A Bulletproof Solution

We on The Other Side are wont to stray beyond the orbit of conventional thought from time to time, and it occurred to us in the rarified air that there’s a better way to protect our schoolchildren from mass murderers than arming teachers: bulletproof vests for every pre-k, kindergarten, grade-school, and high-school student in America.

Bulletproof vests cost as little as $200 and as much as $2,000 each, but more than half of the 50 million bulletproof vests required to save our schoolchildren would be smaller than those made for adults, and they could be bought in bulk. So let’s assume for the moment that the average cost per copy would be in the neighborhood of $300.

Bleeding-heart liberals would doubtless argue that our children would be more afraid of being gunned down by an armed maniac than less because, well, they’d be wearing body armor to school every day. There’s a solution for that: Make bulletproof vests fashion accessories. Young boys and girls could pick “SpongeBob Square Pants” or “Dora the Explorer” vests for example; older students could choose likenesses of rock stars, sports legends, or indicted government officials.

Colorful, age-appropriate vests would be more expensive than the usual black, black, or black, but the protection of our children would be a relative bargain nonetheless. If the 50 million vests we need could be procured for an average of $400 each, the total cost to taxpayers would be a mere $20 billion. But wait; there’s more. Bulletproof vests have a useful life of five years, so the amortized cost would be circa $4 billion per annum, or 5.9% of the US Education Department’s $68 billion budget.

To summarize: The bulletproof safety of America’s schoolchildren could be bought for less than 6% of the Education Department’s annual budget. What are we waiting for?

Logic Abuse

To the surprise of no one, some number of our right-of-center Congressmen continue to insist that the approval of a 90-day extension of the FISA warrant to surveil Carter Page was “politically motivated”, thus the process is irretrievably broken.

The Foreign Intelligence Surveillance Court has approved more than 33,000 FISA warrants since its founding in 1978. It doesn’t matter whether the Carter Page warrant was “warranted” or not; the claim that the process is broken because a single error was made is, from a rhetorical standpoint, exactly like saying:

  • Charles Dickens was a hack because he got one bad review; or
  • Tom Brady is a second-rate quarterback because a wide receiver dropped one of his 8,805 passes; or
  • Honda makes unreliable vehicles because one of the 1.6 million they sold in the US in 2017 had a broken dome light.

We could go on, but you get the picture. All of the above are examples of a rhetorical fallacy called “generalization from the particular.” Simply put: “If one of many is x, then all are x.”

Generalization from the particular is a tool frequently used by politicians of all stripes because it’s invisible to the ears of millions of gullible Americans. If we on The Other Side had our druthers (as if), at least one of the 3,000 pundits appearing daily on national TV would have used the trumped-up FISA controversy as a teaching moment so that fewer voters would be hoodwinked by this egregiously fallacious device.

To our knowledge none of them did, and the midterms are just around the corner. Since we’re worried, everyone should be worried.

Notes:

1) Some of our esteemed Congressmen have complained that all three warrants to surveil Carter Page shouldn’t have been granted because he hadn’t been proven guilty. Forgetting for the moment that a warrant is issued when a person of interest is suspected of committing a crime, the same logic applies to the plural, e.g.: “My pumpkins are ripe, so all pumpkins must be ripe.”

2) As of this writing, Carter Page has not been indicted for any crime, either foreign or domestic. Four of his cohorts have been charged, three have pled guilty, and the Mueller “Which Hunt” continues.

3) The discerning reader will have noticed that we mixed a metaphor. That does not mean that we mix all metaphors.

The Other Side of Privatization

Between April and June of this year, more than 2,000 immigrant children were sent to internment camps without due process because their parent or parents entered the country illegally, which, by the way, is a misdemeanor. Some of the camps were hastily constructed by private-sector firms, which has again raised the question of whether some government services—no matter how reprehensible—should be outsourced to for-profit corporations.

