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Our Slow-Motion Crisis

Saturday, November 21, 2009, 3:29 PM

Becca and I just went through the process of buying the house that we have been renting for the past few years.  The experience has given me another distasteful brush with state laws and regulations.  Over the years, new laws have only been added, never subtracted, making this house purchase entirely different from the one I conducted only ten years ago.

Yesterday, a backhoe came into the yard to completely expose the septic tank covers (three of them), along with an element of the leach field, which took a lot of digging to find.  Why?  Because the state now requires an inspector to peer into these contraptions to assure that they are working, as part of something called "Title V" regulations.  Once everything was dug up, it took only a quick glance from the inspector, who had to sign off on a piece of paper before the sale could go through.

On the surface, how can one argue that having an inspected and functioning septic system is a bad thing?  However, the way the law is written, it only has to pass inspection at the time of sale.  Every sale.  If we decide to sell the house a week after we buy it, the whole process would have to be repeated.

This entire septic system was professionally designed and installed six years ago.  It has been pumped every year, with full documentation of every step.  But no matter.  The law requires the state inspector to be able to peer into the septic system's innards every time the house changes hands.  No exceptions.  So heavy machinery was brought in and the yard torn up.

We could live here for 25 more years, and we wouldn't have to go through this process again.  Or we could sell it in a week and have to do it all over again.  Never mind the fact that if a septic system is not functioning properly, the homeowners will undoubtedly be highly motivated to get it fixed.  And never mind that there are non-invasive ways to tell if a system is functioning properly.  Those factors are apparently irrelevant in the eyes of the law.

This tale is just a small, state-level story in one person's life.  But it is being replicated a thousandfold in a 2,200-page health care bill, a 1000-page Disability Act bill, a 340-page Patriot Act, and numerous other documents combining into more than 72,000 pages of rules and regulations to go along with more than 60,000 pages of tax code (up 44% in nine years). 

And that's just at the federal level.

How large is large enough?

All of these regulations represent a cost to administer and ensure compliance with.  A cost that we might do well to reconsider as this crisis unfolds.

Even as the federal government runs a magnificent 13% of GDP deficit, state governments are experiencing wrenching difficulties.  Such is the difference between having a printing press and not having one.

We'll cover some of the more compelling stories here at the state level, but I want to note that the larger story is nearly universally ignored.  Perhaps the time isn't right - hey, we're in a crisis, you know? - or perhaps the subject is too painful under any circumstances. 

But it needs to be discussed.

The fact of the matter is that state and federal governments are bloated and are entirely too large to be supported.  It would be a mistake to think that they've been viably supported up to this point and that if we could just get past the crisis perhaps they could be again.  The truth is that the current size of government has been significantly bought and paid for using debt financing.

Money has been borrowed, bonds have been floated, future tax receipts have been pre-sold, and so forth, and the proceeds have been used to create a larger government than could have been bought using tax receipts alone.

If we were to set a definition and agree that over the long run that government expenditures and tax receipts had to balance out (which is a very reasonable definition), then we'd have to conclude that either taxes have to go up a whole lot, or the size of government has to shrink.

Once we factor in a shrinking net energy surplus and our current debt levels, the outcome is all but assured - one way or another, more people will have to be productively employed.  But most government jobs either consume or redistribute wealth.  This is not casting any judgment on those jobs.  I like having clear water and safe workplaces.  But I am merely noting that with declining surplus energy and sky-high debt loads, the fact of the matter is that more people really need to be working in wealth-creating jobs than before.

How much of a shift are we talking about?  A very big one:

How the Government Is Swallowing the Economy

November 9, 2009

You know about the bailouts, the stimulus plan, cash for clunkers, and moola for mansions. But for all the anxiety they've caused, those government giveaways are just a tiny part of a mushrooming problem.

By one measure, the government already plays an outsize role in our so-called free-market economy—and it has little to do with the recession. Economist Gary Shilling has calculated that 58 percent of the population is dependent on the government for "major parts of their income," including teachers, soldiers, bureaucrats, and other government employees; welfare and Social Security recipients; government pensioners; public housing beneficiaries; and people who work for government contractors. By 2018, Shilling estimates, an astounding 67 percent of Americans could be dependent on the government for their livelihood. The implications aren't comforting.

If that happens, more than two thirds of the nation will owe their livelihood to the government, which is unsustainable for a number of reasons. It will require federal deficits far larger than the $1.4 trillion bogy we've got now, which is already alarmingly high. If irate voters don't rein in America's debt binge, market forces will, perhaps because foreigners will stop lending us the money or the rates they demand will rise and effectively bankrupt the country. Higher taxes would help solve the problem—and are probably inevitable—but enacting them on rich people alone won't be enough. At some point not too far off, the U.S. government will have to close the vast gap between its income and its spending, and the pain will be widespread.

What this study says is that if we remain on our current path, in less than ten years fully two-thirds of all Americans will be directly dependent on the government for their livelihoods.  I guess that leaves one-third working really hard and paying a lot of taxes.  Somehow I doubt that's going to fly without some sort of a revolt on the part of the remaining taxpayers.  Or our foreign creditors.  Or both.

Twice as Many Administering as Making

I think this chart, which compares the growth in government workers to the decline in manufacturing jobs, illuminates the entire situation perfectly:

Government employees now outnumber all manufacturing employees by 2:1.

Across all workers, for every 4.8 workers in any occupation, there is a government employee.

Said another way, if there were six houses on a street, five of them would have to earn enough to support the sixth plus pay sufficient taxes to cover all the public infrastructure and operating costs (roads, government vehicles, diesel, etc) for their neighborhood.

I imagine that if you were one of the five houses paying these expenses, and the family living in the sixth house showed up on your doorstep each week to collect their salary from you, you'd probably be pretty keen to know what they were doing for you during the work week.  But in our system, the true cost of this situation is deeply repressed by the fact that so much of the cost of carrying a 4.8:1 ratio is obscured by borrowed money.

The Underpaid Public Servant

Recently, the pleasant myth of the underpaid public servant was punctured by a study from the Commerce Department revealing that public servant average total compensation was twice as high as the average for civilian employees - nearly $120,000 compared to $60,000.

Myth of the underpaid public employee

Consider the lucrative lot of the men and women who work for Uncle Sam. In 2008, according to data from the Commerce Department’s Bureau of Economic Analysis, the 1.9 million civilian employees of the federal government earned an average salary of $79,197. The average private employee, by contrast, earned just $49,935. The difference between them came to more than $29,000 - a differential that has more than doubled since 2000.

Take account of total compensation - wages plus benefits - and the disparity is even more striking. In 2008, total federal civilian compensation averaged $119,982 - more than twice the $59,908 in wages and benefits earned by the average private-sector employee.

Again, without casting any particular judgment on this arrangement, I want to illustrate that such a system is thoroughly unsustainable.  If something is unsustainable, it will someday stop.  It is simply not possible to forever have twice as many people working in government as in manufacturing (while earning twice as much as average) and paying for the gap using debt financing.  Sooner or later, the mounting debts become unserviceable from the meager profits from the productive economy.

And the longer-term trend leads to two-thirds of all people in the land becoming dependent on government wealth redistribution policies by 2018.  Again, this is unsustainable.

Paying For It All

How does the government propose to pay for all this?  With new debt, of course:

$4.8 trillion - Interest on U.S. debt

Unless lawmakers make big changes, the interest Americans will have to pay to keep the country running over the next decade will reach unheard of levels.

November 19, 2009

NEW YORK (CNNMoney.com) -- Here's a new way to think about the U.S. government's epic borrowing: More than half of the $9 trillion in debt that Uncle Sam is expected to build up over the next decade will be interest.

More than half. In fact, $4.8 trillion.

Since it really is not sustainable, advisable, or even possible to run up debts to higher and higher levels forever, it's only a matter of time before the issue gets decided by some sort of a funding emergency.

The question before us is this:  Do we want to work out a gentle resolution or a wrenching adjustment brought about by default and failure?

States of Distress

So far, at the state level, the answer seems to be, "Wrenching, please!"

Paterson: NYS Will Be Broke Before Christmas

Governor David Paterson called an unusual joint session of the Legislature Monday to implore recalcitrant lawmakers to close the state's huge budget gap before New York runs out of money.

To some lawmakers it's nothing more than a photo op to help Paterson get re-elected. But the governor is dead serious. He said if the Legislature doesn't cut the budget now the state could run out of money by next month.

"We're going to run out of cash in four and a half weeks. We are going to run out of money. Unless we do something about it, (it will) threaten generations," Paterson said.



Christie may declare a financial emergency

As he seeks concessions from state workers to balance his first budget, Gov.-elect Chris Christie is examining the possibility of declaring a financial emergency in the state, according to an official familiar with his plans.

Such a declaration -- invoking the same law as if New Jersey were hit by a natural disaster -- could give Christie broad powers, such as suspending rules governing state worker layoffs. With many state workers due to receive two raises in the next fiscal year and a no-layoff pledge in place through December 2010, Christie's transition team expects to tackle the issue before he takes office Jan. 19, two of his advisers said yesterday.

