

Here are the arguments that people who aren't concerned about the budget deficit make: 

1. Deficit spending is necessary to stimulate the economy during recession: False: increased spending is often desirable, but if we were running a surplus, that increased spending needn't create a deficit. 

2. Debt as a percentage of GDP is within reasonable bounds: False. Comparing debt to GDP is ridiculous. The government doesn't own GDP and can't use any of it (other than the part of it for which it accounts--about 20%) to pay either interest or principal. When homeowners take out a mortgage, the bank doesn't ask how much money your relatives own; the bank cares about whether you can repay your own mortgage. 

3. If we cut the deficit, we'll tank the economy: False. It depends on how the deficit cutting is done. The way the GOP is (pretends they are trying) to do it seems to portend a draconian, dystopian economy. But if it is done gradually, with an eye towards distinguishing between "spending" and "investment", it will actually stimulate the economy. More on that in Part IV. 

4. Isn't government debt the same as homeowners taking out a mortgage?  Well, yes, with one very important difference: When you take out a mortgage, your very first bill and all the others require that you pay a portion of both interest and principal. But when the government takes out debt, it can pay off both --and in fact it does this every day -- by simply issuing more debt.

The arguments for deficit spending -- mostly variations on Keynesianism -- aren't totally wrong, but they really are one way, with a ratcheting effect. Somehow, it seems OK to deficit spend when the economy goes into recession, but we never pay the debt off. Thus, both the debt and interest payments grow over time, and the interest payments themselves become a leading cause of both deficits and debt.

Last Comment: Running a deficit is simply morally wrong. It amounts to the current generation having a party and sticking our children with the bill. "Oh, no, I'm a good person; I would never do that." Well, if you're not concerned with deficits, you just did.

On Debt and Deficit: Part II

In Part I I laid out some of the basic facts about our national debt and deficit. In Part II, we look at some of the thinking around these issues. 

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There seems to be great relief with the latest CBO projections that the deficit (now projected at $600 billion) is falling quickly. It is such as it ever was: deficits rise with recessions and fall with recoveries. But the deficits never "fall" enough during recoveries (into surplus) to make up for the deficits that accumulated during recessions. And so, we find ourselves $17 trillion in debt.

Further, there seems to be a ratcheting effect: over time the deficits that arise during recessions get larger and larger, while there are hardly any surpluses to speak of, so that the debt grows at an accelerating rate. 

Discussing the deficit seems to be like discussing global warming: The data is murky, the analyses endless, the opinions cover the spectrum and no one really understands the issues. Nonetheless, many in our country believe that the weight of the evidence favors the conclusion that global warming is both real and man-made, and further, that our one and only planet isn't worth taking chances with. Regarding the deficit, many have come to the opposite conclusion: They believe there is no harm from deficit spending and don't seem to be concerned that there might be a point of no return. 

It is a paradox, but I think one that can be explained. Ignoring the deficit is "easier" in that it forestalls the tough decisions that would have to be made to eliminate the deficit; further, backing away from these decisions allows our pols to keep greasing the creaky wheels of government with pork. By contrast, the costs of dealing with global warming seem, to the average individual, to be indirect and borne by others, even though there may be an intellectual understanding that at some point, the costs will be at least partly passed on to consumers.

The net result is that very few people are motivated to look at the facts and fewer yet to deal with the issue -- even though it may be easier to fix than many think.

In Part III, we'll look at the reasons the debt has to be addressed.
In Part IV, I'll present a solution. 

On Debt And Deficit: Part I

Our national debt is now near $17 trillion. The annual deficit rose to $1.7 trillion three years ago, but is now falling. The latest CBO estimate for this fiscal year is $606 billion.

Is this good news or bad? Is it OK to run a deficit? A debt? How much is too much? And what, if anything, should we do about it?

Part I: Background

 The national debt began to rise in a big way only during WWII. By the end of the war, it stood at $258 billion. By the time Reagan entered office, the debt had just reached $1 trillion, and by the time he left in 1988 it had grown 2 1/2 times during his tenure to $2.6 trillion. It continued to grow under the first Bush and also --albeit more slowly--under Clinton, then doubled again under the second Bush to $10 trillion and has grown another 70% so far under Obama to nearly $17 trillion. 