The justification for outsourcing, typically made from the right side of the aisle, is that capitalism is inherently more efficient than bureaucracy, therefore less costly. That’s exactly the sort of general, overarching claim that we on The Other Side are compelled to question.

Fair warning: We believe that capitalism is more than just a good thing; it’s essential to the well-being of the planet and its inhabitants. Before those of you on the left collapse into foaming-at-the-mouth fits of apoplexy, here’s the but: We doubt that capitalism is good for everything, just as we doubt that everything tastes better with ketchup.

To the extent that we can, let’s apply our collective intellect to examining (in five steps) the claim that outsourcing government services to privately-owned companies is more cost efficient than continuing down the old-school, “deep state” bureaucratic path.

Step 1: The classic motive for creating profitable companies is maximization of shareholder wealth. Profits vary from industry to industry, but, in our (lengthy) experience, a pretax profit of 15% per annum is generally considered healthy, therefore a workable assumption.

For those of you who forgot to take accounting in college, that means that fifteen cents out of every dollar a private company makes are set aside for profit and taxes.  Government agencies don’t make profits and don’t pay taxes.

Step 2: By definition, efficient markets are competitive, which in turn requires privately-owned companies to promote and sell their services. The cost varies from as little 10% of revenue to as much as 30%, again depending on the industry. Since we’re a conservative bunch, let’s assume that the average cost of promoting and selling services in competitive markets is circa 15% of revenues on an ongoing basis.

In other words, fifteen cents of every dollar a private company earns are used to pay for a sales force, advertising, media relations, and similar functions. Some government offices, the US Army for instance, also advertise, and they have sales forces (called recruiting offices), but the cost in minuscule in comparison. As far as we know, no one in Washington is considering the privatization of the US Army, although mercenaries were used in Iraq—at a cost of as much as $1,500 per day.  In comparison, an Army captain makes about $180 per day, depending on length of service.

Step 3: Outsourcing isn’t free. In order to ensure delivery of quality, low-cost services to the public, government agencies are required to manage their for-profit service providers. Since government management is inefficient, let’s assume for our purposes that the cost of oversight is about 5% of the overall cost to the taxpayer.

To summarize: We’ve estimated so far that private service providers have to be about 35% more efficient (15% + 15% + 5% = 35%) than government agencies, just to break even on a cost basis. We can argue about the numbers all day. We argued about the numbers among ourselves, but the logic is indisputable.

Step 4: Since private companies exist to maximize shareholder returns, the provision of services can be no more than a means to an end. In other words, the act of privatization subordinates the provision of service to the production of wealth. Government agencies are intended to make service provision their top priority, and the conscientious, well-managed ones do.

Step 5: Over the course of our career, we worked with or directly for twelve high-tech CEOs. Half were corrupt, meaning they manipulated the books for personal gain. Despite our experience, we have no data from credible sources which suggests that private-sector companies are more corrupt than public-sector agencies. So let’s call it a tie.

By definition, the act of outsourcing means that two entities are involved in service provision, which doubles the odds that at least one of them is corrupt. Case in point: The reconstruction of Puerto Rico’s electrical grid after Hurricane Maria was originally outsourced to a one-horse company from Montana.

We on The Other Side are left with four questions:

1) Who wins when provision of services is subordinated to profit? Hint: It’s a three-syllable synonym for owners that starts and ends with the letter “s.”

2) If some private-sector service providers are indeed 35% (or so) more efficient than their public-sector counterparts, is it a structural problem or a management problem? Hint: It can’t be a structural problem. See the above.

3) Does the probability of corruption increase or decrease with outsourcing? Hint: One plus one cannot equal one. See the Principia Mathematica.

4) Where do we draw the line? Should education, diplomacy, law enforcement, and tax collection be privatized, too? Hint: The answer isn’t “yes.”

The bottom line: Privatization of public-sector services is a structurally inefficient and counterproductive way to put tax dollars in the pockets of private-sector shareholders. There may be exceptions, but they’re few and far between.