10 states face looming budget disasters

SACRAMENTO, Calif. – In Arizona, the budget has grown so gloomy that lawmakers are considering mortgaging Capitol buildings. In Michigan, state officials dealing with the nation's highest unemployment rate are slashing spending on schools and health care. Drastic financial remedies are no longer limited to California, where a historic budget crisis earlier this year grew so bad that state agencies issued IOUs to pay bills.

A study released Wednesday warned that at least nine other big states are also barreling toward economic disaster, raising the likelihood of higher taxes, more government layoffs and deep cuts in services.

The report by the Pew Center on the States found that Arizona, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin are also at grave risk. Double-digit budget gaps, rising unemployment, high foreclosure rates and built-in budget constraints are the key reasons.

Through all of these recent articles, I cannot find a single mention of the idea that the size of government has outgrown the economy.  Certainly there are aggressive actions to slash spending to bring it in line with revenues (states have to do that by law in most cases), but where is the deeper conversation about how much is enough, or whether we perhaps have too much?

Instead, I sense the same sort of bewildered confusion that one might expect at the end of an age where the participants cannot see any other way but the past.  A past defined by an ever-increasing number of regulations, incrementally boosted each year with new bodies hired to administrate them, often without any seeming regard to the costs imposed upon the productive (tax paying) side of the economy.

My preference here would be to seek savings, not by trimming a little from each and every state and government function, but by asking the harder (and better) question about whether there could be entire departments or functions that have outlived their usefulness.

Are there no laws that we can trim or eliminate?  Do we need 150,000 pages of rules and taxes to administer ourselves?  Could we do it with 'only' 100,000?  How much would we save in both compliance and administration if we judiciously axed a few rules?  Are there no government functions that are the responsibility of citizens?  Does it make sense to have a tax code so massive and convoluted that even the IRS often has no clue how it works?

It seems to me that the federal government, along with every state, ought to periodically scrub through the books to see what can be eliminated.

My Proposal

Part one of my proposal is to cap all the rules, and their costs, at their current levels.  No more rules can be added without subtracting some others.  Call this part "Cap 'n Trade," which already has some brand essence floating around the halls of power.

This part is quite simple.  If a new rule about, say, inspecting every septic tank at the homeowner's expense is deemed desirable, then an offsetting rule, or set of rules, covering the home sale process need to be scrapped to bring the overall burden of governing ourselves down to its current level.

Part two of my proposal calls for eliminating old, unnecessary, and arcane rules.  Call this part the "Good Housekeeping" proposal.  The idea here is to scrub out all the rules and regulations that made sense in a past world, but not the current one.  This should be relatively quick and easy.

Part three of my proposal calls for shrinking the role of government back to a level that appears to be affordable over the long-haul.  A well-run company would never dream of having a management and overhead structure that consumed 40% of all revenues.  Why should the cost of government be any different?  The level I propose as a starting target is that government should consume no more than 20% of revenues.

Benefits

The benefits to adopting these proposals run far deeper than saving a lot of money.  First, they will create a more livable society, where the average person could at least reasonably start a business or run their life without potentially unknowingly being in conflict with myriad laws.

Second, we'd be more competitive on the global landscape.  It is not reasonable to expect US businesses to compete with countries that choose not to adopt a 40% regulatory and overhead burden structure.

Third, the notion of competing priorities would return to the legislative landscape.  For now, there seems to be no restraint at all on spending.  Health care?  Sure, we'll take a trillion more of that.  Afghanistan?  Sure, send in a bunch more troops.  Deficit spending?  Absolutely, can't live without that.  Military bases in 140+ countries?  Yes, we'll do that too.

The idea of having to cut out old rules and regulations to make way for new ones would create an entirely different sort of conversation and return the concept of setting priorities to the discussion.  For far too long, we've had neither restraint nor active debate and discussion in our decision making.  (Ever watch C-Span and see the nearly empty chambers during each 'debate'?)

Conclusion

We are heading towards a massive funding crisis.  Our self-imposed administrative and regulatory burden is too high.  We can solve both by developing a more rational and cost-sensitive approach to both the number of regulations and the overall size of government.

If we do not, then two out of every three Americans will be dependent on the government for their livelihood in ten years or so.  That is not a sustainable situation and could easily lead to a revolt of sorts among the remaining few being asked to carry the whole weight.  For now, those 'bagholders' happen to be future generations, because we've chosen to mask the true costs with debt.

But debts must always be eventually repaid.

A first act of 'good faith' would be for the state and federal governments to develop a sensible plan for bringing the cost of government into alignment with our actual productive economy.  Capping and then reducing the enormous sets of rules would be an excellent first set of steps.

I would vastly prefer to avoid a massive funding crisis, especially if it's obviously coming and we can head it off at the pass. 

If it's clear that we need to reduce the size and cost of government, isn't now a better time to begin addressing that than later?

I plan on asking all of my representatives, now and on the campaign trail, what they are doing to reduce the size and cost of government.  I encourage you to do the same.

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70 Comments

Jeff Borsuk's picture
Jeff Borsuk
Status: Silver Member (Offline)
Joined: Jul 25 2008
Posts: 150
Re: Governmental Breakdown

If nothing is done then the solutions are limited: en-masse default or "Jubilee" or inflate it away. Then my children get to deal with the fallout.

I'll be asking my representatives what they are doing to reduce the size and cost of government as well.

Thanks Chris!

Jeff

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Our Slow-Motion Crisis

Good read - for someone who was going to be out of touch for the weekend. Hmmm, you wouldn't be a work workaholic?

Hope they found it all by dousing, but still sounds like a mess.

Only our 530+/1 geniuses could come up with something this preposterous. Wonder if the local governmental regulators are exempt from this insanity like Congress is from health care.

Can't wait to see Uncle Buck flat line after the stealth vote.

cat233's picture
cat233
Status: Platinum Member (Offline)
Joined: Aug 20 2008
Posts: 575
Re: Our Slow-Motion Crisis

Thank you Chris for the excellent read!

Cat

 

jpitre's picture
jpitre
Status: Gold Member (Offline)
Joined: Mar 3 2009
Posts: 366
Re: Governmental Breakdown

Chris

Great post !

I knew the government bloat was big, but I must say I am appalled at how big. When you outline the facts and show the comparisons, a sick feeling comes over me in the knowledge that not only are our debt and energy problems nearly insurmountable, but our entire societal system is spinning out of control. Shuffling paper to cut some cost here and there will not get the job done. I shudder to think what the effects will be when a significant portion of the government workforce hits the streets in search of gainful employment

To me it is even more mind boggling to realize that the excess "overhead" as you put it, extends to much of our private sector. The non-productive overhead contributed by our financial sector has doubled in recent years to encompass (as I understand) something close to 20% of our GDP. Add in other mostly non-productive activities such as insurance, legal costs, massive nightmares of accounting for tax purposes, military forces and arms suppliers and I have to wonder who is left  doing anything of real productive value to keep us afloat. We've been measuring increased productivity for years based on fictitious production -- all the while patting ourselves on the back. It is now coming home to roost, and it is my opinion that not many of us even know how to be productive in a real sense

Back to the farm, I guess ........

Jim

 

ao's picture
ao
Status: Diamond Member (Offline)
Joined: Feb 4 2009
Posts: 2220
Re: Our Slow-Motion Crisis

Excellent article Chris.  I remember reading someplace that in 1900, America's population was 76 million and we are now over 300 million yet our federal government has grown 300 fold during that same time!  We definitely need to trim the fat.

spinone's picture
spinone
Status: Bronze Member (Offline)
Joined: Jul 12 2008
Posts: 49
Re: Our Slow-Motion Crisis

I'm a municipal employee.  Public employes are a popular target lately, so this makes me feel a bit defensive.  One of the things I work on is maintaining water and sewer infrastructure.  Unfortunately for government balance sheets, the private sector claimed all activities that make a profit, and left behind all the unprofitable-but-essential ones.  Its hard to make a profit on water and sewer, fire, police, etc.  Much of what we do is fulfulling the demands of unfunded federal mandates.  Don't lump all public employees together, or throw the baby out with the bathwater.

Nichoman's picture
Nichoman
Status: Gold Member (Offline)
Joined: Nov 1 2008
Posts: 422
Re: Our Slow-Motion Crisis

Chris, et al:

Glad you've come to this reality and posted this...I've made this point many times over the past year (recall...am a government employee).

However, your suggestions are too limited, and just scratch the surface.   To reiterate...the government is a "special interest"...that builds empire(s) and consumes power like any entity.

We need more than just what you state, a proper governmental check and balance is missing.  If there was a proper check and balance, we never would have allowed ourselves to get into this predicament.

Your post is welcome, but is a very, very small start...do your 3 proposals require more?  

Our system is not only broken, its busted to pieces...requiring more than just new folks. It requires a process or system of real accountability toward efficient and effective problem solving.

Again, will reiterate, my past experiences at highest levels of executive and legislative branches clearly demonstrate this.  The key decision makers can and almost always do succumb to self preservation versus doing what is right for the people. 

Chris, you refer to the a curve in the road, how can you/we change direction without making real, substative changes?

All readers, please at least consider this point.

2 cents...

