Path Forward

Things have been busy and I haven't put anything on here since the end of February. While I believe the main purpose of this is for me to journalize my thoughts it is a very useful tool for that purpose.

There is so much going on that need to be talked about that it isn't easy to decide where I want to start. I guess since the economic issues tend to be my primary focus I'll start there. We are currently playing politics with the Debt limit and while I think everyone agrees that we need to make some fundamental changes in the way we spend and tax, not raising the debt level is simply unacceptable and will lead to a tremendous impact to the economy. This is so unacceptable that any party that is seen as responsible for this will be dooming themselves in future elections. So we will watch the Republicans threaten and all the Democrats really need to do is stay reasonable and wait. It reminds me of some positions taken in a misguided fashion by totalitarian regimes who later paid a heavy price.

We have three things we need to do to solve our current fiscal deficit.

First, we need to increase growth in this country and the first thing that will help that is to switch from foreign oil to domestic energy, gas and coal and eventually renewable. The jobs and related taxes from this type of effort will be a stimulus for the economy and will protect us into the future.

Second, we need to review spending, and this includes all spending. However, the reductions cannot be at the expense of our social obligations. Republicans like to throw the word socialism around and almost always inappropriately. However, the issue is not socialism but social conscience. Of course the wealthy and upper middle class can do perfectly well without Government help. However, if you believe that all citizens are entitle to adequate health care and at least some minimal financial help after a lifetime of working and paying taxes, we can not now gut Social Security and Medicare. Yes some changes to make the programs more affordable may be necessary, but don't fall for the idea that we can transfer all the responsibility to so many of our citizens who are not able to handle it. We don't have a time machine so we have to deal with the present situation and not discuss the failure of both parties to take appropriate measures in the past.

Third we can not ignore the revenue side. I believe we can make fundamental changes to our tax system that will lead to a more competitive business environment and more revenues. We need to encourage business in this country by making sure we don't impose hidden taxes as well as the public ones. Perhaps the greatest hidden cost is the cost of health care that we make employers in this country pay. Most of our competitors finance health care via the tax system making this not a direct business cost. I have heard a lot of silly things related to health care and I don't hear anyone dealing with this fundamental issue.

I hope to discuss these issues more in the near future.

Productivity Fairness

Its just about the end of February and while its a bit premature, I feel Spring is almost here. Spring is time for renewal as we see the cycle of nature continue (at least outside the tropics).

Oddly, the Arab world seems to be in the midst of their own renewal, one that doesn't happen every year. Its hard to figure out exactly what the result of all that turmoil will be, but its probably safe to say that it won't result in any new utopias.

Looking around the world we are faced with a dilemna. We have mastered significant technology and can produce goods and services more productively than ever before. This is wonderful news, but it has one major downside. This productivity results in many once productive people becoming, as the British say, redundant.

So as we have improved productivity, the result has been that the benefit has accrued to a smaller number of people and many others find themselves unemployed with no good prospects.

Think about it. In general we produce enough food and have fairly adequate distribution systems. We can't get the food to some people and others simply cannot afford it but the food exists. Similarly for manufactured products, we don't have a shortage. In fact generally we produce too much. Even as some third world countries expand their standards of living, the demand will not requre the employment of all the redundant people.

The only real answer, and one that doens't seem all that likely right now, would be to distribute productivity gains differently, reduce the hours for workers while increasing their hourly wage to compensate. The current distribution goes like this. If a workforce of 100 people has a 10% productivity gain, the company profit increases and 10 people are let go. The 90 remaining people do not directly benefit, except they got to keep their jobs, and likely because of the firings didn't get much in the form of a pay raise. The alternative would be to reduce weekly hours for all by 10% and continue to employ all 100 workers.

Now in this simplistic equation, I have ignored the fact that the competitive marketplace forces some of the gains to be passed along as lower prices, and the reason this tactic is not tenable is that firms who tried it would become non-competitive.

Of course, if all firms operated this way it would level the playing field, but you know someone would undercut the prices.

So how is the world going to employ all the redundant people?

Where we are

If you take a bit of time to consider how we are evolving as a nation, there are a number of trends that are very obvious. The amount of labor required to actually produce goods keeps decreasing as we deploy more and more technology and other productivity improvements. In the product delivery cycle, we need less people to produce just about everything, need to store less of it as we have improved logistics, need less people to sell it as we have improved on-line commerce. Where you used to get significant information from salespeople who might even visit you, now that is becoming unnecessary as more and more information is available on the internet.