Full disclosure: As of this writing, we own shares or equivalents in seven for-profit companies and partnerships. We think privatization is a dumb idea anyway.

Notes:

1) We’re fully aware of the contention that for-profit companies provide higher-quality services than their public-sector counterparts. In the absence of relevant surveys of customer satisfaction, however, service quality is wholly subjective.

2) We’re also aware that service quality is correlated with funding. If, in their collective wisdom, Congress and the president elect to underfund government services, then that act alone may be responsible for perceived quality deficits.

It’s possible, therefore, that irresponsible governments could create service-quality deficits by underfunding agency providers—for the sole purpose of (eventually) outsourcing those services to “more efficient” for-profit corporations. But our government would never contemplate such a thing; right?

 

The GOP v. Democrats: Jobs, the Rematch

Years ago, we emailed a good friend a set of data comparing Republican and Democratic economic performance since the Carter years. Our friend was a Republican. As far as we know he still is, but he wasn’t fond of the results. He sent a reply that read, “I think I can tell when someone’s cherry-picked the data.”

For the record, we on The Other Side let the numbers speak for themselves, but we’ve been on the lookout ever since for simple, straightforward metrics that shed a brighter light on the GOP’s economy-management expertise. As luck would have it, we stumbled across a Wikipedia piece titled, “Jobs Created during US Presidential Terms.” The article covers a lot of ground, but one part in particular caught our eye: a chart showing average annual nonfarm job growth per presidential term.

We couldn’t resist the temptation. We had to know whether the results would correlate with the conclusions we published in “GOP v. Democrats, Part III: Jobs.” In our several minds, we thought there was a chance that the Republicans would win this time, even though they were drubbed when the yardstick was unemployment.

According to Wikipedia, the annual Rate of nonfarm job growth per presidential term since 1977 was as follows:

President Party Term Annual Growth
Carter Dem 1977-81 3.21%
Reagan I GOP 1981-85 1.47%
Reagan II GOP 1985-89 2.80%
GHW Bush GOP 1989-93 0.45%
Clinton I Dem 1993-97 2.85%
Clinton II Dem 1997–01 2.33%
GW Bush I GOP 2001-05 0.02%
GW Bush II GOP 2005-09 0.24%
Obama I Dem 2009-13 0.23%
Obama II Dem 2013-17 1.85%

On average, the annual rate of nonfarm job growth during the last five Republican terms was a shade less than 1%. Over the same period, the average annual rate of nonfarm job growth was a shade more than 2% during Democratic administrations.

The usual quibbles apply. Our favorite: The newly elected president’s policies take a year or so to have an impact on the market. Our opinion: That’s true to an extent, but the latency varies and is largely subjective, which makes it impossible to measure. Our second favorite: The president is a tool of Congress. They make the rules; he (or she eventually) breaks them. Our opinion: The policies that affect job growth are generally determined by the president and then watered down by a detached, misinformed Congress.

The (empirical) job-growth bottom line: Republicans 1%, Democrats 2%.

To date, we’ve used four nonpartisan, easy-to-understand metrics to compare the health and welfare of the US economy under Republican and Democratic presidents. The score: Democrats 4, Republicans 0.

But we’re not giving up.  Sooner or later, we’re bound to encounter a barometer of economic performance that favors GOP presidents and doesn’t antedate the invention of the pocket calculator. In the meantime, we’ll look forward to another nasty-gram from the American Association for the Advancement of Innumeracy. You can support their cause by sending donations to the cable-news network of your choice.

Full disclosure: According to data published by the Bureau of Labor Statistics, 2.19 million jobs were created in 2017, Trump’s first year in office and a splendid result by any measure. From The Other Side: 2.34 million jobs were created during President Obama’s last year in office, or about 7% more than Trump’s first year, but a year is a fourth of a full term. Maybe things will change.