Nichoman

(30+ Year military and civil service employee...and consciencious objector to "the system")

Tapani's picture
Tapani
Status: Bronze Member (Offline)
Joined: May 3 2009
Posts: 69
Re: Our Slow-Motion Crisis

"Parkinson's Law works everywhere" -- Michail Gorbachev

idoctor's picture
idoctor
Status: Diamond Member (Offline)
Joined: Oct 4 2008
Posts: 1731
Re: Our Slow-Motion Crisis

Chris sounds like that septic tank situation got under your skin.....I don't blame you the Govt is so idiotic & you can not begin to reason with them. They create some stupid system & you have to deal with it like it or not.

I had a septic tank problem at my house & rather than deal with all the Govt BS I bought my own Backhoe & did it myself. Helped pay for the backhoe which I still have in service.....what a great machine.

I basically work for myself but I am getting so burned out on dealing with the entire mindless BS in medicine now that I am looking at throwing up my hands & just work for someone else. This way I can spend more time covering my backside which is totally unproductive but will keep me from possible getting sued or breaking some law I didn't even know existed.

Side benefit would be I would make less & therefore pay fewer taxes. I would put in fewer hours & spend more time with the wife & kids. I guess the sick people can wait another day or two.

Our current system is failing in so many ways it blows one's mind. Sad part is the cast of characters that are in charge of this mess have no clue IMHO what is causing the problems so there is no hope of them understanding how to fix it. Really there is no fix IMHO because it has already run too far in the wrong direction.

We could start to do things in a sustainable direction which would help but I just don't think they could do enough fast enough to halt the inevitable. Just wait til all those baby boomers land squarely on Social Security. That would be a big load by itself in a good economy let alone what we are faced with now.

Looks obvious to me that the clueless running this show will continue to take the wrong paths. It will be management by crisis as always where it should be management by truly good leadership...... that would be unpopular as there would be more pain than people like in the beginning.

Really your last few reports have been fantastic & confirm what I have felt for a long time. I knew this system was unsustainable by the direction we were going. I am just disappointed in myself in feeling this that I didn't act on this with collecting Gold & silver much earlier than the last year few years.

Chris, you refer to the a curve in the road, how can you/we change direction without making real, substative changes?

We will all be making real, substative changes in a big way IMHO....the economic tsunami from horrific managment will see to this.

EndGamePlayer's picture
EndGamePlayer
Status: Platinum Member (Offline)
Joined: Sep 2 2008
Posts: 546
Re: Our Slow-Motion Crisis

In the early 90s I read material from "Neo-Tech" who's then fanatical rant was that all politicians, clergy and those in administrative positions are financial dead weight (in part because there is more to it than that). I'm sure they are still around as some of thier material made sense. The problem was how franatically they presented it (it was angry at those who "drain" society of all its ability for forward movement). Neo (meaning "new") Tech (meaning technology) has transformed how we live but they wanted to use it for more- to make a "collectively run" 100% transparent government (everyone votes instead of having a senator or representative . . )  It makes more sense now than it did then . . .EGP

petski's picture
petski
Status: Member (Offline)
Joined: Aug 23 2008
Posts: 3
Re: Our Slow-Motion Crisis

Chris,

I'm curious, do you intend to take the $8000.00 tax credit on your new home purchase and add another drop to our federal ocean of deficit?

Subprime JD's picture
Subprime JD
Status: Platinum Member (Offline)
Joined: Feb 17 2009
Posts: 562
Re: Our Slow-Motion Crisis

For the first time in my 27 years i am ready to join the workforce. As i posted earlier i passed the California Bar Exam and will be recieving my license to practice in a few weeks. Its pretty damn scary out there as im hearing alot about layoffs in the public and private sector. Its also frustrating as i have knowledge that my "profession" is saturated beyond belief and has actually become a burden on the economy. Too much litigation taking place has slowed business and has added a "tax" on businesses as lawsuits are flying galore. I decided to go into the legal field 5 years ago, and now that the journey is over i have realized in how big of a pickle i am in. I dont want to be a leach in society, making money off of other people by bringing BS lawsuits. I want to help business owners do business quickly and efficiently. I do understand that many attorneys drag out litigation as long as possible to bill as much as they can. This is wrong and i will not do this in my practice.

Bottom line: i want to use my license as a benefactor for the economy and not be just another leach attorney.

 

Bear
 

EndGamePlayer's picture
EndGamePlayer
Status: Platinum Member (Offline)
Joined: Sep 2 2008
Posts: 546
Re: Our Slow-Motion Crisis

RE: the septic system.When we bought the lake place, the new then system was compliant but within a few years it was obsolete. We wanted to remodel so the only thing I could think of to do was put in a Kyoto Prtocol compliant system and be done with it once and for all (or so I thought).

The county took us to court 3 times in front of a judge over putting in composting systems (which no one but us knew was a composter since the toilt flushes to directly below). It was eco-friendly and since we cared about the water quality of the lake place - we were happy with not being part of the problem. Anyway - it took 3 times in front of a judge to tell the county lawyer it was compliant. . go figure. On top of their outrageous pay - I have to do their job fior them.

If I had it to do over again, I would go with an even cheaper system - goBar! EGP

Back2Land's picture
Back2Land
Status: Member (Offline)
Joined: Nov 20 2009
Posts: 2
Re: Our Slow-Motion Crisis

I too am employed in a quasi-governmental job working as an electrician for the largest water utility in the nation.

The concerns of many that government has become too large is not unfounded, however, my particular job is necessary and vital as I perform a valuable service for a huge water treatment plant which, if privatised, I would shudder to think of the repercussions ala Enron.

We need to make sure that government is efficient and that basic public services do not fall into the hands of privateers who, as has been seen, will seek to profit before the needs of the citizens.

Simple oversight in these matters is all that we need.

Fair wages and pensions is not an unreasonable request. Racing to the bottom is not a better long term strategy.

For what it's worth, I see a third worldization of America coming and it will not be good for any of us (although the environment may fare better as we reduce our consumption and impact on the biosphere).

Prepare people, dark days ahead before the New Sunrise.

 

jpitre's picture
jpitre
Status: Gold Member (Offline)
Joined: Mar 3 2009
Posts: 366
Re: Our Slow-Motion Crisis

Spinone

I think that the problem within our society has more to do with non-productive "overhead" activity in general. It just so happens that government  has a strong leaning towards more than their share of non-productive activity. I don't think that water/sewer, police, fire and the like fall into that trap and from what you say, you are providing essntial service to the people in your area -- and for that, here's a pat on the back.

Chris mentioned "most government jobs either consume or redistribute wealth." which is valid in many areas of governmental activity, but not in the essential services area. I think that in the private sector, the financial services area may offend as badly if not worse that the government at this point in our history as do a number of other private sector activities including a bloated military industrial complex as well as an unwieldy legal system.

My thoughts, anyway

Jim

rhare's picture
rhare
Status: Diamond Member (Offline)
Joined: Mar 30 2009
Posts: 1325
Re: Our Slow-Motion Crisis

Chris, glad your becoming Libertarian. Cool

For those govenment employees that have spoken up and stated that their jobs were critical, I ask why does it have to be done by government? You bring up water, sewer, police - I would counter that there are many private versions of those sytems in use today in the US. Also you said you can't make money on these systems, I would venture to say that get government out of the way and all of these would be the most profitable systems in the world.  Everyone needs them, what more do you need to be profitable?  Some one else brought up Enron, but things like Enron, Fannie, GS, AIG only ended up where they were because of government interference in the first place.  You can't look at those situation at the end and say oh look, we need government to fix them, it's important to go back to the start and ask why were they able to get into the situation in the first place, and I would bet in all cases you find some government regulation at the root of the problem.

And for everyone looking for a solution, we all ready have one.  The Constitution was very carefully worded to limit government.  The federal government has very few responsiblities, states get whatever else the people of each state decide, the rest is left to the people.  This places responsibility on the people, not in government..  I encourage you all to read it if you haven't in a while.

The other thing that would quickly put an end to this is to move to a sound money non-fractional reserve banking system.  If you actually have to tax directly for benefits and people have to put their savings at risk, borrowing and government would be much more limited and serious risk/reward consideration would be given by every citizen.

For everyone that hasn't read Ron Paul's book "The Revolution, A Manifesto" I highly recommend reading it.  It's a short read and if nothing else talks about the ssues of a large government.  I would also recommend reading articles at the Campaign for Liberty.  I have found many of the articles challenging some of my core beliefs. 

 

 

evohep's picture
evohep
Status: Member (Offline)
Joined: Nov 17 2009
Posts: 10
Re: Our Slow-Motion Crisis

Hello from the UK

For those important government employed people whom are providing essential works Chris most certainly is not implying that infra structure support such as water, sewerage, fire services, essential medical help are not important.

These services are without doubt essential for survival, and are indeed highly valuable.

The horror that presents itself to people when they turn on the tap and nothing comes out is immediate. Panic quickly ensues. So many times you never really know what you have until it’s gone (or even just interrupted)

The insane burden of useless, non productive and totally invaluable bureaucracy eats away large parts of ones income. You have to work that much harder to support such a parasitic system.