The people who we do still need in this cycle need to have more skills than they once did. They need to be machine operators or tech gurus, able to provide value. Those with the right skills are in demand and since I think they will remain that way. Yes we will improve training, but the creative thinking the new society requires has always been in short supply and there is no reason to believe it will become commonplace.

We have also seen the same developments in the service industries which actually account for more jobs in this country than the goods producing industries. Lower skilled service level jobs are disappearing as artifical intelligence get better and better. When I was younger, to open a broderage account required actual interaction with real people, and was a bit time consuming. Further, transactions also required actual interaction to give your order to a broker. Now, we have tools that allow you to open an account, fund it, make trades and get informaion without actually talking to anyone. I assume that at some point a person is involved, but I guarantee one person can handle an exponentially greater number of accounts than in the past. The so called robo signing crisis in the Mortgage industry is simply an example of our judicial system failing to keep up with technology. Inevitably, the laws will adjust to the new way things get processed. And yes, some mistakes will be made, but trust me, there will be fewer mistakes than we used to have using people, although technology does have the capability to make outrageous mistakes that most people would never make.

So, all these trends tell me that we need less, more highly skilled people. What then about the people who simply don't fit. Now don't get me wrong, there will always be some jobs for relatively unskilled people in many areas that don't lend themselves to technology, although think about things like traffic enforcement where we now manage to fine people without actual human intervention using cameras. Creative people will find ways to transform more and more things to be more productive. We clearly will be left with a percentage of the population that simply don't have the skills required to fit.

The only real opportunities for many of these people is become true service providers. I believe we will see, in fact I think we already see it, a world where we find it easier and cheaper to buy services that require little skill but do requrie time. Shopping, cleaning, chores are areas that at one time were handled by servants. Most of us are not going to hire servants per se but you can hire companies that will shop for you, clean your house, do your chores in a sort of on-demand way, making it affordable for many more of us.

Logical Decisions?

One of the things that is clear that when emotions get enflamed people make decisions that are not in their own best interests. As a retired federal employee, I stay in contact with that community. Now let me say that in general, these are people with good guaranteed pensions and assuming they made the right decisions at retirement affordable health care. However, last year, it seemed more and more of them (certainly not all) became emotionally connected with the tea party movement and joined the “get rid of Obama socialism faction”.
Now, however you feel about Obama’s policies or whether they had a socialist tendency, one thing was always abundantly clear. He was going to be better for federal workers and retirees than the alternative. Now, of course if you believe he was going to lead to the total collapse of civilization as we know it, opposition is logical, but I don’t think that was the general belief. So, assuming the expressed opinions of these people reflected their votes, they would have voted for tea party type candidates.
Now they are faced with federal pay freezes and attacks on their benefits and interestingly, despite their votes for exactly those things, they seem surprised. Additionally, they are blaming Obama. Now, while Obama is still the President and has to make tough decisions, does anyone not understand that he is forced to accommodate the new majority in the House?
One is almost face with an inescapable conclusion that the animosity towards him is based on something other than reality.

America’s Future

In every era there are people who are "Chicken Little's" convinced that the sky is falling. They always feel that this time is different, these challenges are unprecedented, and that basically we are facing a doomsday scenario unless we take some sort of drastic action.

Of course they have always been wrong in the past, and I suspect will always be wrong in the future. The primary reason they are wrong is their belief that people are, well stupid.

If we are engaging in a destructive behavior, and we all do to some extent, we will change that behavior when it becomes obvious to us it doesn't work. Now, consider all of our current problems. We have a large deficit. Why? Well in addition to some tax cuts enacted when we had a surplus we decided to engage in two significant combat operations and subsequently had a major economic collapse. We clearly could have predicted the problem if we had thought about it, but politics led to the policies that led to the deficit. Now, the deficit isn't a good thing but does it mean that the country is about to collapse? Hardly! Of course we have a bunch of new politicians who ran against Government but now that they are in office seem to think that Government action can solve this problem. Let's get real. The deficit will be reduced as the economy improves. This is a double edged solution as we get more tax revenues and need to spend less on our social requirements. Does that mean the Government shouldn't take action to reduce spending? Of course not, but without an economic recovery it won't solve the problem and if we overdo it, we will jeopardize the timing of the recovery.

What we are most likely faced with for the next decade or so is an adjustment as America weans itself from foreign oil and becomes more self sufficient in energy production. This will create hundreds of thousands of jobs and help reduce unemployment, while reducing our trade deficit, increasing the tax base and helping to stimulate the overall economy.

