Reform! And our new Shadow Government!

Delving deeper and deeper into the "Health Care Reform" bill makes me feel almost dirty...unclean. It brings back uncomfortable memories of when I moved about with communists, socialists, and various "revolutionaries" in an attempt to understand their mindsets and to better understand how propaganda worked.

I did this as a teenager...back in the sixties...always fascinated by propaganda of various regimes and movements, of which my father was a scholar and kept a library of such work, and I wanted to see how people related to such brain-washing in real time. After having read Soviet prop-agit magazines and newspapers for years, it was easy to "go undercover" and talk the talk...blending in believably with real radicals.

Some, I soon discovered, were simply lonely, or lacked self-esteem, or were bored upper middle class kids looking for adventure and a sense of faux danger. Others were dangerous individuals...very manipulative, controlling, and lacking any moral compass whatsoever.

The one I recall the best was twice my age, in his mid-thirties at the time, and he led the movement in the region and was commandant of the secret cell. He kept the lists of who would be imprisoned, or executed, once the new socialist regime was established. He was at once vicious, and cowardly...afraid literally of his own shadow and convinced the FBI was behind every corner. I don't think he knew, or could socialize, with anyone over the age of eighteen.

I remember most vividly his 12 year old girl friend...you read that right...who lived with him in his basement apartment. She had been "given" to him by her parents, real nut case left wingers, who wanted her to become a revolutionary woman of the world and to learn at his feet. His sexual liason with this child should have been what worried him about the long-arm of the law...but his real paranoia was that the "secret police" were always stalking him because of his brilliant mind and the danger it posed to capitalist society.

He was a truly disgusting slug of an individual...and it was extremely difficult to pretend to adore him like the other kids did.

Needless to say, the months I spent mingling with these loons, most harmless but some truly psychotic, gave me a pretty solid ability to recognize and follow their progress as society changed and they went "mainstream"...abandoning their battle fatigues for three-piece suits.

One of their most telling traits was a complete paranoia of everything private...private property owners, private businesses, private non-profits, and even privacy itself. They could not tolerate anything or anyone not being monitored by them...as everyone but them had to be evil capitalists...and in their minds the perfect monitoring system was to control agencies and use those agencies to monitor everything and everyone.

Thus, when I started hearing about health care "reform" my propaganda radar started blipping. The word "reform" is a hot button word. Such words are used to alter the listener's perception of reality, to misleed, to cloud the thought process by invoking an emotion, and to discredit the subject of the story. "Reform" insinuates that there must be a criminal or fraudelent behavior to be addressed and someone to be brought to "justice."

Obviously to anyone who has read the health care bill, the writers have no intention of making health care available to all, but have designed an elaborate bureaucracy which will smother any person or organization in the health care field with constant filling out and filing of reports. It's also quite obvious, reading between the lines, that the writers truly believe all involved in the health care field are evil money-grubbing leeches sucking the lives out their patient/victims.

As I read it, I felt as if I were once again in darkened, secret, meetings with the marxist wannabees of my youth...stridently discussing bringing down all of society. The sense of paranoia is strong throughout the document, if you know what you're looking for, as is the near psychotic need to be inside every office, every exam room, and every discussion between patients and their evil health care givers.

Now all of this may make the old Professor sound somewhat over the edge...and without my rather unique education and experience I would not have seen the background of this bill to the extent I do.

So here's a challenge...read the bill yourself. Actually think about the actions the bill is demanding of private individuals and companies...and try to come up with logical reasons why these demands are in the legislation...reasons outside of a paranoid need to control everything not government. Then go one step further, as I've done, and try to find out who...in congress that is...WROTE THE BILL!

This massive tome, you may recall, was rather suddenly introduced to congress seemingly out of nowhere. It is supposedly a house bill...but I have been unable to find anyone, either in congress or on their staffs, WHOM KNOWS WHERE THE BILL CAME FROM!

But look fast...this loophole will be closed soon. I'm not the only one out there who has come to the realization that congress...the folks we hire to write legislation...was not responsible for this document. Soon they will be assigning some poor scapegoats to be the "authors" in order to waylay such accusations (probably a group of staffers who they can afford to let go).

And be prepared to study other bills that suddenly "appear" on the floor of the house. This will not be the last...the nuts have come together again...only this time they are not hiding in basements and raping underage girls. This is time they are hiding in the highest levels of government...and we may be their intended victims.