The national budget has been balanced just six times in the last 56 years -- four times under Clinton, and twice under Johnson. The last GOP president with a balanced budget was Eisenhower, in 1957. 

In theory, servicing this debt means paying the interest due and also the principal portion of whatever debt has come to maturity. In practice, the interest has been paid, and so has the principal -- but all of the latter, and some of the former, only by issuing more new debt to cover the cost. 

The interest cost of our national debt is a function not only of the debt, but of interest rates, and secondarily the length of maturity of the debt issued by the Treasury. The Treasury tries to extend maturities when interest rates are low so as to lock them in, and shorten them during times of high interest rates, but it is always a guessing game. The point is that the interest cost on the debt is not a direct function of the amount of debt outstanding, and often lags changes in general interest rates. 

Thus the cost of interest -- which must be borne by each year's budget -- is quite variable, although over the long haul, it has certainly trended up. Interest costs actually fell from FY 2011 to 2012, from $454 billion to $360 billion and may yet fall farther in FY 2013, thanks to very low interest rates. The 2012 figure implies an average interest rate paid of just 2.1%, a historically low figure. In 1995 the average interest rate was 6.7%. 

At $360 billion, interest on debt is the fourth most-costly item in the entire budget, behind Defense, Medicare and Medicaid. And if the average interest rate paid today was equal to that of 1995, interest cost would be the single most costly line item, at well over $1 trillion by itself.

Next Post: Part II -- Why we Ignore the Debt.

On Unions

Unions are largely irrelevant -- now --  and there are good reasons for that. They have a chance to regain their clout, but they'll have to rethink their roles and tactics.

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My aunts belonged to the ILGWU back in the days when garment workers weren't allowed to use the bathroom before lunchtime. Unions helped bring us the 40-hour workweek, the weekend, and a host of other benefits that we now take for granted. Unions started at a time when capital held the power, both capitalistically and legislatively; there was plenty of labor available for the mostly unskilled jobs available, including millions of immigrants. Each unit of labor was expendable. And until 1933, when the NLRB was enacted, there was no legislative enforcement to speak of for the right to organize. 

Understandably, companies fought the unions and the history of those struggles is well-documented. Beginning in the late 1940s, however, the tone of the struggle changed: the fights were less about union rights and more about union wages and benefits. And by and large, those wages and benefits were generous. US manufacturing companies had the market to themselves (as late as 1965, the Big 3 owned 90% of domestic auto sales) and there was more to be lost from strikes than gained by bargaining down to the last penny. Too, much of the value of the benefits bargained for by the manufacturing unions were "future" benefits in the form of defined-benefit pension and medical plans.

By bargaining future benefits, both management and unions were kicking the can, same as today's pols kick the can on fiscal policy. Union leaders could wave those future benefits to their members as proof they were doing their jobs; management could wave them to their Boards as a way of preserving labor peace with a promise that would only have to be fulfilled long after all of them retired. Those future benefits were a collusion between labor and management leaders to keep the peace, and --this is crucial -- no one bothered to do the math.

By the time the chickens came to roost, it was too late. The investment returns were lower than expected, the demographics had turned as inexorably as the tides, medical costs were on the rise, and although GAAP has rules around the funding of defined-benefit plans, many plans were underfunded in the expectation that investment returns would make up the difference. Now, many companies (and governments, too --this is an even bigger problem for the public worker unions than the private) -- are simply unable to fulfill their promises, and are forced to either renegotiate them or go into bankruptcy.

Are managements (and governments) responsible? Yes. But so are the unions. Together, they buried their collective heads in the sand. Today's companies, governments and workers are holding the bag.

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What else happened to reduce union power? The obvious cause is globalization, and the access to low-labor cost markets such as China. I won't belabor that point, except to say that the impact of low-labor cost markets is already beginning to fall.

