Why We’re in This Mess

March 1, 2013

The NYS Comptroller revealed today that New York State overpaid Medicaid $26 million due to flaws in the computer system built to process claims. We should be pleased that the Comptroller’s auditors found the problem and that the NYS Dept. of Health is implementing the OSC recommendations. Unfortunately, however, this is another case of shutting the barn door after the entire herd escaped.

What the Comptroller’s press release does NOT tell us is why the mistake was made? Who developed the computer system? Was it a private contractor or an in-house system? Was political favoritism involved either in choosing the winner of a bid or deciding against letting a contract for the system? Why did it take so long to discover the problem? Will any heads roll as a result?

In a nutshell this is the problem with modern government––federal and state. No one takes responsibility or pays the price either for success or failure.

Andrew Mason, Groupon CEO, lost his job today. It probably should have happened in November of last year. He did a lousy job and he had to go.

In the public sector, you have to commit a crime to lose your job and, if you’re a teacher in the NYC school system, even that’s not assured.

In the public sector, no one pays the price when $26 million dollars are pissed away, just like no one is rewarded beyond their regular salary if they save the taxpayers money or exceed expected results.

That is why so many government run programs either fail or produce mediocre results. We rely on the good will of the public sector employee to care about the results. That’s nice when it works, but what about when it doesn’t work? What about when a person has been promoted above their level of competency? What about when someone consistenly makes bad decisions? What about the lack of oversight coming from the Executive Chamber and the White House?

Management in the public sector suffers because our elected officials seem to spend 99% of their time campaigning. Even Barack Obama spends most of his time campaigning and he can’t run again.

Who’s minding the store?

Sampling other recent audits from the Comptroller’s office we learn that many localities fail to employ proper procedures for monitoring expenditures. A few examples:

• Payments were made to the clerk-treasurer of the village of Richmondville without board approval.
• In the village of Forestville, “the clerk-treasurer’s records for the water fund were inaccurate and misrepresented the fund’s financial condition.”
• The Town of Finley board “did not develop and adopt accurate budgets…based on realistic estimates of revenues and expenditures.”
• The Village of Parish’ board “did not ensure that all claims were audited prior to payment…”
• There are significant weaknesses with the timeliness and accuracy of how the town of Livingston’s tax collector recorded, supported, deposited, disbursed and reported tax payments.
• Internal controls over cash receipts and disbursements were not appropriately designed or operating effectively for the Niagara County Soil and Water Conservation District.

In a year’s time, the Comptroller’s office finds dozens of examples of mismanagement and poor controls. They also find fraud and theft, which lead to criminal prosecution and conviction. But keep in mind that what is discovered is only the tip of the iceberg and all of the problems are discovered AFTER THE FACT.

All of the above explain why so few Americans––other than the ones who are going to be furloughed––are upset about sequester. Americans know in too many instances their local, state and federal governments are not being managed properly. They know too much of their money is being wasted. They know too many of those who should be benefiting from government programs are being short-changed.

That’s the part of the story some people don’t want to hear. It’s not because the public hates government or doesn’t think it’s needed. What we hate is mismanagement and waste––not the public sector employee. We hate that system doesn’t include the possibility that a bad job is punished and a good job is rewarded. We hate thinking this is the best there is. AND, we hate those who make excuses and blame the messenger. It’s time the apologists for mediocrity and failure took some responsibility or get out of the way. Let’s clean up this mess now.

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Who’s Watching Washington?

February 14, 2013

In light of President Obama’s pledge to introduce more programs to solve our nation’s problems, someone ought to ask him how those already in place are doing! How well are taxpayers being served by the Energy Department’s Economic Recovery Act grants, for example? The one to LG Chem Michigan, the manufacturer of car batteries, seems to have been a near total waste of $150 million dollars. According to today’s Washington Post (Page A11), the U.S. Inspector General issued a report that found less than half of the promised jobs were created AND workers were found to be playing games, watching movies––even volunteering for animal shelters WHILE GETTING PAID.