As ones ultimate survival is dependent on the survival of ones fellow man. Perhaps the analysis of ones work should be in its very 'final valuable product'.

If all our activities were arranged on the basis of providing a valuable final product which accomplished the greatest good for the greatest number of people then by default we should be on the right track.

Reward those whom works are contributing to the survival of not only themselves but also to some greater or lesser degree their fellow man. Penalise those whom works are not contributing some way in the measurable survival of their fellow man.

Selfish non productive works without a measurable social benefit and/or results in some destruction or harm of ones fellow man should be discouraged and most certainly should not receive reward.

Prove to me that the financial crisis in my country the UK (now proven to actually have been engineered) has a social benefit, and I will eat this laptop I am currently using.

Prove to me that our leaders are acting in our best interests. Prove to me that our leader are NOT either satisfying their own selfish interests or conversely just pathetically wallowing in their own abhorrent ignorance and I will eat the table that this laptop is currently resting on.

When these energy crisis phenomena truly hit our economies, these aforementioned items may be the only thing I have to eat.

It has been stated that society is three meals away from riot and revolt.

I consider myself to be very fortunate to have come across Chris’ Crash Course. It enables one to understand, confront, prepare and help oneself and others, to foresee and hopefully overcome the difficulties ahead.

Thank you Chris.

Paul

The UK

spinone's picture
spinone
Status: Bronze Member (Offline)
Joined: Jul 12 2008
Posts: 49
Re: Our Slow-Motion Crisis

Water and sewer utilities have been privatized in other countries.  They are run essentially the same way as they were publically, often by the same employees.  The difference is that excess revenue generated by higher-than necessary user fees (rates) is not used to reduce rates as they must in a public utility, but distributed as 'profit' to shareholders.

Sam's picture
Sam
Status: Bronze Member (Offline)
Joined: Jun 5 2009
Posts: 51
Re: Our Slow-Motion Crisis

I spent years getting an education and sharpening my skills. I went to work for a very large corporation, doing IT work. Over the years, I realized that upon my broad shoulders sat layer upon layer of useless trash who produced nothing. I grow lettuce for the farmers market now. I shrugged.

In response to the government employees who visit this site, your paycheck is provided for you by thugs with guns. If you offered your services in the market most people would gladly pay the true cost of those services. As it stands you are "providing a service" to people whether they want it or not, that is very much like the "protection service" offered by the other criminal syndicates that operate in so many of our large cities here in the U.S.

hsagues's picture
hsagues
Status: Member (Offline)
Joined: Oct 2 2008
Posts: 2
Re: Our Slow-Motion Crisis

Being from Florida, where our state budget must balance each year, and being a govt. employee (education), I'd like to share what is happening in Florida and catching on across the nation. Virtual education has grown expontentially in Florida over that past 12 years. Florida will serve over 150,000 students this year on either a full or part time basis, however this is still less than 3% of the student population.  Back in 2007 an independent study (Florida Taxwatch) concluded that online learning is as good or better than traditional brick and morter learning and saves taxpayers at least $1000 per student (probably more now). The USDOE also published a study this past summer stating that virtual and hybrid models produce as good or better results than traditional brick and morter. Think of the savings that could be incurred across this national if we over-hauled the public school system so that students only needed to attend a physical school building when necessary (testing, physical labs, face to face tutoring). Granted some will need to attend every day if they have access issues or if that is the only place where they can eat (sad but true). But what if 80% of students did not need to attend a physical school every day? Think of the energy savings alone!

Buried within all that govt. waste, there are a few pockets of innovation.

I urge you to read the following report to see what is happening in your state.

http://www.kpk12.com/downloads/KeepingPace09-fullreport.pdf

HS

 

Woodman's picture
Woodman
Status: Diamond Member (Offline)
Joined: Sep 26 2008
Posts: 1028
Re: Our Slow-Motion Crisis

Hi Chris, I hear your frustations with Title 5 regs, as an engineer I've read through the regs several times when designing new systems to be compliant.  But there are actually some elements of common sense in there; an inspection is valid for up to 3 years if you have pumping records.  Another inspection should not be needed if you sell again soon  unless the local Board of Health has a more stringent requirements.  I'd just use a shovel to locate the system next time too; Americans in general need to get used to doing more work by hand again as PO arrives.  More info here on Title 5:

http://www.mass.gov/dep/water/wastewater/faqsprop.htm

Typically homeowners have no incentive to spend $ on their onsite system unless wastewater is heavily breaking out of the ground or there is a backup into their dwelling.  Therefore, at the time of a sale is one of the few times there is leverage by the regulators to enforce compliance.

One funny thing is that wells or septic systems serving a single home are seldom tested, but if you put hook a bunch of those same homes together into a shared community system then period monitoring and testing is enforced.

More regulation and greater levels of water and wastewater treatment is a trend in the past few decades due to increasingly dense populations, especially in States like Mass, and due to our ability to pay for these systems with cheap energy and debt.  We are rich enough in the US to worry about the chance in the long term of 1 additional death in 10,000 people due to cancer from tiny concentrations of compounds like trihalomethanes while other countries are faced with much more acute waterborne diseases like cholera.  My sense is the regulations will plateau as our ability to build and maintain more expensive treatment systems becomes prohibitively expensive.

The state and local regulators in water and wastewater generally are generally reasonable folks to work with and are responsive to sound engineering in my experience.  Some departments were not provided additional funding for more staff to deal with new regs and stimulus programs and are struggling to keep up.  It's when the politicians get mixed up with technical regs that common sense starts to get lost and waste increases.

Getting back on topic...

A good example of the burden of administration you are talking about is in the American Reinvestment and Recovery Act.  The rules are so complex for administering grant funds and low interest loans, in my office we appointed one person full time just to track them for our clients.  Managing Davis-Bacon wage rates, "Buy american" compliance, jobs retained reporting, etc. etc. etc. I estimate adds 10% to 20% of the cost of the project in engineering fees and contractor bids. That's not a Stimulus, that's money right down the drain to me; there's no return on that investment since you aren't even building anything tangible with it.

Tom

 

 

 

joemanc's picture
joemanc
Status: Martenson Brigade Member (Offline)
Joined: Aug 16 2008
Posts: 834
Re: Our Slow-Motion Crisis

One other proposal I would add to yours is sharing resources. I live in a state(CT) where you can get from one corner to the other in 90 minutes. There are 169 towns and cities in that little space. Yet, very few share public services. Think police, fire, library, etc.

One problem we have had in the state is politicians, from both parties, buying votes. When the union contracts come up, the politicians make sure the public employees are taken care of, in exchange for their support during the next election of course. And then there's the whole pension issue. There's been numerous instances where employees have retired with pensions higher than their salaries at the time of retirement, due to loopholes and sweeteners. Now, isn't the whole idea of a 30 year mortgage to get you to retirement age, with your house paid off, so you wouldn't need as much money as your ending salary to live past the age of retirement?

The other night I was at a Green event and the current mayor of the city where the event was held gave the keynote speech. He rightly pointed out that our electric rates are higher than nearby states, which has led to job losses because of higher costs. What he didn't mention were all of the regulations, and taxes, that have driven businesses away and have made it nearly impossible to build power plants in the state. Several years ago, a homeowner in a suburban town wanted to put in a small windmil/turbinel in his backyard. The neighbors were adamantly against it because the windmill would disrupt the scenery of the landscape. The town council denied the homeowner's request to install the windmill.

We certainly have a lot of work to do educating our neighbors, our citizens and our elected leaders about the challenges we face in the next decade or 2.

kelvinator's picture
kelvinator
Status: Silver Member (Offline)
Joined: Dec 25 2008
Posts: 213
Re: Our Slow-Motion Crisis

Realizing that government must be radically downsized, optimized, and cost controlled is actually not the same as being a libertarian.    I agree with everything Chris said in this post, but I also see how the libertarian philosophy (minimal government and regulation and belief in "free markets")   was the guiding principal of Alan Greenspan and other key players who helped run the global financial system off a cliff.   They permitted fraud on an unimagined scale by closing their eyes to their congenial criminal friends dressed in suits selling trillions in worthless loans, securities and derivatives and by refusing to represent the public interest.   The notion that unregulated free markets are going to generate a happy result is not different that thinking that a community without morals and laws is going to somehow be a paradise to live in.  It won't.

The real problem is that our system of governance is very broken at this point.   It's run by special interests intentionally generating irrelevant political drama hopped up by cable chatter for general distraction while deals are cut behind the scenes.  Forget about creating open, serious discussion and real problem solving.  That might hurt some of those huge special interests on all sides.    As Thomas Friedman has said, our ability to come up with innovative, optimal solutions has been paralyzed.  Instead we get 2000 page bills that are the sum of all special interests compromises fought to a standstill and paid for by debt.

The Supreme Court has done its part, heavily influenced by big money.  It has been deciding things like corporations are citizens and money equals free speech.  As one lobbyist (a former Congressman, of course) said, "If you've got $100 and I've got a million dollars, do you think your voice is going to be as loud as my voice?"  I don't think so.