 

The Other Side of Automation

It seems to us that a magnificent new product made in Silicon Valley is announced every day in the press, on television, and via social media outlets around the world.  From an historical perspective, there’s no doubt that many of these innovations have improved the productivity of governments and the profitability of corporations, and they’ve enhanced the lives of everyday, garden-variety folks like you and us. But we wonder if we aren’t approaching a point in time when advances in AI (artificial intelligence) and robotics will destroy jobs faster than the economy can replace them.

In the near future, self-driving cars, SUV’s, trucks, and buses will be cheap and reliable enough to be sold in volume. Driving will be safer, and commuters will be more entertained and less stressed, but operators of commercial vehicles will be made obsolete because their vehicles won’t need them anymore.

According to the Bureau of Labor Statistics (BLS), there are 2.4 million commercial truck drivers in the United States who on average make about $50,000 per year. In the near future, those jobs will be lost to automation.

The BLS estimates that 7.5 million retail jobs will be lost to automation. More than half of retail workers are women who make about $23,000 per year.

A recent report by the McKinsey Global Institute forecasts that as many as 73,000,000 American jobs may be lost to automation by 2030. If their forecast is in the ballpark, then the US economy will lose a number of jobs that’s approximately equal to 45% of the nation’s current workforce. (See Note 1.) But the McKinsey report isn’t as foreboding as it would seem at first glance, because it also suggests that an overhaul of the economy could more than offset the 73,000,000 job losses.

Here’s the rub: The overhaul would have to rival or exceed the magnitude of our transformation from an agriculture-based economy to the Information Age, which took 165 years. This time, though, we have twelve years, which means we have to move fourteen times faster than we did last time.  (See Note 2.)

We on The Other Side have a few questions:

1) Is the overhaul a training/retraining problem (as they suggest), a social problem, a political problem, a financing problem, or some combination?

2) If politicians are even remotely involved, what are our chances?  Dodd-Frank wasn’t passed until after the Great Recession. Our bridges, ports, railways, and highways are crumbling, but as of this writing Congress has yet to bring an infrastructure renovation bill to the floor of the House or Senate. When was smoking in public places outlawed? Was it before or after millions of Americans died from lung cancer?

3) Who’s going to pay for the retraining of the existing labor force: the public sector, the private sector, or the displaced workers themselves? We expect it’ll be all three, but will government move quickly enough (see the above), will corporations be more disposed to retrain their employees than hire trained ones, and how much money will the unemployed have to invest in retraining themselves?

4) What’s the real-world scale of the problem? How many bus drivers, bank tellers, and baristas will have to be taught to program computers, mine data, and repair robots, how long will it take, and what percentage of them will make the grade?

We could go on, but you get the point.

Unemployment during the Great Depression peaked at 25% in 1933.  In the absence of another cataclysm or two, we’re confident that the unemployment rate won’t come close to 25% in the next ten to twenty years. But we’re just as confident that the pace of job destruction will far exceed the economy’s capacity to compensate for the losses––and no one will do anything about it until it’s too late.

At South by Southwest this year, Elon Musk said, “Mark my words: AI is far more dangerous than nukes, by far, so why do we have no regulatory oversight? This is insane!”  (See Note 3.)

Notes:

1) According to Wikipedia, 161,000,000 Americans held part or full time jobs in the US at the beginning of 2018.  Seventy-three million divided by 161 million is 45.3%.

2) One-hundred and sixty-five divided by twelve is 13.75.  We rounded up.

3) The quote from Elon Musk was from ZDNet, a high-tech website. We didn’t change a word, but we did edit the punctuation.

4) A roomful of statisticians and economists at the Bureau of Labor Statistics could model the most probable outcomes, but they’d have to base their forecasts on so many assumptions that every politician, private-sector economist, and talk-show pundit could find at least five to dispute—for one news cycle. The next day, they’d be arguing about something else. We have two bits of advice for the BLS: a) forget the model, and b) tell your kids to get degrees in robotics.