There are three other more important reasons. The first is that paradoxically, labor now holds the power over capital. Well... most labor. Not fast food workers or hotel maids. But all professionals and a growing number of blue-collar workers hold more power than ever. It's called brains. Business has become exponentially more complex and specialized, and one result of that is that companies realize the power of brains and must compete for the best -- worldwide. And while brawn (read: "old" manufacturing) lends itself well to union representation, brains do not. There are way too many specialties that don't lend themselves to broad representation. And many "brains" don't want any organization to represent them. They want to represent themselves and to compete in a meritocracy. And third, brains hold the power anyways. They don't need help and they don't want to pay dues.

By the way, if you don't believe that skilled blue-collar workers have "brains", try running a six-axis CNC machine tool, and good luck to you.

The second big reason that unions have lost power is the flip side of the first--the reduced power of capital. If you don't believe me, look at how little money it takes a bunch of teenagers with one good idea to start an internet company that's worth millions in a few months. Look at the disintermediation in the markets; look at Kickstarter; look at venture-capital and private equity funds and even micro-loan banks. I'm fond of saying that of all the resources that a business needs, money is the easiest to find. Like a rule of physics, capital flows to good ideas, and these days, ideas rule.

And third, most important: Unions lost their own way, a dozen times. They were greedy beyond reason. A unionized printing plant I ran paid its pressmen over $24/hr plus benefits -- in 1988, four years before we had to close the plant because our costs were outrageous -- and went on strike, for more. As union membership fell, the union leadership became corrupt; in 1993, at a metals service center plant I ran, I personally reviewed union documents that stated no receipts were required for "reimbursement" of union leaders' "expenses". Unions started to do more to try to preserve themselves as institutions than to represent their members; the rank and file in the second union plant I ran, with whom I generally got on well, told me every week how much they resented the weekly dues. The leadership of that union actively fought safety measures that I introduced at the request of the rank and file. 

The biggest mistake the unions made, though, was ignoring a truism of economics: Thou Shalt Not Demand An Increase of Compensation Without Helping To Pay For It. At first blush, this may seem like something out of Alice in Wonderland, but workers and unions do (sometimes) contribute to their own increases in compensation by improving productivity. Companies can well afford to pay higher wages per hour if productivity increases drive down the unit cost of labor per output. But when collective bargaining work rules are set in cement, productivity can't increase. The looniest example of this occurred back in the printing plant, which had three unions under the same roof. The unions got into a fight with each other over jurisdictional work rules, and one of the unions actually threatened to strike the others, until the three of them arrived at an agreement where a single piece of work, involving a simple transfer of printed materials from one pallet to another, was shared by all three unions. Meanwhile, as plant manager, I watched helplessly as the three unions slugged it out with each other, only to get to a solution that satisfied all them -- and which lowered our productivity and raised our costs. That was Alice in Wonderland.

The response of most unions was to circle the wagons -- to respect seniority regardless of merit, to protect the weakest in the name of representing all, to demand ever-higher compensation without offsetting productivity improvements. And they learned a painful lesson that some businesses (and some of today's governments) have yet to learn: you can't cut your way to greatness.

If there is one thing I hope the reader comes away with, it's this: Companies can afford higher wages and benefits if and only if workers, unionized or not, help to improve productivity by enough to pay for that compensation.

Of course, there are plenty of examples where this rule wasn't respected, but you don't read about them any more. Those companies are dead. 

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So, to where now for unions? It seems that there are opportunities. As the middle class becomes skived into the haves and the have-nots, the ranks of the have-nots grow. Many of the have-nots work in service industries which starkly resemble the manufacturing industries of old: it doesn't take a lot of brains to stock shelves at WalMart or to make beds at hotels, and there is a seemingly inexhaustible supply of labor for these jobs, thanks to a host of domestic factors and immigration.

The lower-paying service industries represent a huge opportunity for unions but only if they don't repeat the mistakes of the past. They need to do the math on "future" payments promises, they need to understand and account for the effects of globalization, and most importantly, they need to collaborate with management to improve productivity enough to make up for increases in compensation.