The Professor

Health Care Reform? Can't afford it!

With a huge sigh of relief, the Professor has finally finished doing the job of Congress...

Yes...I've read HR 3200, the Health Care Reform legislation as it's come out of the house. Now keep in mind I didn't analyze every paragraph in detail, as the majority of this huge use of paper is taken up in definitions and pointing to other sections of the bill. But I do, finally, have a rough idea of what's going on here.

I'm pretty certain that's a lot more than any of our Congressional members can say at this point, having heard them go on about it to the media. It's a lot more than most folks will ever be able to say, as wading through this claptrap is a mind-numbing experience at best.

Between definitions of every facet of the health care industry, and how every facet has to be changed to meet new federal standards, and requirements for personnel and administration of any company making a medical device, a drug, providing any type of service, and actually...heaven forbid...finding time to practice medicine...I'm amazed they got so much into the thousand plus pages.

Anyone in the health care industry today understands that efficiency in operations is the key to getting costs down and making products and services more affordable. This is why procedures that used to cost hundreds of thousands of dollars now cost thousands. It's why we can buy generic drugs, that didn't exist a decade ago, at discount stores for under five bucks.

One of the main administrative costs in hospitals, clinics, and practices today is the managment of insurance claims, billing, and invoicing. You've likley noticed, when visiting your own doctor or dentist, that there are more bodies in the front office than there are in treatment rooms. Every doctor needs up to half-a-dozen support staff just to survive anymore.

A great deal of study has gone into making these admin functions more efficient. Something that private business does better than any entity on earth is to figure out how to control costs. Every business owner is aware that every dollar wasted is money from their own pocket.

Government, on the other hand, is extremely good at piling up costs and increasing expenses beyond belief. It's simply the way government functions...the larger the agency, the more the waste and the less it performs for every dollar it sucks in.

The major problem with this health care bill is not philosophical...it's not about losing control of your ability to make decisions with your physician without a counselor being involved...it's about costs! And the costs are stunning...well beyond what anyone has even begun to calculate, because most of those costs will be passed on to the consumer and the provider. And it is a short-fused time bomb!

The bill is more than 1,000 pages...and almost every page...read it yourself if you don't believe me...creates another 2 to 4 forms for the industry to fill out and file with the government.

Some of those forms are required for every patient...some for every patient visit...some are annual, some quarterly, some monthly...most are arbitrary. Most would appear to be on the wish list of some petty bureaucrat who wants to monitor some little tidbit of some business with which they may well have an axe to grind. From diversity forms which will prove the doctor doesn't discriminate against any and all types of victim groups, to forms proving a prescribed drug meets cost-benefit ratios, to forms recording financials and requiring justification for all billings...the burden is unbelievable and crushing in its volume.

It literally seems as if a thousand people contributed to this bill...each certain that his or her set of forms and requirements were absolutely vital to making the health care system work...and none knowing that the other 999 folks were also requiring a report and a form.

Taken as a whole...our health care industry will need a couple of years to hire people to wade through this bill...try and decipher what it means...try to come up with reports and forms to fill all the requirements...and every manufacturer, practice, clinic, and hospital, will have to hire armies of admin personnel to try and keep up with these reports.

You think health care costs are high now? Brother you have no idea what's coming down the pike. This is a tidal wave of bureacratically enforced expenses that will crush any and all who wish to serve the public in health care...and the people who want to receive care as well.

The estimated costs of a couple of trillion dollars if this bill becomes fact...waaaaaaay too low. This could run a hundred times that over the next decade and simply put every provider and vendor out of business.

Anyone want to tell me I'm lying...read the bill. Check out the Library of Congress...it's in our links...and pull up the text for HR 3200. It's a simple thing folks...break the bank and there ain't no more banks. Break the health care system...and where will you go when you need help.

Well...there's always Canada! Maybe they can squeeze out some aspirin and bandaids.

The Professor

Negotiating the Red Herring

Good negotiators have long used a tool called the "Red Herring" to increase their odds of cutting the best deal for themselves. The device is used to confuse an opponent, waylay their fears, give them the impression you have surrendered something so they should as well; or all of the above.