While there is much to be pessimistic about, one thing that has made me more optimistic is finding that I actually have many views in common with people all across the political spectrum, (eg audit the Fed, stop bailing out Wall Street with taxpayer money, enhance real democracy and problem solving).   The only hope at the macro level (Federal, state) is to get rid of the paralysis and somehow get realistic, serious, informed democracy functioning again.    Can this be done by generations of citizens who have let their lunch be stolen while they were hypnotized by paper-thin political slogans, TV escapism and charge-card lifestyles?  I guess we'll find out.   In the meantime, having a Plan B backup for macro failure seems pretty essential to me.  But I still write my Congress people and the White House all the time.  Change is coming one way or another.  It seems best to try to keep the faith and take action putting in my two cents to move it in the right direction.

 

paals's picture
paals
Status: Member (Offline)
Joined: Oct 28 2008
Posts: 6
Re: Our Slow-Motion Crisis

I am one of your creditors. Maybe it's time to listen to your creditors, the people that lend all this money to you.

I don't  think - not for a second - that you can "cut and save" yourselves out of this mess. The only solution is to increase taxes. Taxes on consumption. Introduce a VAT of say 15%. And add a tax of say 2$ per gallon of fuel. This would solve all your problems.

I live in Norway. We produce twenty times the amount of oil that we need for our own consumption.

Still I have to pay $ 7.60 a gallon for gasoline. It is sick that you don't have any taxes to speak of on fossile fuels that you have to import. $ 7.60 by the way is no problem. Gasoline makes up such a small part of the costs of owning a car.

I also pay 25% VAT on more or less everything i buy. This is also no problem as our income-taxes are lower than yours and healthcare, medicines, schools and universities are free.

Maybe the U.S. model doesn't really work anymore. Maybe it's time to take a fresh look at the world around you? You don't have to look further than Canada to see a country that works........

 

 

pmcsh's picture
pmcsh
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Joined: Feb 28 2009
Posts: 4
Re: Our Slow-Motion Crisis

We agree completely that government needs to be much smaller but we're not hopeful that's going to happen. Partly because another piece of this puzzle that no one wants to talk about is population pressure. By some reports we're adding 150,000 new people to the work force--or the not working force-- each month and we're set to nearly double our population in the next 40 years.  Where will jobs for these new people come from?  For most of them there won't be jobs as we think of them today. The 300 million US population will be 400 million and then 500 million. That's going to pressure the government to "do more" not less.  Right now the government is the economy. It's just not likely to make itself smaller. That 58% of the population currently supported by government will push toward 70%, then 80%.  The US will borrow, spend and tax to try to support itself as long as it can, and then it will collapse--maybe not completely, but it has to.  We can't support 500 million people and live the lives we're used to. In the end we think the US is going to look a lot like Indonesia (we lived there 10 years), a huge inefficient bureaucracy and much lower standard of living. It makes all the difference in the world to have a roof over your head, a support system and a little garden. A truely simple life can be very satisfying. Invest in your own security the best you can and in your  friends and community. Make your voice heard nationally, but make local your first priority. A bloated bureaucracy can survive a lot longer than most of us believe and the US could lumber along for years, or go in a heart beat.  We just can't know.  But your close community will be what supports you if things get really hard. In regard to government money, we think take any government money that's given to you and invest it in something to sustain your family or community.  When and if things fall apart that money could turn out to be the best spent government money there was. The real things we've created will be the foundation for going forward, whatever that's going to look like.

ckessel's picture
ckessel
Status: Martenson Brigade Member (Offline)
Joined: Nov 12 2008
Posts: 480
Re: Our Slow-Motion Crisis

Chris,

How the heck did you have time to pop out this report while also being at Rowe??!!!  Great report BTW.

It seems so many of our laws come about because of the desire by "lawmakers" to be doing something to show that they have earned their pay come the next election. At that time they then point to all of the great changes they have made and bills they have sponsored and so on. It is all about quantity and preserving the status quo. Just think of all of the public health benefits that accrued to our great society because of the legislation that requires every septic tank to be inspected upon sale!

The "Americans with Disabilities Act" that came about circa 1990 has provided access to millions of square feet of commercial and public buildings to disabled persons. This act is in addition to building code requirements and is enforcible in courts of law rather than through the permitting process. This enables anyone who cannot access a building to file charges with the State Attorney Generals Office to force compliance.  Don't get me wrong here, I am not in ooposition to accessibility or equality  but what has been lost is the human element. Now it is big business because one disabled person and one lawyer can go from business to business and file complaints which will award them around $4000 a pop plus the business owner has to pay to fix the discretion.  A well known insurance company in Calif recently irritated a disabled patron by raising rates so the individual decided to "get even". You guessed it, that person and a lawyer are going to every office in the state and "ensuring that there is full compliance with the law" to protect the public interest!  The insurance adjuster commented that the persons average income per month last year as reported on tax returns was about $16,000. I think that worked out to inspecting one office per week!

So we make laws to protect and defend and then exploit them for financial gain.

 

spinone wrote:

I'm a municipal employee.  Public employes are a popular target lately, so this makes me feel a bit defensive.  One of the things I work on is maintaining water and sewer infrastructure.  Unfortunately for government balance sheets, the private sector claimed all activities that make a profit, and left behind all the unprofitable-but-essential ones.  Its hard to make a profit on water and sewer, fire, police, etc.  Much of what we do is fulfulling the demands of unfunded federal mandates.  Don't lump all public employees together, or throw the baby out with the bathwater.

Spinone, I have many friends with jobs similar to yours. They do a fine job and care about their product. The point I think is not that your job is not valuable but rather how much administration there is that rides on top of it. How much 'fat' rides on your production? Do you have to support union infrastructure. How about administrative personnel as a ratio of work done to administrative staff. How much reporting is required by Gov't agency for you to prove that you are doing your job correctly? What about safety in the workplace, tools and equipment inspections and so on. All of this requires that it be someones job and it is all above the fellow actually in the field keeping the system functioning.

Firefighters used to be a volunteer organization here up until a few years ago. But it became too expensive for a volunteer to provide all of the required certifications and training just so it would be OK for him to volunteer to help. And the unions didn't particularly like it either because they wanted to be sure that the public interest was being looked out for. After all, we wouldn't want a volunteer to show up at your house without being properly certified. OOPs, am I being too sarcastic here? Anyway, my point is that the work that is done to maintain our infrastructure is valuable and appreciated. The overhead expense is likely way too high to support much longer.  Government IS an overhead expense.

Coop

nigel's picture
nigel
Status: Silver Member (Offline)
Joined: Apr 15 2009
Posts: 145
Re: Our Slow-Motion Crisis

I live on a remote farm. I collect my own water 7500 gallon tank. I have my own septic system. I have my land cleared around the house to protect from fire. I have my own fire fighting tank on a trailer with a pump. I don't have a rubbish service. The roads to my house are unsealed dirt.

I really don't need any government help other than maintenance of the road to my house. I do have a tractor with a grader blade to maintain it myself because it doesn't get maintained often enough. Fuel for the tractor and car are the only real issues I have.

If all residences were self sufficient in terms of water, sewage, power and food, the burden of a government is much lower. If you abrogate your personal responsibility for convenience the consequence is big spending government.

rhare's picture
rhare
Status: Diamond Member (Offline)
Joined: Mar 30 2009
Posts: 1325
Re: Our Slow-Motion Crisis

but I also see how the libertarian philosophy (minimal government and regulation and belief in "free markets")   was the guiding principal of Alan Greenspan and other key players who helped run the global financial system off a cliff.

How can you possible say that!  That's complete socialist rhetoric we get out of the MSM every day.  Alan Greenspan and many of the other key players were incredibly anti-free market.  The whole Fed is anti-free market, since if we were really a free market their would be no FED.  They arbitrarily adjust interest rates primarily for political reasons, and are an anti-competitive banking cartel.  How can you even remotely call that a free market. In a free market you would have competing currencies, no legal tender laws, and certainly no setting of interest rates or printing money from thin air at a whim.  People would be allowed to choose the money they wished to use and the dollar managed the way it is would loose very quickly.

Then if we look at what led to the housing/real estate crisis.  Government interference in the market via tax credits, tax deductions, guarantees of loans (FHA, Fannie & Freddie) and things like the CRA which forced banks to make stupid loans so politicians could get votes.

We haven't had a free market for so long no one knows what one even looks like.  Government is so involved in everything that all markets are deeply distorted.

The notion that unregulated free markets are going to generate a happy result is not different that thinking that a community without morals and laws is going to somehow be a paradise to live in

I think you still have laws that protect property rights, punish fraud. That's it.  Then you let people protecting their own self interest govern the system.  The problem is we chosen to concentrate risk management in the hands of the government instead of distributed among all citizens and look what that has gotten us.   By putting that management in the government you reduce the number of checks on run away corruption. For example: When is the last time you checked to see how safe your bank was?  Are they making reasonable loans, managing a good balance sheet, or are they playing it risky?  No one checks because we have government distorting the banking market by guaranteeing funds through the FDIC.

So I say all the fraud, corruption we have seen are not due to a free market, but have grown to the scope they are now because we haven't had free market forces limiting them.  The main free market force being a sound currency.  After all without free money to play with none of this mess could ever have occured.  We set out on this distructive path a long time ago.

