Sunday, July 24, 2011

Running Government Like a Business

If a business is losing money, its leaders must take timely and appropriate remedial action. Either that or it will soon be forced to close its doors.

Similarly, if we are to fix our problems as a country, we need to put our financial house in order now. Our national security depends in large part upon our financial strength. Beyond national security, our individual freedoms and world leading standard of living are based on our free market based entrepreneurial economy. Capitalism and freedom go together. It's as simple as that.

Our freedom and our capitalism are interdependent. Together they form the underpinnings for our American way of life. We need people, including but not limited to politicians, who are not only willing to try new things but to learn from those trials. By so learning, we can undo that which needs undoing and keep improving that which is working.

To Err Is Progress reviews the book "The Beginning of Infinity". While I haven't read the book, I recommend that you take a few minutes to read the article containing its review. The book makes the point that the scientific method of acquiring knowledge applies to government as well as to virtually everything else.

The book's author argues that for centuries knowledge virtually stood still. In the reviewer's words, "Conformity reigned, and innovation was suppressed." After the scientific method became accepted, mankind's knowledge progressed rapidly as evidenced by the scientific and industrial revolutions.

What struck me most about the review, however, was the following reminder, "We also advanced in the political realm, replacing archaic forms of governance with more just, representational systems." He goes on, "The greatest threat to continued progress ... is our belief that we can achieve--or, worse--have already achieved--ultimate solutions. We must accept that we are fallible ... and hence that our knowledge is tentative and improvable no matter how definitive it may seem at the moment."

Our forefathers did a terrific job in laying out for us the Declaration of Independence, Constitution, Bill of Rights and related documents such as The Federalist Papers. Yet we haven't achieved perfection, and I'm quite certain that our founding fathers would agree that we never will. We're not even close to perfection. Nor shall we be. Not ever, at least on this earth.

So let's admit our fallibility, learn from our mistakes and proceed accordingly. The recommended approach would be to hurry up and find what doesn't work, so we can try something else that may work, and go from there. And so on.

So why do the self described political progressives work so hard to act conservatively and perpetuate what doesn't work, despite overwhelming evidence to the contrary? And why do the self described conservatives cling to whatever's been done just for the sake of keeping things just the way they are, despite overwhelming evidence of the need for change?

The Great Society of Lyndon Johnson didn't work. and President Reagan, although he tried, didn't change us from a tax and spend society to a fiscally sound society. Under his watch, we went from tax and spend to tax and borrow. Long before that Hamilton advocated a permanently funded national debt, whereas Jefferson took the other side and believed that each generation should pay off government debts in their entirety.

As a country, we began with slavery, women not being able to vote and other inequalities while professing that all are equal. But we righted those wrongs and many others along the way to today, too.

From where we began, we've changed a lot of things for the better, and our forefathers structured the Constitution so that we could do so. We the People can change our Constitution when we deem it necessary to do so. Let us look at Prohibition, as an example. We voted it into existence and after a short trial repealed it.

Times change, people change, our knowledge changes, and we change how we do things. The national experiment with individual freedom continues today. That's our way. The American way.

My problem is this: for some reason, we have a hard time "unchanging" the things that, based on objective evidence, clearly need changing. Once something comes into existence, it's virtually impossible to vote it into extinction.

Well, you know what? That has to change, too. The scientific method has to apply. Always. Try it and if it works, improve it and keep going. And if after a fair trial we learn that it doesn't work, then let's try something else, or even stop trying. Just leave it alone and see what happens. Then proceed accordingly.

What's all this experimentation talk all about? Well, simply this. Let's start looking at our government and economy by agreeing that nobody has the final answer. Because nobody does. And let's agree that our society is at its healthiest when it is rapidly evolving as opposed to when we're in a state of equilibrium. The main idea is simply to preserve order in the midst of change while changing in the midst of order. All the time. Keep it stable, but keep it moving, in other words.

With our government's finances it's time to take out a clean sheet of paper. A zero based budget system. Let's start by asking whether what we're doing can be best done by government or outside of government and in the private sector. Maybe we should start with social security and medicare/medicaid and education.

But whatever we choose to tackle first, let's decide what to try and then move on to something else. But let's agree to pay for whatever we do as we go along. Let's not stick future generations with the bill. Jefferson was right about that one, for sure.

Today we'll look very briefly at a few simple things that we could do and that would go a long way toward solving our financial problems as a nation. It's as simple as 1,2,3.

We'll begin with two of my favorite formulas: (1) If we're doing the wrong thing, we're probably doing it poorly. (2) If we know where we're going to end up, we may as well save time and start there.

With that in mind, here goes.

(1) Increasing revenues -- Government usually tries to raise revenues solely by increasing taxes. This is often counterproductive and results in lower tax receipts than had it done nothing as its effect on private sector activity tends to reduce business activity and therefore tax receipts.

That said, one very realistic way to expand government revenues meaningfully would result from selling our services and products to more customers and in more countries. Aggressively expanding oil exploration, production and refining activities would add countless jobs and generate genuinely large government tax receipts. It would also reduce the amount of oil imports on a dollar for dollar basis and by so doing, the cost of imported oil would come down. As a result, other economic activity would expand as consumers had more money to spend. In turn more tax receipts for the government would result. Transportation costs for businesses would also decrease, thereby generating more profits and more taxes from the more profitable U.S. businesses. This is a no brainer.

Growing more food for export would also produce more income, jobs and government tax receipts. We should encourage the agricultural sector to sell its wares throughout the world at market prices. To do that, we simply need to resolve to become world class price competitive. Our costs are already quite competitive in the world.

Same with manufacturing. We need to grow our manufacturing business and exports, too. We also need to earn more domestic business from foreign competition. By taking off the gloves, we'll increase jobs, revenues and income across the board.

There it is. 1,2,3. There are many more opportunities as well. We must adopt an all out aggressive economic growth strategy. We accomplish this by adopting a world class competitive take no prisoners approach to making, growing and drilling our way to market share gains across the board.

(2) Reducing operating costs -- This is actually a pretty simple process. And it's not difficult either, assuming there is the political will to do it. Eliminate any expense which isn't driving revenue or isn't absolutely necessary as we seek to slay the sacred cows, of which there are many. The main idea is to initiate an effort to produce and sell more stuff at less expense per unit of output, and with less government involvement wherever possible. That's productivity in its raw state. Strive for less input for each unit of output.

(3) Reducing fixed costs -- Stop building government buildings for a starter. Then reduce staffing in government offices by at least 20%. Begin with the highest paid staffers, and go from there. The department of education may be the best place to start, but it really doesn't matter as long as we start.

In the end, if we adopt the attitude that anything we're doing can either be eliminated or done better, we'll be well on our way to lasting success. Our only problem is to find the will to tackle these issues in an aggressive manner now. If we know, as we do, that we'll have to face these issues sooner or later, let's opt for sooner. How about now?

Thanks. Bob.

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