5) The Apex Child is a novel about this very problem. Fair warning: it’s longer than this article.

 

 

Self Regulation

There’s been a lot of talk in the media lately about “self regulation.” Despite broad support from the business community and a large number of our learned legislators, can it be possible that the contraction is a dangerous contradiction?  To wit:

  • The counter salesperson at Sunrise Tactical Supply was self-regulating when he or she sold an AR-15 assault rifle to a mentally unstable nineteen-year-old, who then murdered three Parkland teachers and fourteen high-school students with it. Civilian ownership of semiautomatic assault rifles was banned until 2004, when an enlightened (Republican) Congress overturned the law and let self-regulation take over.
  • President George Walker Bush (43) was self-regulating when he ordered the invasion of Iraq. More than 4,000 American soldiers and 100,000 Iraqi civilians died in the war. To be fair, Congress hasn’t issued a formal Declaration of War since 1941. Maybe they should rethink their approach.
  • The FDIC, aka the Federal Deposit Insurance Company, shuttered more than 350 banks in the three years after the Crash of 2009. The bankrupt banks self-regulated themselves out of business.
  • Congress was self-regulating when they awarded themselves lifetime pensions at age 62 after five years of service. Presumably, America’s workforce can expect to benefit from similar legislation in the near future.
  • Self-regulation is working in Idaho, where the maximum interest rate that payday lenders may charge their customers is unlimited by law. Thanks to the government’s hands-off, laissez faire policy, the average payday loan in the state carries an annualized interest rate of only 582%.
  • Cain was self-regulating when he killed Abel. The Ten Commandments came later.

For the record, we don’t believe it makes sense to regulate every little act of meanness or stupidity. Picking one’s nose at the dinner table and dipping the outcome in the clam chowder will have a detrimental effect on most appetites, but Congress doesn’t need to pass a law that forbids it and create another three-initial bureaucracy to enforce it.

At the opposite end of the spectrum, there’s a word that means the absence of regulation. It’s called “anarchy.” A civilized society like ours has to draw the line between anarchy and a four-hundred-year-old body of law that’s suffocating, ambiguous, contradictory, and costly. But when we draw the line, we need to be honest with ourselves.

Self regulation is a myth, a con. It’s identical to no regulation. If you still have doubts, ask the surviving students and faculty at Santa Fe High School.

The GOP v. Democrats, Round 1: The National Debt

Believe it or not, there was a time in the not-too-distant past when moderates walked the halls of Congress and the policies of the the two parties overlapped—which meant that the passage of legislation was not only possible, it was commonplace. Then the Civil Rights Act was signed into law by President Lyndon Johnson, and that was the tipping point. Conservative Southern Democrats began to cross the aisle, the Southern Democrats who didn’t were beaten, and once-fertile legislative ground was displaced by a yawning, barren gap.  (See Notes below.)

It now appears that representatives from the two parties can barely speak to each other, and the passage of an actual bill is a media-worthy event. On the other side of the coin, to borrow a phrase, it’s easier to tell the parties apart, or rather it’s easier for the two parties to distinguish themselves in the minds of voters.

In particular, we’re often told that Republican administrations are better at stimulating the economy and cutting the deficit. If punditry and campaign rhetoric are indicators, the Democrats appear to have turned the cheek on both accounts, but they claim they’re better job creators. Who are voters to believe? Are the Republican better at stimulating the economy (see “Trickle Down: The Lost Alternative”) and cutting the deficit, and are the Democrats better “job creators,” or not?

The Other Side of Obvious is like a foster home for skeptics; we’re not inclined to believe anything we’re told by politicians or pundits or pedicurists or anybody else. If the assertion appears to be nonsensical, then we try to make sense of it. If it’s testable, then we use simple, commonly accepted metrics to test it.