Here are some articles that are more articulate about this than I am:

Free Market Capitalism Killed Our American Economy? A Ghost Story

There Is No Free Market in America

How Can Anyone Blame the Free Market When it Comes to Money?

 

ckessel's picture
ckessel
Status: Martenson Brigade Member (Offline)
Joined: Nov 12 2008
Posts: 480
Re: Our Slow-Motion Crisis
paals wrote:

I am one of your creditors. Maybe it's time to listen to your creditors, the people that lend all this money to you.

I don't  think - not for a second - that you can "cut and save" yourselves out of this mess. The only solution is to increase taxes. Taxes on consumption. Introduce a VAT of say 15%. And add a tax of say 2$ per gallon of fuel. This would solve all your problems.

I live in Norway. We produce twenty times the amount of oil that we need for our own consumption.

Still I have to pay $ 7.60 a gallon for gasoline. It is sick that you don't have any taxes to speak of on fossile fuels that you have to import. $ 7.60 by the way is no problem. Gasoline makes up such a small part of the costs of owning a car.

I also pay 25% VAT on more or less everything i buy. This is also no problem as our income-taxes are lower than yours and healthcare, medicines, schools and universities are free.

Maybe the U.S. model doesn't really work anymore. Maybe it's time to take a fresh look at the world around you? You don't have to look further than Canada to see a country that works........

UUHHHH..........I don't think so Paals. Increasing taxes does not necessarily mean that you will not continue to spend more than you make. Our problem is that we are willing to continue unchecked deficit spending. Since our currency is the reserve currency we print what we need. That is what is wrong with our finances.

I have several Canadian friends and they would disagree with you. It's not that they agree with what is going on in the US, it's just that they think that increasing taxes to support a government that "takes care of it's peoples every need" is not what is desired. Increased dependence on a government that provides for all of it's citizens needs is not what built this country although it may be what will take it apart.

Coop

emhswm's picture
emhswm
Status: Member (Offline)
Joined: Nov 5 2008
Posts: 20
Re: Our Slow-Motion Crisis

I lived in CA when the Governator came in as a reformer - to reform state spending and to shore up the budget - the very shortfalls Gray Davis was run out of town for.

- Ahnold looked at the books as well as the spending and declared, 'this is unsustainable" and he succeeded in establishing ballot intitiatives to curb state spending and reform the pension.

He was cut off at the knees without mercy by both the CA State Public employee union and  CA teachers union - he never saw what hit him.

- these 'special interests', especially the public service employees, are VERY motivated than any other special interest since their very livlihoods (salary, pensions and healthcare) depend on who is in office and their policies - and they have learned how to effect electoral outcomes

- it was amazing to watch Ahnold's initiatives and momentum and popularity crash to a halt when assaulted by these special interest unions.

This 10/09 video below of CA Treasurer Bill Lockyer (lifelong CA -D) scolding the predominant democrat legislature for wreckless spending is instructive ......just before the 1 minute mark he suggests the legislature can't repair the state pension "because of who elected them", where he obviously refers to the CA State Public Employee Union who's very pensions are at issue.

http://www.thefoxnation.com/justice/2009/10/27/video-get-clue-ca-treasurer-scolds-legislature

Chris - I admire and agree with your proposal, but the entrenched public employee union forces are too much.  'Runaway governent' can only end badly and through the painful forces of exogent circumstance. - most likely a funding crisis as you suggest.  The unions, bolstered by the UAW/GM fiasco, will play chicken past the point of no return -

Gotta go find me a Happy Hour   :)

 

cheers,  TW

fedwatcher's picture
fedwatcher
Status: Member (Offline)
Joined: Aug 31 2008
Posts: 2
Re: Our Slow-Motion Crisis

paals,

You make some good points. But the path taken in Norway and the path taken here have led us to different outcomes. Norway's excellent management of its oil surplus is one example. Because in your neighborhood high fuel taxes are the norm, Norway could ignor those who wished for 2 Krona per gallon gas. If we had such a surplus of oil, our voters would be demanding $0.39 per gallon gasoline! We should look to Canada for examples. Unfortunately our politicians are bought and paid for. They have found many Canadians traveling south to the U.S. for healthcare but failed to mention that Canadian Healthcare was picking up the cost. It is indeed cheaper for Canada to send someone accross the bridge from Winsor to a hospital in the U.S. that has an underutilized MRI machine rather than buying an MRI machine for Winsor.

Our disfunctional political system is the cause of our disfunctional economy.

james_knight_chaucer's picture
james_knight_chaucer
Status: Silver Member (Offline)
Joined: Feb 21 2009
Posts: 160
Re: Our Slow-Motion Crisis

Hey Chris,

We have similar stupid regulations imposed on us here in Europe. Two examples:

1.)This year I sold a derelict house to be turned into flats, but due to EU rules, I had to get a £300 Energy Performance Certificate for it before I was allowed to sell it. (The flat conversions will still have to be brought up to current insulation and heating standards.)

2.) If I rent out a house of three or more storeys to five or more sharers, since 2006 I have had to get a 'House in Multiple Occupation' Certificate from the Council, costing £900. In order to get this, I had to have the wiring checked and brought up to date.

There is a strong feeling here that the government see these impositions as job creation schemes. I think governments get these ideas from each other.

James

rhare's picture
rhare
Status: Diamond Member (Offline)
Joined: Mar 30 2009
Posts: 1325
Re: Our Slow-Motion Crisis

Hmm, must be bash the US day...Cry

I am one of your creditors. Maybe it's time to listen to your creditors, the people that lend all this money to you.

Norway's public debt is 55% of GDP, hmm not exactly in the black there. And lets see, Norway ownership of US public debt is .84%.  Not exactly one who lent all the money to us.

We produce twenty times the amount of oil that we need for our own consumption.

Hmm, for now.It looks like oil production started dropping in about 2002, like the rest of the world supplies.  I wouldn't be too smug since if you are on this site, you are probably aware of peak oil. :-)

Still I have to pay $ 7.60 a gallon for gasoline...

I also pay 25% VAT on more or less everything i buy.

This is also no problem as our income-taxes are lower than yours and healthcare, medicines, schools and universities are free.

Free, really? With the two statements directly above that.  You just pay for it in a different way.

$ 7.60 by the way is no problem. Gasoline makes up such a small part of the costs of owning a car.

Hmm, lets see a land mass 1/30 the size of the US with most of the population packed into a small area in the south.  Try living in the western US and you might discover you drive just a bit more.

Maybe the U.S. model doesn't really work anymore. Maybe it's time to take a fresh look at the world around you?

Or, perhaps it's time we got rid of all the socialist crap going on in our country and get back to a limited, free, and prosperous society that we once were before we decided to try all this "free" services without taxes.

A. M.'s picture
A. M.
Status: Diamond Member (Offline)
Joined: Oct 22 2008
Posts: 2368
Re: Our Slow-Motion Crisis

Rhare,

You and your silly facts.

Aaron

rheba's picture
rheba
Status: Bronze Member (Offline)
Joined: Apr 22 2009
Posts: 71
Re: Our Slow-Motion Crisis

We should talk more about this. It is not sufficient to bash the regulatory structure. It was created to try to blunt the impact of big corporations assault on the environment. In order to diminish the need for regulations our society has to redefine the mission of government and to set real limits upon land development - both roads and houses. 

For example, it is pretty well known that the Title V regulations are all we have to stop developers from building in every corner of the Commonwealth of Massachusetts. Does this make sense in an ideal world? No. But in this world it is all we have.

I am pretty sick of the financial bloggers whose solutions to our predicament involve shrinking the regulatory power of local government. First get rid of the developers. Then start talking about DEP. 

Eye's picture
Eye
Status: Bronze Member (Offline)
Joined: Mar 7 2009
Posts: 88
Re: Our Slow-Motion Crisis

" Or, perhaps it's time we got rid of all the socialist crap going on in our country and get back to a limited, free, and prosperous society that we once were before we decided to try all this "free" services without taxes."

Your comment is timely.  Today I concluded we are a socialist country.  What threw me over the edge wasn't  the current taxes, or the current whealth redistribution programs, or the bloated civil service interests.  What really struck me was irresponsable budgeting and the deficits deeper and wider than the Atlantic.  We have been irrevocably "socialized" by force through the burden of our national endebtedness.  Those of us who really produce enough to pay taxes are shouldering the whole burden, now and for our lifetimes.  It has been happening for years and I just finally realized the sheer scale of it.

 

Ken C's picture
Ken C
Status: Platinum Member (Offline)
Joined: Feb 13 2009
Posts: 753
Re: Our Slow-Motion Crisis
rheba wrote:

 

First get rid of the developers.

Rheba,

Development over the last several decades has been fueled by low interest loans, government sponsored programs, and very lax oversight about who should qualify for a loan. If money was harder to get fewer developers would pave over paradise with highways, ugly houses,condos and strip malls.

 

Ken

 

joemanc's picture
joemanc
Status: Martenson Brigade Member (Offline)
Joined: Aug 16 2008
Posts: 834
Re: Our Slow-Motion Crisis
Quote:

I am pretty sick of the financial bloggers whose solutions to our predicament involve shrinking the regulatory power of local government.