For its part, management needs to consider the possibility that a better-compensated work force might be good business. Indeed, WalMart's cost of retraining because of its huge turnover must be staggering; Costco has a completely different business model including much higher wages, and it's a successful company by any measure.

And government, and the voters, need to understand that they literally subsidize WalMart's business because so many WalMart employees can't subsist on their wages and need public help. Since when is our government in the business of subsidizing public business?

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Lastly, a teaser: There is yet another business model which flies under the radar. It's called employee ownership. Indeed, after my disastrous forays in unionized companies, I have for the last 19 years worked at a company which was partially employee owned when I arrived and which, in 2001, became 100% employee owned. 

Yup, that's right. Owned 100% by the employees; every employee who's been with the company for one year owns shares. You don't think that drives productivity? You don't think our customers aren't impressed with the quality of service they get from our machine operators? Our little American manufacturing company has seen its shares rise by an average of 16% annually over the last ten years. Some of our machine operators are retiring with multiple six-figure accounts; it's possible that in the future, some will retire as millionaires. 

I certainly hope so. More on this in a later post.

My Politics

Politics should not be a spectator sport, and thanks to Twitter, blogs, etc., it's more accessible than ever. Of course the flip side is a bit-torrent of drivel. I leave it to my readers to decide if my blog is wheat or chaff.

With the exception of a brief but revealing internship with a Capitol Hill lobbying group, my entire career has been in business, mostly manufacturing. And notwithstanding the well-publicized crooks on Wall St and the Enrons of the world, the vast majority of businesspeople I've met are at a minimum straight shooters and most are good and decent people. Business is not a bad thing. And the profit motive is one of the engines of a healthy economy, especially for those of us who like to earn a living.

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One hears the plaintive plea all the time: "Why can't we run the government like a business?" I must admit thinking that more than once standing in line at the RMV, waiting for some unmotivated paper-pusher to deign to serve this taxpayer's needs. But the questions answers itself: The government isn't there to turn a profit, and so it isn't a business and shouldn't be run like one. The government exists to serve its citizens at whatever price its citizens deem appropriate.

That begs the question of what government's role is, and my answer is: government should do what no other organization can do better, no more and no less. 

Of course that definition begs many more; a topic for another day.

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I consider each issue on its own merits. I registered independent the day I was eligible to do so and I've never changed. I've voted for Democrats and Republicans in roughly equal proportions, and a few third party candidates too. I hate dogma. I hate the idea that because I belong to this or that party or organization that I'm "supposed" to think some way or other.

I do think that our federal government's role has expanded too much. All things equal -- this is a lesson I've learned in business -- decisions are best pushed down to the lowest level competent to make them, and that includes individuals.

I won't get farther into my opinions on specific issues here. Suffice it to say that my positions cover the spectrum of labels that are applied, often wrongly (see "The Venn Diagram Of Labels" ) to those of us who engage in the discourse of politics.

The Venn Diagram of Labels

Liberal, Conservative, Libertarian... (communist, fascist, socialist...). The labels we slap on each other are way too facile, in two important ways.

First: no large group is homogeneous. Within both political parties there are huge diversities of opinion; today's GOP/Tea Party is the most obvious example, but even within the Tea Party there are opinions that vary on every subject and also on the spectrum between ideology and pragmatism. The Democrats, traditionally more welcoming of diversity to begin with, fight among themselves on almost everything. Will Rogers famously said that "I don't belong to an organized political party; I'm a Democrat."

Within groups, differences stem not only from genuine ideological differences but also from more local issues; porky projects, NIMBYism, etc. Senators from coastal states will be more concerned about rising oceans than those from the inland; Politicians from states along the Mexican border more concerned with illegal immigration that others, etc. Pols from states with military bases will be more concerned about (whose) base closures than those without bases. It is a real kaleidescope of overlapping and intersecting issues that determine where people will stand on an issue and many of these differences defy labels.