Those were monies that the administration spent to stimulate the economy and we already know they deserve a C at best for those efforts. What about the day to day routine operations of government in Washington? Let’s take the U.S. Department of Housing and Urban Development as a case study in how Washington operates. First, Congress authorizes expenditures that propose to solve some problem. In this case affordable housing. Then dozens of people are hired to administer the program at the federal level and of course at the state level as well. Then if there’s anything left over, local politicians decide where those monies are spent and which of their campaign donars get the work. The people who need affordable housing? A few of them get the housing, but not as many as if Washington had just given them the money in the first place and let them buy their own housing.

Then there’s the sad truth that all these federal and state employees whose job it is to manage the $1 to $2 billion annual expenditure designed to build, buy or renovate housing are not up to the job. I don’t blame them individually, but I do fault the concept. Why would we expect layers upon layers of bureaucrats to be able to do a good job managing monies whose intent is clouded by political aims? At best the U.S. Department of Housing and Urban Development should be shuttered. If states want to use taxpayer monies to build and renovate affordable housing, fine, but why should the federal government be involved? Oh, the Inspector General–which seems to be the only agency in Washington that does its job–which found HUD’s oversight faulty a year ago says there hasn’t been much improvement (Washington Post, 2/14/13, Page A2). Are we surprised?


When is a lie not a lie? Answer: When the public believes it.

January 6, 2013

President Obama’s claim that the cliff deal reduced the deficit by $737 billion earned only one Pinocchio from the Washington Post’s Glenn Kessler. The fact is that the deal cost $3.8 billion in lost revenue over ten years, and middle class families––who supposedly didn’t have their taxes raised––are losing the payroll tax break which the President claimed as part of his tax cut during the campaign.

But Obama deserves at least one more Pinocchio for pretending the tax rate hike truly impacts the wealthiest 2 percent of Americans. In fact, it only impacts to any meaningful extent high salary wage earners (like pro athletes). As Rush Limbaugh and others have pointed out, the deal doesn’t impact Warren Buffet and the truly wealthy whose income is derived from capital gains or carried interest (which is income that is treated as a capital gain). Warren’s rate will only go from 15% to 20%––which is still less than his secretary will pay if she earns more than $36,250 (assuming she’s single or she and her husband earn more than $72,500.)

Here’s Kessler’s conclusion: “In effect, Obama is arguing that eliminating the tax cuts for the wealthy reduces the projected deficit, but keeping tax cuts for all other Americans…has no impact on the deficit.” Further, the end of the tax holiday is not a tax increase because it was deemed to be temporary. Got it?!

Why is any of this important? If we’re not used to Washington truthspeak by now, we haven’t been paying attention, right? The point is that Obama and the Democrats can’t and won’t stop with this victory. They will need more revenue in order to implement their agenda. Therefore, like the Communist Party of the Soviet Union, which claimed they had gotten rid of all the capitalists until they needed to impose some new harsh measure and therefore found some vestiges of capitalism that had escaped their prior house cleaning, the Democrats are suddenly going to discover that the wealthy still aren’t paying their fair share––only this time, they’re going to have to include more people in the “wealthy” category in order to meet their spending needs.

Limbaugh argues the Democrats can’t touch the truly wealthy because they are dependent on them for campaign contributions. So, look for wage earners in the $250,000 to $450,000 category to be the sacrificial lambs in the next Democratic Party tax deal. How many Pinocchios would you give them?


The Plight of Black Males: My Take

December 14, 2012

Michael Gerson wrote about a topic today in his Washington Post column that I’ve given a lot of thought to over the years––“the plight of black males”. Gerson argues that “the vast, increasing segregation of young, African American men and boys from the promise of their country” constitutes the “greatest single threat to the unity of America.”

I don’t know where on the scale of threats to unity the plight of black men lies, but it is a major problem which Gerson correctly observes is not top of mind of most political leaders.

Few of us need to be reminded that black men are under-schooled, under-employed and in prison in higher numbers than any other identifiable group.

What are his solutions?

1. Promoting early childhood education and parenting skills––been there, done that.
2. Encouraging youth development and mentoring––ditto.
3. Expanding technical education and apprenticeships––ditto.
4. Fostering college enrollment and completion––ditto.
5. Offering greater opportunities for national service––like Job Corps? Ditto.
6. Extending wage subsidies to low-income, non-custodial fathers––Is that practical?
7. Reforming sentencing and easing prisoner re-entry––even this has been tried with mixed results.