The Red Herring in the current health care "reform" legislation being argued now in public venues is referred to as "the public option." Recall this is that part of the bill which states the government will create a federally funded and mandated health care insurance plan as an alternative to the private sector which has served us so well (there are actually people who feel this to be a superior alternative to the government giving vouchers or "health care stamps" to folks so they can buy private insurance...thus making use of an existing industry and saving hundreds of billions of dollars in the process.)

The reason for the "public option" and for a government run program of course has nothing to do with supplying health care to the needy among us. It has everything to do with a lust for power, and even the culture of Malthusian Economics with its focus on "scarcity" and eugenics for the sake of the "environment." Oh...the creation of that purposeful misconception however, is not a Red Herring...it's simply a lie!

A Red Herring is a negotiating point you intend to give up before you begin the negotiating. The second thing to strike me, after reading through the entire bill...as overly wordy as it was...was that there was no actual plan for a "public option." There are pages of platitudes...but nothing that would constitute an actual "business plan" to move it forward. That was the first sign to me that it was the Red Herring of the upcoming negotiation.

The first thing which struck me reading the bill; there was no need to spell out the public option! The remainder of the bill is designed very specifically to economically destroy the private health care industry which is the envy of the world. Once the hospitals are going bankrupt, the insurance companies have closed their doors, doctors are taking early retirement, and the nursing shortage becomes acute...the government can declare an "emergency"...much as they did with GM...and simply confiscate the segments of the industry piece-by-piece.

That will be the beginning of a new "public option"...or in this case an "only option."

This is a very smart way of sneaking past the public outrage...the citizens may feel they've won the negotiation, when in fact they have simply played into their opponent's hand. Like a bluff in Poker, abandoning the public option now will keep the players in the game so the government, with the winning hand, can take all. And don't kid yourself...they will.

There is only one problem however, but I'm sure the administration can talk around it. That 20% of the population who actually think government run industry is superior to private, are already screaming the president has failed them. Even the more radical leftists in Congress and the Senate are not understanding the ploy...of course how bright are radical leftists...they actually believe their own absurd hooey (I used to play poker with a bunch of socialists when in undergrad school...it was like taking candy from babies).

That means the Prez will have to either tough it out...and then please them in the end when the industry crashes...or he will have to speak to them and tell them how the plan is going to work. If he does that, however, someone in the media...probably at the Washington Post or Fox, as they are about the only honest media outlets remaining...is going to make those speeches known to all.

Then the public will know they've taken the Red Herring...and they won't like the taste of being lied to again. And the angrier we get...the harder it is for our employees...particularly those in Congress...to pretend they don't work for us.

So watch for the Red Herring...it will come...and when it does remember that this bill in its entirety needs to be scrapped. Actual health care coverage for those who need it and want it is available through simpler and cheaper options...and could be written and passed with everyone's concurrence if the power-mongers will simply step out of the way and let the people get it done.

The Professor

Another Painful "Reality Bites" Issue

Ah yes! The Cash for Clunkers issue just keeps giving...sorry about that...but this program provides such a wonderful learning tool.

Today, let's speak to an economic principle we call "consumer conditioning."

This principle tells us that consumers, like you and I, are actually able to learn and to adjust their buying habits to their own interests. Pretty shocking concept...we do what we feel is best for us...not best for producers or government.

Cash for Clunkers is a perfect example of how to condition consumers. First off, the bait is pretty darn good...up to $4,500 given as a virtual gift to entice one to buy a new car. This is not the sort of gift we take for granted, or just shrug off. WE WANT THE MONEY! AND WE WILL CONTINUE TO WANT THE MONEY!

Therein lies the problem. Car companies and dealers wanted this program to help "kick start" car sales. It did that for the first 4 days until the money ran out. What happened then? Did sales continue? We're they "kick started"?

Well...duh...no! Shoppers came in...found out there was no more money...then went home to wait until more funds were allocated to the program.

Should this have surprised anyone with about a week's worth of business experience?

Of course not! The prospective buyers came in the door wanting their $4,500. When the money wasn't there, they went home. Then sure enough...a week later the funds came through...twice the amount as in the first package.

Oh joy! The dealers are excited...the buyers are again showing up...but this time the dealers are sharing an uneasy feeling. They have begun to realize that consumers are now getting conditioned. In other words...when this money runs out...no one will be coming in the doors. Prospective buyers will sit at home and wait for more money to come in.

It won't matter how adamently the government, or the dealers, or the car makers, insist and advertise that the money is never going to be coming...the consumers will stubbornly wait.