Second: There is more agreement on specific issues between the labels than one might guess. Another popular label, "populist", has been applied to pols of all leanings. No one wants higher taxes; the Democrats are sometimes accused of that, but what they are saying is that they're more willing to pay higher taxes in exchange for something they like; but no one wants to pay more. Liberals who favor womens' choice might be joined by Libertarians who think the whole abortion issue is none of the government's business; Libertarians are joined by conservatives who oppose gun control.

They don't say that politics makes for strange bedfellows for nuthin'. Shades of gray matter, too: Most conservatives are against gun control, but most conservatives also favor background checks. And the opinions on the Snowden affair, and the tradeoffs between national security and individual privacy, cut across all ideological and party lines.

Finally, there are other important issues of the day on which everyone agrees: 

• Puppy porn. No one can resist. 
• Congress. Over 90% disapprove. 
• Bacon. Everyone loves bacon. Except maybe Communists.

 Choose your labels carefully.

Campaign Financing, aka Bribes

This is a large subject. Tracking the money "donated" for campaigns is no easy task. But there are several organizations that supply a lot of information on this, including OpenSecrets.Org and The Sunlight Foundation. I won't go into detail in this post, but I encourage readers to explore these sites and others.

I've cited these bribes as one of the four biggest reasons why our politics are disfunctional in my post " The (Root) Causes Of Our Dissatisfaction.

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The vast majority of campaign donations (as measured in dollars) are nothing more than bribes. I'm not talking about regular people who give a few dollars to their favorite candidate. I'm talking about wealthy individuals and corporations and other organizations who buy access and lobbying clout by ponying up the mother's milk that propels (or more likely keeps) politicians in power.

This extends across the political spectrum. One may agree or disagree with the politics or the contributors, but fair is fair and facts are facts. The oil companies (and many more) buy the GOP; the Democrats have been purchased by unions (and many more). You think a politician isn't going to listen to a bundler or an organization who can rain millions of soft dollars?Can you buy that kind of access?

There have been efforts to rein this disgrace in, although, to be fair, the politicians aren't trying that hard. But the efforts of a few honest pols and many more concerned citizens have been blunted at nearly every turn by the monied interests-- and also, a legitimate issue: the First Amendment, and its guarantee of free speech. The courts have consistently ruled that the First Amendment trumps any attempt to limit the financing of advertising on behalf of candidates. There are limits on direct donations to the candidates, but no limits on donations to the PACs or the Super-PACs, and constitutionally, there doesn't seem much that can be done about it.

When the Supreme Court ruled in Citizens United that corporations have the same First Amendment rights to free speech as individuals, the floodgates opened for companies to donate as. To be fair, Citizens United didn't create the problem of bribes, but that decision aggravated the practice in a big way. And to think of corporations as people (hello, Mitt), is just ludicrous.

I'll have a lot more to say about this. For now, remember: Your politician has been bought. Your vote decides which interests you'd like your representatives to be owned by.

Gerrymandering Ourselves to Partisanship

In a previous post,  "The (Root) Causes Of Our Dissatisfaction" I contended that one of the most important underlying causes of the extreme partisanship in Washington --and by extension, our failure to substantively address issues such as joblessness -- is the method of drawing up congressional districts known as gerrymandering.

A Brief Explanation: The 435 seats in the House of Representatives are allocated to the states pro-rata by their population. The decennial census is the basis for changing this allocation; it reflects relative changes in the states' population. 

In most states, the redistricting required when the state's number of seats in the House changes (plus or minus) is done by the state legislature. This places a premium on control of the legislature, because the controlling party can draw the districts in almost any way they choose. Where control is mixed, huge partisan fights can occur, and in states losing seat(s), part of the calculus involves which unfortunate congressperson will see their district combined with another's and have to fight an incumbent for re-election.

The word gerrymander is a combination of Massachusetts Governor Elbridge Gerry, who in 1812 directed a redistricting that resulted in one district that wags said resembled a salamander.