Actually, if we really wanted to stimulate the economy, we should open the doors to a much greater number of young immigrants who will seek the American dream, work hard and help support our aging domestic population.

America is a very rich country. We have abundant resources and create a tremendous amount of wealth each and every year. We have recently been exporting a lot of that wealth, and that has to change, but the best way to do that is to encourage domestic industries.

There needs to be a debate in this country about what constitute basic Governmental obligations. In the modern world the population of a country is dependent on services that in our pioneer days were simply not feasible. Realistically we have many people alive and productive today who would be dead in the 18^th century. We have people living longer and to a large extent, because of the evolution of our societal values, no longer supported by an extended family structure.

The good old days had some good things, but make no mistake about them, people died younger, worked longer and suffered from things we just wouldn't accept in today's society. The number of people in this country who ever lived or worked on a farm is a small percentage and getting smaller all the time.

America's future is not a return to the little house on the prairie; it is a modern internet based technological society that is part of the entire world. We should embrace it.

Congressional Theatre

We witnessed the public spectacle that the new congress will be for some period of time got started yesterday with a reading of the Constitution. Now, the version read left out parts that had been amended over time and I don't really care about that since the whole thing constitutes waste and abuse since I would like to think the congress should be conducting business instead of theatre.

Of course saying there is waste and abuse in congress is probably unnecessary since they have so much of it. They did cut their own budget by 5% but are now going to engage in some additional play acting related to repealing the Health Reform Bill.

Now we have a lot of people who were elected because a certain portion of the public was angry and went out and voted. Remember that the turnout was typically low for a mid-term election so the mandate is really the feelings of about 25% or so of the American public, many of whom I firmly believe were caught up in the concept of "throwing the rascals out".

The cause of our economic problems is unrelated to the Health Care Reform and probably unrelated to anything the current Administration has done. What the current Administration failed to do was get us out of the mess we were in, and it is questionable if there is really anything that would have accomplished that in the first two years.

The good news seems to be that the economy has picked up some steam recently; however, it is still easily derailed. The new crop of congressmen may be the cause of the next train wreck if they don't actually get to work and stop posturing.

Solutions, not Blame

We think of the New Year as something of a natural event. After all it highlights the fact that the earth has completed another revolution around the sun. Of course the date we pick to celebrate this event is arbitrary. In ancient times, it was often celebrated in the spring to commemorate the fact that there was a rebirth of the world, symbolized by new growth. The spring is clearly a more logical choice, but our use of January goes back to the Romans and has been incorporated into our modern calendars.

We like to reflect on the New Year and consider areas that we could improve. Many of us do this individually. We also see many articles about things we can do better as a society, or ways to improve our finances, lose weight, meet members of the opposite sex, etc., etc.

The general idea is that reflection can lead to improvement, if we consider what didn't work and what did. However, human nature being what it is, you can most likely reprint the very same self improvement articles/blogs every year since we continually make the same mistakes.

There is one thing that we, as a society, could do that would help improve our future and the future of our children. That would be to adopt a forward looking approach and not a backward looking one. Unfortunately, it is much more common, because it is generally much easier to assign blame than it is to fix a problem.

Now clearly wrongdoing should be punished, but honest mistakes are not wrongdoing. When you consider the spill in the Gulf, the majority of the coverage both at the time and afterward was about how someone was at fault. I read an article the other day that depicted the last moments on the rig before it exploded and while interesting it ignored what was the real issue. The failures to act were the result of what proved to be poor decisions. Poor decisions are unfortunately something that humans do. Of course had the specific scenario been anticipated and if enough information had been available, perhaps an action could have been initiated to prevent the explosion and much of the resultant spillage. However these actions were drastic and the fear of overreacting is often the greatest fear of all.

What should happen now is that lessons learned from the event should help improve future training and improve future decision making. Hopefully this is going on at all the major drillers and it should make future drilling safer, not foolproof, but safer.

We usually don't know when catastrophes are avoided. I often read criticism of our anti-terrorism efforts as being ineffectual. Of course the criticism is usually voiced by someone with a vested interest. What matters is the absence of terrorist acts. Yes, our countermeasures incorporate reactive strategies, based on known terrorist attempts, but these strategies have prevented a repeat of 9-11 for almost ten years. The terrorists haven't taken a vacation but clearly we have become a more difficult target. Could we be better? Of course we could and suggestions to improve our efforts could be valuable, but criticism for political or economic gain is unproductive.

We are faced with plenty of problems to solve. Instead of spending so much unproductive time trying to blame someone, we need to focus on solving our problems.