The problem with regulations is that they benefit the big corporations and not the small businesses. The big corporations have deep pockets and can more easily get around the onerous regulations. The small businesses? Not so much. I don't think anyone here, including me, is saying to gut the regulations. Rather, we should streamline the regulations so they are fair, both for citizens, the environment and ultimately businesses.

This morning I saw on the news the issue of drivers being distracted because they are texting with their cellphones while driving. I'm sure new laws will be passed and that is going to have to be added to the books at some point. That's a good example of a new and meaningful regulation, or law, if you will.

 

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rheba
Status: Bronze Member (Offline)
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Posts: 71
Re: Our Slow-Motion Crisis

I am going to comment once more on this topic and then retreat since I am feeling sort of troll-like. Where do you all think the internet came from? Where do you think the water and sewer infrastructure that many of you rely upon came from? Perhaps you have to use the word "public sector" instead of government. 

I believe that government has got the wrong mission - partly because it has been seized by special interests but mostly because that is what has made all of you guys rich enough that you have time to sit around blogging instead of killing yourselves in the fields and forests. Everything has been centralized and gotten big and that has worked really well for most US citizens. Now, however, the party is over. We have to deglobalize and relocalize. That is going to be unpleasant for all of us. Most people reading this blog are not going to like it. I hope that the public sector can be turned around - at least at the local level - to make it easier for citizens. 

Signing out. 

 

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igorcarajo
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Posts: 8
Re: Our Slow-Motion Crisis

Great article by Dr Martenson, and some interesting replies. The data about how the average government salary (plus benefits) is twice as high as non-government is mind-blowing. Also I think if we are discussing the issue of government size being unsustainable, we should first look into cutting the welfare programs. Food stamps, public housing, zero or negative federal income tax liability for 47% of people, medicare, medicaid, social security, etc. Those welfare programs need to be seriously curtailed. And also, as has been mentioned, the regulatory functions of government need to be re-assessed and what's useless needs to be cut off.

To claim that Greenspan was a libertarian seems asinine to me. When you read Bastiat's "The Law", it is clear that the libertarian phylosophy is based on the idea of government being a "negative" force. That is, not a force that causes good things to happen (like welfare programs) but a force to prevent (or punish) bad behavior, namely acts against a person's freedom or property. So in the libertarian movement government has a very definite role, and that role is to enforce the law that protects people. So Greenspan and his anti-regulatory efforts were really as anti-libertarian as they come. In a libertarian system, the Fed members would be in jail for printing money and thus eroding my savings; the mortgage brokers and bankers who conspirated to create all of those "teaser" and interest-only mortage loans would also be in jail for fraud; the big fish Wall Street inside players would be in jail for rigging the market. What Greenspan, Gramm, Leach, Clinton, Bush, Bernanke, Geithner, etc. have done is to clear the way as much as possible for their buddies to establish their raqueteering operations with impunity.

igorcarajo's picture
igorcarajo
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Re: Our Slow-Motion Crisis

One more thing, you can't just privatize everything. The most glaring example would be the water and wastewater services. Obviously for a free market system to work, the customer needs to be able to punish the service provider or seller by not purchasing the service or product and taking his business elsewhere. With water, sewer, electricity, or natural gas service, you are limited to one infrastructure, so the logical arrangement is for those services to be operated by the government.

rhare's picture
rhare
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Joined: Mar 30 2009
Posts: 1325
Re: Our Slow-Motion Crisis

With water, sewer, electricity, or natural gas service, you are limited to one infrastructure,

Not true.  I happen to have a well, a septic tank, natural gas and electricity provided by our local utilities.  Some of my neighbors have propane, city water, and city sewer.  I'm in the process of putting in a large Thermal solar array for heat and a large PV system for electricity, and many of my neighbors have done some of these as well.  So none of these services you listed have to be public sector.

In fact in even more densely populated areas you can easily have alternative solutions from different providers.  For example many metropolitain areas now have multiple cable, phone, internet providers.  Granted water, sewer, gas, electric have higher costs associated with multiple providers but it can be done.

The main thing with private companies is they either have to perform or go bankrupt.  If they fail financially then someone else buys up the assets and hopefully does a better job.  With public there is no incentive to do well particularly since they can always count on a taxpayer "bailout".  You also end up with distortions, for example, if we actually had competition how many other inovative ways could some of these services be provided?  Just look at television: we used to have broadcast, now we have C-band satellite (dead), digital satellite (multiple providers), cable, microwave, wireless, phone provider based (ie. fios),data over high voltage electric.  We also see phone  and internet across all these methods as well.  Why, because if you as a consumer get fed up enough with one, you can change and vote with your dollars.

While we talk about competition, this is also why you don't want a strong federal government and you want most services resolved at the local or state levels. Because if you don't like one you can move to a different city/state.  It is much hard to move to a different country although if it gets bad enough people do make that choice as well. 

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cmartenson
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Posts: 5731
Re: Our Slow-Motion Crisis

It's been interesting reading all the comments and reactions to this article.

My main point was not to say "there's no value to government services" as some interpreted.  Nor was I bashing local government and services as others thought.

Instead, I intended to spark a discussion about the observation that the it really does not make sense to have 2 people drawing a government paycheck for every one person working in manufacturing.  Further, with every passing year we overly complicate our lives by adding more and more rules and regulations without ever seeming to stop and ask "do we have too many?  How many are too many?"

At what point is the sheer size of government no longer a help but a hindrance?   Certainly we can all agree that zero government (Somalia) is not a suitable condition in today's world while we can also hopefully agree that having 100% of the economy consumed by government spending would also be an undesirable state of affairs.

The point here is actually have an open, fact-based discussion about the proper size of government.  I have put a stake in the ground and made the case that the US government (state, federal, local) is now past the point of being either suitable or sustainable and so it will (and should) shrink.

It's really just a matter of assessing our priorities and making hard choices, both of which will be features of our future whether we wish them to be or not.  So why not start now while time and resources exist to have those discussions?

I'd rather do this before a major funding crisis causes a disaster-spree of hacks and cuts to necessary services even as relatively or entirely unnecessary ones are funded and preserved.

 

 

 

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mktqwn
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Posts: 22
Re: Our Slow-Motion Crisis

At what point is the sheer size of government no longer a help but a hindrance?

 

Chris,

You are right on the money with all your comments and I thank you for them.  Having two small family owned businesses, most people have never had the experience of dealing with the local, state and federal governments.  We deal with all three every week and it is rare that the experience is nice and/or helpful.  The general public has no idea how the laws and regulations have increased each year and the time it takes a business to deal with them and comply.  All this time and money used to deal with the government could be used instead to increase profit and hire more employees instead of being overhead.  Unfortunately, there seems no end in sight.

I feel the focus has been lost that we, the taxpayer, are the customers and need to be treated as such in customer service and the laws and regulations in this country.

As business owners, we cannot think of any reason why someone would want to start a small business in today's envirnoment and that is truly a sad statement for this country.

As always, thank you, Becca, your family and staff for your wonderful work and your time!  Teresa

 

 

 

GregSchleich's picture
GregSchleich
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Posts: 187
Re: Our Slow-Motion Crisis
cmartenson wrote:

The point here is actually have an open, fact-based discussion about the proper size of government.  I have put a stake in the ground and made the case that the US government (state, federal, local) is now past the point of being either suitable or sustainable and so it will (and should) shrink.

Jefferson said, “The natural progress of things is for liberty to yield and government to gain ground.”

After 232 years, I think it's pretty clear, we're looking at another exponential curve here!

Here's a short easy article that puts things in historical perspective, and in my view, does an excellent  job of  explaining the very natural, if unfortunate process by which  we got into this mess. The article explains, not only the inevitable tendency for government to grow, but also the unfortunate tendency for it to become captured by special interests. It also features some remarkably prescient observations by Alexis de Tocqueville, who even in the absence of monopoly public education and the corporate media, cynics like me like to blame, pessimistically predicted we would be "reduced to nothing better than a flock of timid and industrious animals, of which the government is the shepherd." Sheeple anyone?! The guy had us pegged 175 years ago!

As I see it, we've long forgotten how to govern ourselves. Just as de Tocqueville predicted, we've become wholly absorbed in our own private affairs, leaving governing to "others." And so naturally, rent seeking special interest groups have all too generously moved in and assumed that responsibility for us.

http://pmcms.socialsecurityinstitute.com/news/essays/totalitarianism-in-democracy-tyranny-by-committee/

From the article:

Dr. Lawrence A. Hunter Ph.D. wrote:

... Yet, here is the conundrum, the great contradiction of democracy in America today: Despite the widespread agreement that government in 21st-century America is too large, people from all points on the political compass also expect government to solve their personal problems, guarantee them financial, employment and healthcare security, deliver an ever-increasing array of “public services,” enforce egalitarian precepts of fairness in institutions public and private, manage the economy, police the world and even control the global climate. How is it that Americans hold such contradictory views about government, complaining bitterly about its size, scope and reach while perversely encouraging politicians to grow it even bigger and more enveloping with each passing year?