The Effects: When districts are drawn as to practically guarantee that one party will win, the real contest is  the primary of the party likely to win; the general election, is a foregone conclusion. This in turn means that the Republican primary candidates in Republican districts try to "out-Republican" each other; the same in reverse is true in Democratic districts. The effect is to drive Republicans to the right and Democrats to the left; thus these congresspeople arrive in Washington already poles apart, and in no need to compromise; in fact, compromise in Washington can "compromise" the representative's ability to win re-election, for fear of being primaried from the right (for the GOP) or the left (for the Democrats).

Thus, there is no mood to compromise, no need to compromise... and the media supporting the respective parties makes this even worse. 

Some Hope:  In a few states, notably California, the practice of having the legislatures do the redistricting has been ended and replaced by citizens' commissions or other more objective bodies, with good effect. But the majority of states still invest their legislatures with the power of redistricting, to the nation's great disfortune.

The (Root) Causes of our Dissatisfaction

Verily we moan about the challenges we face: shaky employment, low economic growth, crumbling infrastructure, and the increasingly divisive debates on social issues.

These issues and others of their ilk will be the stuff of debates in 2014 and 2016, with the participants droning on about their importance (as never before!) and flogging their (purposely vague) solutions.

Little of that pap will mean a damn because none of our esteemed pols will consider the causes of why we are where we are, most of which tie to an intermediate issue: the extreme partisanship, the inability of our parties to work together to get anything done.

And not much will get done until the root causes of that partisanship are addressed. These are the real challenges that confront us -- and you can be sure, no politician will mention them.

1. Campaign Financing: Politicians are bought with bribes before they ever get to Washington. Is it any wonder that their votes are a foregone conclusion? Where is there room for compromise when one's owners instruct how to vote?

2. Gerrymandering: By and large, congressional districts are carved out so as to guarantee that a member of one party or another will be re-elected.In turn, this means that Republicans will be primaried from the right and Democrats from the left, so the parties become increasingly polarized.

The bribes and gerrymandering go a long way to explain why Congress as a whole is held in such low repute while the re-election rate is more than 90%.

3. The Debt: Say what you will about Keynesianism, austerity, and esoteric ratios of all manner, but this much is true: The larger our debt, and the more we have to spend on servicing that debt, the less flexibility we have in otherwise allocating our tax dollars.

4. The MediaTwitterBlogoBleatingsphere: The constant spin of "news" makes thoughtful consideration almost impossible. I  don't know that anything can be done about the sources of this noise --I'm one of them--, but there is no reason that a politician who truly believes in public service should feel obligated to respond to every blast of drivel like a ping-pong player returning serve.

When these root causes are dealt with, we can then make progress on the issues that Americans think they care about. 

On a Note "On a Note" About The Tea Party

“The spirit of which I speak creates imaginary and magnifies real causes of complaint; arrogates to itself every virtue – denies every merit to its opponents – secretly entertains the worst designs – mounts the pulpit, and in the name of a God of mercy and peace, preaches discord and vengeance; invokes the worst scourges of Heaven; war, pestilence, and famine, as preferable alternatives to party defeat; blind, vindictive, cruel, remorseless, unprincipled and at last frantic, it communicates its madness to friends as well as foes; respects nothing, fears nothing.”

Dear Reader: In my title, I have lied. The quote above was uttered in 1830, 183 years ago, by Edward Livingston, then a Lousiana senator and a friend of President Andrew Jackson’s. He was speaking of the politics of the day. It seems applicable now.

The quote is excerpted from Jon Meacham's ( @jmeacham ) “American Lion: Andrew Jackson in the White House” (2008, Random House), p. 133.

On Manufacturing

At the market to buy a steak, and there it is: gleaming and red, wrapped hermetically in saran and styrofoam, labeled to inform me what it is, and to provide tracability in case, lord forbid, it needs to be recalled.

I don't have the faintest idea what efforts it took to deliver that steak.

When I tell people that I'm in manufacturing, I'm generally greeted with a blank stare and a "oh, that's nice" that I reserve for someone who tells me that some celebrity I've never heard of broke up with her boyfriend. Most Americans -- only 12% work in manufacturing now -- are so divorced from the means of making stuff that they never give a thought to that widget they just bought except to hope the damn thing works. Usually, it does.