This is the first article of three that compares the relative economic performance of the last three Republican administrations against the last three Democratic administrations. Each article uses a single criterion––in this case the reduction or containment of the federal budget deficit. The next two articles measure relative stock-market and job performance over the same period of time.

For the purpose of this first comparison, we researched the growth of the national debt during each presidential administration since fiscal year 1978, when Jimmy Carter approved his first federal budget. The comparison ends on September 30, 2018, which was the last day of the last fiscal budget approved by Barack Obama.

The incoming and outgoing national debts by administration over the forty-year period were as follows (in rounded billions):

President Party Years Entry Debt Exit Debt Increase Percent
J Carter Dem 1977-81 $772 $1,142 $370 48%
R Reagan GOP 1981-89 $1,142 $3,233 $2,091 183%
GHW Bush GOP 1989-93 $3,233 $4,693 $1,459 45%
B Clinton Dem 1993-01 $4,693 $6,228 $1,535 33%
GW Bush GOP 2001-09 $6,228 $13,562 $7,333 118%
B Obama Dem 2009-17 $13,562 $21,735 $7,813 58%

Reading across the top line, the chart shows that President Carter inherited a national debt of $772 billion. The debt had reached $1.142 trillion (that’s trillions, with a “t”) by the end his last fiscal year, which was an increase of $370 billion, or 48% more than the debt he inherited.

In aggregate, the data tell us that the national debt increased by $10.884 trillion during the last three Republican administrations and by $9.719 trillion during the last three Democratic administrations. In other words, Republican presidents increased the national debt by $1.16 trillion more than Democratic presidents, or a paltry $51 billion per fiscal year.

If that’s not clear enough: The average Republican administration increased the national debt by 115%, and the average Democratic administration increased the national debt by 46%.

Draw your own conclusions.

Unless the moon is indeed made of cheese, the Republicans will yell foul and produce their own “unbiased” analysis. That’s not to say that Democrats use agnostic, statistically valid data and Republicans get theirs from a twelve-year-old “statistician” who flunked math and who happens to be the daughter of an NRA lobbyist. Sadly, the politicians in both parties appear to be equally skilled in the dark arts of exaggeration, data manipulation, and use of third-grade logical fallacies. If, however, you have qualms about the outcome, then change the dates, find a better barometer, and run your own numbers. The Republicans will doubtless be grateful––if you can produce a different result.

It can also be argued that White House occupancy is a poor basis for comparison because Congress passes the budget and the president merely approves it. In fact, the executive branch creates the budget at the president’s direction, he and Congress negotiate it, the president signs the final bill, and then he manages federal expenditures for the entirety of the fiscal year.

Update: On June 26, 2018, the Congressional Budget Office released its latest report on the growth of the national debt. According to their projections, the national debt will exceed the size of the US economy in 2031 and double by 2048. Their assumption, by the way, is that the Trump tax cuts will be rescinded in 2026, according to current law. The bad news: Congress is considering a bill that will make Trump’s tax cuts permanent—which means that the deficit will increase more rapidly.

Notes:

1) According to The Economist, only one Congressional legislator from the great state of Georgia was a Republican in 1981, a promising young man named Newt Gingrich. As of this writing, the Georgia delegation is 100% Republican.

2) The forty-year period beginning with the Carter presidency in 1977 and ending with the Obama presidency was not chosen at random. The first use of the term “post-industrial society” was attributed to Alain Touraine in 1969. A comparable analysis of the Second Industrial Age would begin circa 1850 and end circa 1970.

3) Between 1977 and 2017, Republican presidents occupied the White House for twenty years and Democratic presidents occupied the White House for twenty years. In both cases, two presidents served two terms and one president served one.

4) The sources for the budget deficits and other data are the US government and Statista. Nothing in this article came from Cambridge Analytica.

5) Their claims notwithstanding, neither party produced an annual budget surplus except for the last two fiscal years of the Clinton administration. That’s 38 years of deficits versus two years of surpluses.