In other words, everything he mentions has already been tried or is impractical. Gerson’s final message? Try harder, spend more money, and really mean it this time.

Sorry, Mr. Gerson. I’m with you on the need to do something, but your solutions are a recipe for continued failure.

To solve a problem one needs to understand the cause and while this problem is as complex as any social problem facing our country, solutions exist that can be identified.

To see the solutions, we need to look more closely at those black men who are succeeding despite the historical and cultural obstacles facing them. If no one were succeeding, the problem would have to be defined differently, but that’s not the case. Although the number of success stories is not high enough, some black men are succeeding. In other words, there are opportunities for those young men who can see them and who are sufficiently motivated to go after them.

I’m not talking about starring in the NFL or NBA. Instead I’m referring to those men who became employable either by going far enough in school or the military service to acquire a skill and work ethic or those who start on the bottom rung on a job and work their way from minimum wage to a living salary.

The problem is that there are too few non-school, non-military opportunities and too many young men are turned off by the prospect of starting as a stocking clerk and working twenty years before becoming an assistant manager.

Those young men see greater opportunity in gangs and drugs than in private sector employment. What it comes down to is the lack of employment opportunities for unskilled workers. Even “expanding technical education and apprenticeships” won’t solve the problem if there are no jobs for the graduates of those programs.

Some people blame the lack of such jobs on companies for shipping jobs overseas. The news on that front, however, is not all bad. Some companies are moving back to the US where they can see their way to success.

Opportunities for unskilled males in those communities where there is high unemployment can grow if government recognizes lack of attractive jobs is the primary problem.

Compounding that lack of jobs problem is the fact that public sector employment, which has been an outlet for minorities for the past 40 years, is drying up and will not grow as fast as it did in the past.

Economic growth is driven by access to capital, labor and markets. Policies that repress access to capital and attempt to control labor and markets, such as high taxes, excessive regulation, and funding the public sector to do work that can better be done by private sector all militate against the growth of economic opportunity.

Another major problem is the monopoly over construction trades by the union movement, which drives up the cost of construction projects and discourages hiring. Union leaders prefer to bribe their members with overtime than hire an extra hand. Right to work laws therefore will help minority youth gain employment opportunities.

Obamacare will exacerbate the problem, as private sector companies will be loath to hire someone unless they are absolutely certain that potential revenue will exceed the cost of that person’s labor including the cost of healthcare. In too many union shops the math doesn’t add up, which again is why right to work laws are critical for minority youth opportunity.

Finally, let’s address the question of racism. In my opinion it belongs at the bottom of the list of factors that contribute to the plight of black men. Employers want to hire people who will help their businesses succeed. Present the right attitude and walk your talk and you’ll succeed.

Bottom line. Foster economic growth and in time the plight of black men will no longer threaten national unity.

Michael Gerson wants leadership in driving that solution to come from the current occupant of the White House. Unfortunately, that’s not going to happen. Obama’s agenda is anti-growth pure and simple.

Progress is being made in some states and localities (like Texas) and that’s where Gerson will have to look if he wants to publicize examples of success in addressing the minority employment problem.

I hope Gerson continues to focus on this problem and that he begins to sort out solutions that have a chance of succeeding from those that are built on a misleading analysis of the cause.


Election Analysis: What Went Wrong; What Can Be Done

November 8, 2012

2012 will go down as the year the Republicans proved wrong the theory that said a president could not get re-elected if the country faced high, persistent unemployment and slow growth.

Mr. Romney did considerably better than John McCain in 2008, but he failed to take advantage of Mr. Obama’s low approval rating and the country’s economic ills. Why?

The seeds of Romney’s failure can be found in the primary debates. Facing half a dozen challengers attacking him from the right, Mr. Romney took a hard line on immigration. Newt Gingrich was crucified for trying to avoid that pitfall, but Romney walked right into it. As a result, Romney won a lower percentage of Hispanic votes than either John McCain or George W. Bush. That cost him heavily in the battleground states.

Mr. Nice Guy

The second problem that showed up in the debate was his personality. Mr. Romney is by nature and by conviction a polite, considerate human being––too nice perhaps to be sent into battle against a veteran of Chicago style politics where it’s okay to lie as long as you sound convincing.