Most Americans also think that manufacturing in this country is dead. They don't know that the value of goods manufactured in the US has risen consistently over the years, albeit interrupted by various recessions. What they do know, almost by default, is that fewer and fewer Americans work in manufacturing.

A hundred years ago, more than a third of the country's workers were engaged in agriculture; today, that figure is 3%, and they feed all of us and a good chunk of the world. In 1970, about a third of the US workforce was in manufacturing; that figure is down by two-thirds since. In both cases, it's called productivity, and it's also about added value -- higher quality, more features and a lower labor content per unit out.

Many people also have a distorted view of what US manufacturing involves. The picture is generally of hot, dank factories populated by scads of unskilled workers turning lug nuts or driving forklifts. But today's factories are bright, sharp and clean, the workers are more technicians, and the technology is just amazing. One of the projects in my company involves measuring the width of the product to a thousandth of an inch, several times a second, 48 at a time, and the first time we turned it on, we damn near blew up the server. Workers are expected to be knowledgeable and to contribute to decisions, often using data gathered right from the machines.

There is opportunity in manufacturing. I went into it because I wanted to see something tangible for my efforts, and now I also enjoy the less tangible rewards: helping workers with their work and their lives, developing strategies, researching and pushing our technologies. But it is a tough slog, especially for American manufacturers; the competition is international and brutal, the customers demanding, the information systems complicated and the regulation stifling. American manufacturers are on a journey, not at a destination, and the journey is a never-ending push to add value, improve quality, lower cost, abandon commodity markets and invest into markets that offer more promise. Oh, and we have to make a buck, too.

Manufacturing is different from most jobs in that it's a 24/7 enterprise and you never know what you'll walk into each day. The pace of learning is incredible and the pressure intense. And it's a perspective that seems to be missing from the national discourse; not only is it a weak sister deserving only the obligatory lip service when the pols pontificate on "issues of national importance", but the learnings that have been forced into those of us in the business seem not have translated into a meaningful set of lessons for the country. And so, to that end:

1. It begins and ends with people: if you get great people, challenge them, teach them, guide and motivate, the job -- any job-- becomes one hell of a lot easier.

2. There is no tradeoff between quality and productivity. In fact, they are mutually reinforcing.

3. If you don't measure it, you can't improve it.

4. There are many kinds of waste -- money, time, material, moving stuff around, and more -- and huge opportunities, in fact whole industries, are in those waste streams.

5. Business isn't about perfection. It's about optimization.

6. You get lots of resources to play with, and money is the easiest to obtain. Time is the only resource that is fixed and thus demands the most intense management. Ideas, on the other hand, are free.

Now: Are you ready to talk with your kids about exploring manufacturing as a career?

~P0TUS
August 4, 2013

Welcome

I have managed to avoid blogging until today. Alas, the combination of the lack of nuance available on Twitter and my love of writing has conspired to make me give it a shot. 

My interest is primarily in politics, with a smattering of other matters (that’s you, #RedSox).

I am frustrated beyond words with the lack of factual discourse in today’s politics, and broadly speaking, that extends across the political spectrum. As an example, there is great controversy about whether the wealthiest among us create jobs. Everyone has an opinion, backed by quite varying degrees of logic, but no where have I seen a presentation of these facts: Who are the 1%? Are they individuals or companies? How many jobs do they create – and why? Is their job creation a function of demand for the business, level of taxes, and/or a thousand other reasons? Doesn’t anyone actually know? 

It also drives me nuts that pols of all stripes refuse to offer specific solutions. The Sounds of Silence are heard when you ask a Tea Partier what services they'd cut or a big-city liberal how they'd help American business to become more competitive.

The picture I substituted for a headshot was taken in Haiti a couple years ago when I traveled there with a group to help build an orphanage. Haiti, compared to most of the US, might as well be another planet. Except, not. That picture reminds me to have some perspective. 

I hope you enjoy this blog. Comments are welcome.

~P0TUS

August 3, 2013