Nancy Pelosi & California

Reading the news today I see the following from Nancy Pelosi:

"The American people have an anger about the growth of the deficit because they're not getting anything for it...If somebody has the idea that the percentage of GDP of what our national debt is will go up a bit, but they will now -- and their neighbors and their children -- will have jobs, I think they could absorb that, and then we ride it out and bring money in."

Ah yes, the California way: Spend money you don't have and by some miracle of a God you don't believe in, it will all be okay. Oh wait, California is going bankrupt. I forgot that. In fact, California has been forced to put a 10% increase on every persons paycheck to try and balance the budget.

A little economics 101 for Speaker Pelosi:

1. If people have less money, they don't spend as much.
2. If people don't spend as much, businesses don't sell as much.
3. If businesses don't sell as much, they lose money.
4. If businesses lose money, they fire people.

In other words, California is about to insure that they can't fix the economic problems they're having. In fact, they'll be making them worse.

Now, of course, Nancy Pelosi wants to help do for the rest of America what she has helped do for her home state of California: Drive the rest of America into bankruptcy.

Yes, Ms. Pelosi, we do want to see more Americans with jobs. But we don't want to do it at the expense of a massive amount of future jobs when the American economy collapses under the mountain of debt that you, the rest of the Democrats, and, for the 8 years prior, the Republicans and George Bush helped us amass.

Here's an idea: Get us out of Iraq and Afghanistan (save money in the short term), change the focus from health insurance reform to actual health care cost reform (save money in the long term), start helping small businesses succeed and get much needed capital (creating jobs), and streamline the way our national government works (save more money in the long term).

Health Care, Not Health Insurance, is the Problem

I've been listening to a ton of "health care" debate and the fact is, what we're dealing with now, is a "health insurance" debate...and it's ridiculous. Here's why: Health insurance isn't the problem! The problem is the cost of health care itself.

To give an example: United Health Care, everyone's favorite, evil health insurance company, pays out 82% of all premiums collected to hospitals. Even if they could be run at the 3% administrative rate that Medicare claims to be run at (which is bogus because that number doesn't consider fraud), their customers would only save 15% on their total health care expenditures. With health care rising at about 6% a year, it will only about 3 years before any savings on insurance costs are eaten up by the actual health care costs.

Despite what the politicians and media are saying, the major problem we have to solve is how to bring down health care costs and not how to get everyone insured. Yes, insuring people is a concern, but the biggest issue we're facing is the cost of care.

It doesn't matter if the government runs that as a sole payer, a public option is available, or it's all handled by the private sector. Until we figure out a way to actually fix the cost of the care itself, we will continue on a path towards either bankruptcy as a nation or serious restrictions on health care.

My next health care post will give you all the solution to the problem. Stay tuned...

Why Liberals Should Oppose the Health Care Bill

I listen to a lot of conservative and liberal talk radio. Almost universally the conservatives are against the current health care reform and the liberals are for it. The one liberal complaint is that it doesn't go far enough. They want a single payer system.

But the bill that has passed the house and is going through the senate should scare the bejesus out of liberals. Why? Because as much as you may not want to admit it, democrats will not always be in control of the government. Imagine if there was a single payer system where the government was in complete control. Now imagine that President Bush was back in office or that, may heaven help us, Sarah Palin were to get elected president of the United States.

Pretty scary thought, isn't it? What do you think uber-conservatives would do if they were in control of the nations health care? Not only would payments for abortions be completely banned but any stem cell treatments would probably be banned too. You can completely forget about medical marijuana being funded. I'm pretty sure they'd put strict restrictions on pain medication...

You get the idea. Everyone screaming for the federal government to take over our health care system, ask yourself this question: Would you still want this system if the other party was in control of it? I assure you that one day they will be.

No Incentive, Lousy Employees

Running my own company has me thinking more often about business and economics. Lately, I've been considering the effects on an organizations of having an effective incentive program. After walking into the post office today, I have no more doubts: The inability to fire someone has seriously negative impact on performance. The same can be said for fixed pay structures (think teachers union).

So what happened to me today? I had to run to the post office "quick" to drop off a package. It was about 1:00 when I walked in and there were about 5 or 6 people in line in front of me. A pretty decent sized line for my small post office down the street. Now you would think that, being right around lunch, a popular time to run errands like going to the post office, that there would be 2 or 3 people working behind the counter.

You would be wrong. There was just 1 person.

You would think that if 5 or 6 people were standing in line and waiting, on average, 15-20 minutes to get service (which is how long it took for me), that someone else would be called out to work one of the 3 empty counter spots.

You would be wrong again. Instead, the one person behind the counter just kept plugging away, methodically and slowly, servicing each customer in line. I know they have more employees because I've been in there before and seen 2 of them working, albeit very slowly, while a third person putzed around doing nothing as a long line of people was gathered.

So with 20 minutes to kill while standing in line, I started thinking about economics. A common theory in economics, and most private businesses, is that to get someone to do something, there must be an incentive.

Consider the following examples:

1. I ask you to dig a small ditch for me but tell you I'm not going to pay you anything. You'd probably refuse.
2. I offer you a $1000 to dig the same ditch. You'd probably do it.
3. I tell you I'll pay a $1000 whether or not you dig the ditch for me. Almost everyone would take the $1000 and a lot of people wouldn't dig the ditch. Those motivated by guilt might do it but even they would probably do a lousy job of it.

Being a government employee is pretty much like option #3. It's almost impossible to get fired and your pay structure is determined almost entirely by how long you've been working. Your pay has little if anything to do with how good of a worker you are. So, at my local post office, as long as they show up for work, they're good to go. The problem is, once they've shown up for work, they have little motivation to hurry, make customers happy, or do anything above and beyond the absolute minimum they must do.

A similar position holds for those in the teachers union, the UAW (auto workers), and airline unions. Is it any wonder that our government, schools, auto industry, and airline industry are all in trouble? It's not a coincidence, it's a lack of motivation. Make it clear to all of them that they can get fired for not performing and you'll watch productivity skyrocket.