Romney did not fight back during the summer months when the Obama campaign painted him as a protect-the-rich vulture capitalist. Money may have had something to do with it, but after he failed to release his tax returns and was tarred with the 47% statement, he found himself in a deep hole at the start of the fall campaign.

In order to win the election, Romney had to dispel the image that he cared only for the rich and then convince people he had a plan that would help all Americans. He got off to a great start in debate #1, but the fact that Obama did so poorly may have given the Romney team a false sense of confidence. Whatever the reason, their man was not sufficiently prepared to go one-on-one with Obama in the town-hall format and then failed to attack Obama’s Benghazi cover-up during the foreign policy debate.

Instead of going toe-to-toe with Obama, Romney played presidential. Big mistake. That’s a strategy you employ when you’re ahead, not when you’re the underdog or tied.

Don’t Act Like Democrats

Republican candidates in the future need not act like Democrats––bribing special interests to get their votes. They must, however, speak to issues that impact Hispanics, seniors, etc. and where possible, take positions that address the concerns of those constituencies in constructive manner.

Mr. Romney failed to address immigration in a way that anyone found plausible. He dented the youth vote, but he did not fully disabuse seniors of the charge that he and Paul Ryan were going to gut Medicare.

On that basis I feel the Paul Ryan nomination was a mistake. In the end Ryan’s nomination appeased conservatives who were going to vote Republican anyway while doing nothing to counteract Obama’s characterization that Romney and the GOP care only about the rich. A better choice would have been Susana Martinez or Marco Rubio.

By the Numbers

Mr. Obama should consider himself fortunate to still be president. He won despite pulling 6.8 million fewer votes than in 2008, including roughly 1.6 million fewer votes from African-Americans. Had Mr. Romney won just 1.5 million of those who voted (or 1.18 percent of the total), he would have been the winner.

Cover-Up of the Cover-Up

The electorate was less than enthusiastic about Obama than in 2008 and it took an expenditure of $900 million attacking Romney to pull it off. The national news media helped Obama tremendously throughout the campaign, parroting the campaign’s accusations, downplaying Obama’s failures and then by giving President a pass on his handling of Benghazi, they prevented the cover-up from becoming the defining issue it should have been.

Some Republicans argue Romney lost because he was not a true conservative. Litmus test nominating almost may work locally, but it guarantees defeat on the national level. Others argue he waited too long to move to the center. Playing to the extreme during the primaries and then trying to move to the center during the general election is also a poor strategy because it leaves the candidate open to charges that he’s unprincipled.

What’s the answer? To win in 2016, a candidate must be willing to weather attacks both from the party’s extreme right and from the Democrats on the left. No individual should be expected to have an empty personal history closet. Rather she or he must be willing to explain the contents of that closet in a way that defuses any issue. Did admitting his youthful drug use cost Obama votes? No. But, did paying lower taxes than people with lower incomes hurt Romney? Yes, because he didn’t defuse the issue.

A successful candidate must foresee possible attacks and be prepared to deal with them. She or he must also have a clear, well thought out plan for the country. Romney was unable to convince enough people that his tax and budget numbers added up. Had he done so, he might have moved voters away from their social issue concerns to voting their economic self-interest.

The Next Four Years

How Obama handles the fiscal cliff problem will have a lot to say about where the country will be in 2014 and 2016. If he thinks he has won a mandate and won’t compromise with the Republican-controlled House, his party will take another big mid-term hit and the Republicans should be in good shape for 2016. If Obama adopts Romney’s platform of tax and entitlement reform coupled with spending control, he can create a legacy for himself and give the Democrats a chance to hold on to the White House and Senate. Time will tell.


Election Challenges

September 7, 2012

After watching both conventions, it’s clear that both presidential candidates face major challenges.

As the incumbent, Barack Obama should have gone into the convention as the favorite. His approval ratings, however, have been low based on the sluggish economy and polls had the race at dead even. At the convention, therefore, the Democrats had to recast their record from one of failure to one of moving in the right direction. To win this argument, they have to convince voters that the Republicans’ solutions are the same ones that got the economy into trouble in the first place.