French philosopher and author Alexis de Tocqueville untangled this contradiction while visiting the United States a half century after the founding of the Great American Experiment. In his classic work Democracy In America, de Tocqueville explained how and why the “natural progress of things” of which Jefferson spoke operates as a ratchet toward a new type of despotism in a democracy. De Tocqueville observed: "It is in the nature of all governments to seek constantly to enlarge their sphere of action; hence it is almost impossible that such a government should not ultimately succeed, because it acts with a fixed principle and a constant will upon men whose position, ideas, and desires are constantly changing."

In a democracy, de Tocqueville contended, the electorate actually will facilitate the growth of government even though the vast majority of citizens desire just the opposite:"Democratic eras are periods of experiment, innovation, and adventure. There is always a multitude of men engaged in difficult or novel undertakings, which they follow by themselves without shackling themselves to their fellows. Such persons will admit, as a general principle, that the public authority ought not to interfere in private concerns; but, by an exception to that rule, each of them craves its assistance in the particular concern on which he is engaged and seeks to draw upon the influence of the government for his own benefit, although he would restrict it on all other occasions. If a large number of men applies this particular exception to a great variety of different purposes, the sphere of the central power extends itself imperceptibly in all directions, although everyone wishes it to be circumscribed."

One-and-a-quarter centuries later, the Public-Choice School of economics emerged, beginning with Nobel Laureate J. Kenneth Arrow’s great work Social Choice and Individual Values and followed by the seminal work of James Buchanan (also a Nobel Laureate) and Gordon Tullock, The Calculus of Consent. Public-Choice scholars formalized the insights of De Tocqueville and the American Founding Fathers regarding the failure of majority rule to achieve the public interest (what they called the General Welfare) but instead to generate factions and rent seeking, which act as a political dynamo constantly inflating the size and reach of government and transforming government from a public trust into a special interest.

Again, de Tocqueville succinctly summarized the nature of the problem in a democracy, especially in a commercial democracy such as he found developing in America:"Private life is so busy, so excited, so full of wishes and of work, that hardly any energy or leisure remains to each individual for public life...[that] men can never, without an effort, tear themselves from their private affairs to engage in public business…[Thus people abandon the public business] to the sole visible and permanent representative of the interests of the community; that is to say, to the state…The love of public tranquility is frequently the only passion which these nations retain [which] naturally disposes the members of the community constantly to give or to surrender additional rights to the central power."

This central authority, de Tocqueville lamented, becomes a velvet despotism in which: "Power is absolute, minute, regular, provident and mild...For their [citizens’] happiness such a government willingly labors, but it chooses to be the sole agent and the only arbiter of that happiness; it provides for their security, foresees and supplies their necessities, facilitates their pleasures, manages their principal concerns, directs their industry, regulates the descent of property, and subdivides their inheritances: what remains, but to spare them all the care of thinking and all the trouble of living?" 

The result, de Tocqueville concluded, is emergence of an enervating Leviathan that: "After having thus successively taken each member of the community in its powerful grasp and fashioned him at will, the supreme power then extends its arm over the whole community. It covers the surface of society with a network of small complicated rules, minute and uniform, through which the most original minds and the most energetic characters cannot penetrate, to rise above the crowd. The will of man is not shattered, but softened, bent, and guided; men are seldom forced by it to act, but they are constantly restrained from acting. Such a power does not destroy, but it prevents existence; it does not tyrannize, but it compresses, enervates, extinguishes, and stupefies a people, till each nation is reduced to nothing better than a flock of timid and industrious animals, of which the government is the shepherd." ...

rickets's picture
rickets
Status: Silver Member (Offline)
Joined: Jun 8 2009
Posts: 238
Re: Our Slow-Motion Crisis

Thanks Chris,

I think your points regarding responsible sized governments points out to me what is the greatest threat to our country.

California has an 84 Billion dollar budget.  Depending on what estimates you read, they are increasing debt at about the rate of 7 - 15 Billion per year.  By next year, CA looks to be roughly 20 Bln in debt.  I know these numbers are rough...but my point is:

Its almost funny that all they need to do is reduce spending by 12% to balance their budget?  Really?  How many American families and businesses have had to scale back by more?  That is really not a big deal.  Whats scarry is that they cant seem to even cut 5%.  Whats scary is that all they do is prolong difficult decisions.  Whats scary is that if they dont make those cuts, the whole country is likely to pay. 

California will be interesting - as so goes California so might go the country.  I dont know that folks from more responsible states will allow for a federal bailout of California.  I dont know how anyone living in Colorado or Texas (as random examples of more fiscally responsible states) will allow their federal tax dollars or their federal debt dollars to go to bailing out a state that cant even cut 12% of their bloated budget. 

My guess is that by mid next year you will start seeing people not only angry at their federal government as they already are, but angry at their neighboring states.  I  find it unreal that the federal government has adopted different durations for unemployment benefits depending on which state you live in (yes, the worse off the state the more welfare you get).  This cant last and continue - as at some point those who have acted with prudence will tire and then become enraged at paying for all those who spend spend spend.  Why does a guy out of luck in CA get more months of unemployment than someone in CO?  That is absurd. 

We all know the federal government is likely to come to the aid of CA and NY....the question is will that be the straw that breaks the camels back...

 

 

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Our Slow-Motion Crisis

I've been reading all this stuff with interest, but not commenting, it's all americacentric and irelevant ot me anyway. What has puzzled me ever since I got involved with this site is how much Americans love to bash their governments!  And I mean bash for over reaching, because of course here in Australia we love to bash our governments too, but it's usually for not doing enough...  For instance, there is currently an outcry because the State gov wants to sell some assets like the rail network.  And I mean like 80% or more of the people are totally against it, ditto with electricty grid.....

So I started wondering why our two quite similar cultures vary so much on this particular point, and I now think it might be because the USA is too big a country, too unwieldy to "govern"  Of course I could be wrong, I'm just putting this forward as an explanation.  Another symptom of "too many people"?

Whilst we have far smaller governments here (notwithstanding our state government amalgamating some of our city councils to turn them into, yes, unmanagable super councils which have been raising taxes!) we too are prone to stupid regulations. Like the plumbing department naking me replace all my 1/2 inch cold water feeder pipes with 3/4 inch stuff, a reg brought in because people are building ridiculously large mcmansions with multiple bathrooms and toilets.  Our toilet doesn't even flush for goodness sake!

So now we use more water than we used to.... and I pleaded sustainability (as opposed to insanity :-) ) to try and stop them..... to no avail.

Mike

 

GregSchleich's picture
GregSchleich
Status: Silver Member (Offline)
Joined: Jan 16 2009
Posts: 187
Re: Our Slow-Motion Crisis
Damnthematrix wrote:

I've been reading all this stuff with interest, but not commenting, it's all americacentric and irelevant ot me anyway. What has puzzled me ever since I got involved with this site is how much Americans love to bash their governments!  And I mean bash for over reaching, because of course here in Australia we love to bash our governments too, but it's usually for not doing enough...   ...

So I started wondering why our two quite similar cultures vary so much on this particular point, and I now think it might be because the USA is too big a country, too unwieldy to "govern"  ...

Mike

Surely you don't  think this site is representative of the general public? Because unfortunately, most Americans are probably a lot more like Australians. In fact, they seem to think it's the government's job to solve all our problems - and the rest of the world's too. That's how we got into this mess! Many people, particularly those among the 40% or so who don't pay taxes, don't seem to understand that everything the government gives,  it has to take away from someone else first. And of course, as de Tocqueville pointed out, even when Americans do prefer smaller government, they still want it to be active on behalf of THEIR particular cause. And so it grows anyway. I tend to doubt there's much of a difference between Americans and Australians in this regard. 

But I think you may have a point about the USA being too big and unwieldy to govern. Even at the time of it's inception, when it was a much smaller country, it was never the intention of the founders (except Hamilton) to have such a powerful central government, but rather a federation with more power residing in the states. I also have to cynically wonder whether our government may just be more fully captured and corrupted than any other, because it represents by far the biggest prize (the highest rent) to the rent seekers (banks,multinational corporations, etc.). Also the privileged status of the dollar as the world's reserve currency allows our government to print that much more recklessly, paying for it's bloated programs through inflation and generational theft more shamelessly than any other country.

But I'm also surprised you find this to be irrelevant over in Australia. To one who is obviously very concerned about climate change and peak oil, I would think our nearly trillion dollar "defense" policy and our primary role in promoting globalism, which in my view exacerbates poverty and facilitates far cheaper resource extraction, affects the entire world very dramatically, not just Americans.    

Greg

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Our Slow-Motion Crisis

Sorry if I didn't express myself properly Greg, when I said irrelevant , I was strictly speaking of the American government bashing...

Mike

GregSchleich's picture
GregSchleich
Status: Silver Member (Offline)
Joined: Jan 16 2009
Posts: 187
Re: Our Slow-Motion Crisis
Quote:

 ... unfortunately, most Americans are probably a lot more like Australians. ...

Mike 

Speaking of expressing one's self properly, I'm not sure this came out exactly right!

But you know what I mean

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