At Tampa, the Republicans portrayed Obama as having blundered the job of managing the economy and offered themselves as knowing how to fix the problems. Romney/Ryan face a major challenge in winning the electoral college even if the popular vote is close. Therefore, it is imperative that they overcome the portrait of Romney as someone who is too rich to appreciate the problems of the middle class and Ryan’s tea party philosophy as cruel and un-American.

People who follow these issues closely can easily take apart each candidate’s arguments. Fact checkers can point out the many discrepancies and inconcistencies. But the election will be determined in large part by perception not fact. Thus, Bill Clinton could have a major impact on the outcome. The GOP lacks anyone of Clinton’s stature or his effectiveness as a speaker. He is unequalled in his ability to reduce complex issues to a sound bite.

The debates give Romney an opportunity to overcome Clinton’s impact. Painting Obama into a corner will not be easy. He sounds convincing even when he’s contradicting previous statements or decisions he made over the past three plus years.

To win the debates and the electrion, Mitt Romney must both catch Obama off-guard, pointing out where his claims lack veracity, and make a convincing case that his plan will work. It’s a tall order, but he doesn’t deserve to win if he can’t accomplish both goals.


From Occupy Wall Street to Occupy My Employer

January 11, 2012

If the “99%” can feel justified in taking property away from the “1%” on the grounds of fairness, then why can’t workers take a bigger share of a company’s revenue on the same basis? That’s the logic behind a campaign launched by CWA 1199 against Cablevision. Why do Cablevision’s employees need a union according to 1199? Because a former company COO earned more than twice as much as his employees.

Fairness as a determinant of a person’s pay level is also behind the drive to raise New York State’s minimum wage and behind living wage legislation on the agenda in New York City and elsewhere.

The fairness doctrine is predicated on the notion that one’s pay should be more a matter of want than one’s contribution to the enterprise in which one is employed.

Hence, performance as a basis for rewards of pay and status should be downgraded because that criteria undermines the opportunity for those who do not perform well to get their fair share.

Further the ability of the enterprise to pay — whether public or private — should not be considered when it comes to compensation of the work force. Such considerations undermine the ability of those who are unproducitve to gain their fair share.

Let’s be clear that fairness is a subjective value. In the past fairness was balanced against the need of the enterprise to be successful and survive (either make a profit or do the job with available resources). Today, there’s an underlying assumption that no company or government entity is paying its workers a fair wage. Rather, they are hoarding their resources and giving them to the 1%.

A company that pays its workers above the value of the contribution they add to the product or service will not long remain in business. The history of the American car industry is about that very issue. By giving in to union wage and benefit demands, GM, Ford and Chrysler had to charge so much for their cars that they opened the door to foreign manufacturers which were able to sell a superior product at a lower price even when the cost of shipping foreign made cars to the US was taken into account.

The history of the public sector over the past 40 years parallels that of the automobile industry. Elected officials gave in to union demands without consideration of the ability of taxpayers to foot the bill, often by ignoring the future pension obligations they were agreeing to. That lack of political courage has harmed both public sector employees and the general public, as it contributed to the belief that public sector employees are overpaid and underworked relative to private sector workers.

Let’s not waste our time debating whether fairness as a basis of compensation is socialistic or communistic. Labels are not important. What’s important is to recognize the long-term implications of undermining ambition and achievement.

Taken to its logical conclusion doing well in school and working hard in order to obtain a job that gives one decision-making authority and pays well should be discouraged. Why? Those values place the successful individual above the norm and undermine the ability of those who are below average to get their fair share.

Like pay, school grades should not be given out on the basis of performance but rather on the basis of want. Minority and handicapped students have a greater want of good grades since many come from low-income households and enter school with “unfair” disadvantages. Since they will not need to learn skills or work-world values in order to get a fair wage why require that they master subjects or compete with other students!

Grades, jobs and compensation should not be based on merit or performance but rather want — the measure of fairness.

Since the majority in any country skew to the average, the tendency of democractic societies is to elect officials who are in favor of policies that focus on results rather than contribution, on rewards rather than worth, on outcomes rather than effort.

The question we must ask ourselves is will that kind of society be able to compete against those that reward success based on enterprise, competition and equal opportunity and that provide a model for young people justifying effort and ambition? We only need to read the daily accounts of the problems facing Europe to gain a hint of the answer.

If that’s where this country is headed, is such an outcome the kind of fairness we owe future generations?