So the government might cave in again...consumer behavior will then be set in concrete. It could be years before folks give up and figure they will just have to pay full price for their new cars. Car sales, in the meantime, will hit all-time lows and will devastate the industry.

The short burst of sales enjoyed by the industry will be just that...a slim ray of sunshine before the industry collapses under this shortsighted promotional gimmick. It's easy to believe government people thinking up this program...it's hard to understand why industry personnel would not have tried to stop the madness before it began. Of course, that lack of awareness could help explain why the industry was having problems in the first place.

But to replace those original sales figures, which were down by a few percentage points, with this uncertain future, shows a lack of business acumen normally seen only in government agencies, and particularly in this administration.

The Professor

Bureaucratic Friction Defined by Clunkers Program

Having received some feedback on my last post criticizing the Cash for Clunkers program...I just couldn't help myself...

I have to post an "I told you so" post now that phase one of the program has come to completion. After all, this is a classic example of government waste, and one of the more wasteful ones at that. Don't believe me...or understand how it could be? Read on dear reader and see if you don't agree.

Congratulations to the Obama administration and its cadre of economic and business geniuses for so clearly demonstrating how "bureaucratic friction" works. For those non-economists out there, bureaucratic friction is a term for the loss of production in the economy due to the size and inherent innefficiencies of the organizations in the ecomony. Every organization is inherently less than 100% efficient...the larger the organization the greater the loss of efficiency.

One of the major chores facing management is to constantly seek means of decreasing this inherent loss of efficiency. Every human being has a set amount of production they can do in a set period of time...say an eight hour work day. If we start with a measure of ideal production, then start subtracting time spent on other issues, like breaks, we get a very simplistic measure of inneficiency.

The real measure is actually a result of all the frictions faced by the person in a day. The mind simply wanders, work is not scheduled efficiently, the pace and delivery of other persons with whom our subject interacts slows the process...meetings, phone calls, putting out "fires", customer issues, materials and tools issues....any of a vast number of distractions take away from the original estimation of how much this person could actually do in a day.

A really well-run firm, with motivated and happy workers, if accurately measuring their bureaucratic friction, might uncover a loss factor of 20 to 30%. In reality, it would be really difficult to do much better.

We can also look at how money moves in and out of a firm...what we call cash flow. We can uncover certain innefficiencies through this methodology as well. In a private company, we might find that expenditures of $100,000...for example...result in productive activity of $92,000. In essence, we find certain losses inherent in the operation of the company...in this instance an 8% friction loss. Management can attempt to isolate these "leaks" and patch them up. This is a rather straightforward way of measuring how well the firm and its processes are managed.

In a private company, this 8% would likely be considered too high and remedial steps would be taken immediately. If $100 grand was spent, they would want $100 grand of goods to come out the other end. Of course, this ideal is impossible to attain thanks to bureaucratic friction.

In government, it's quite another story. We have to remember that the real goal is not to get value from money spent...it's to get the spenders re-elected. The folks spending our money...and remember it is our money...want only to impress us with the benefits they "give us" or make us feel we have received something for nothing, or will receive it in the near future.

Thus; Cash for Clunkers! The government is "giving" you up to $4,500 to buy a new car. Pretty sweet deal...right?

Well, let's remember they had to take that $4,500 from someone first. "That's okay" you think, "it probably came from some rich guy who won't miss it."

Remember again, that the rich guy would have spent it on something...possibly something you make at your job...and would therefore help guarantee you keep your job. But that's a philosophical argument that can easily be shrugged aside.

Let's look at reality however; this may change your whole outlook! Remember bureaucratic friction....the law of bureacratic friction tells us there must be some loss of revenue due to the inherent friction within an organization. In this case, the US Government agencies which manage the Cash for Clunkers program. How much loss could there be? After all...all they do is give out checks to car buyers...right?

Let's do the math: the first phase of the program cost one billion dollars...that's $1,000,000,000. The number of cars sold, according the news media and the government posts, was under 25,000. Crunch those number and you get...$40,000 per car!

$40,000 per car! That represents bureacratic friction of some 90%. For those who haven't yet caught on...the Obama folks spent $40,000 of your money...gave about $4,000 to somebody else...and kept $36,000 within their agencies as overhead!

Boy...that really helps "kickstart" the economy doesn't it? You might notice that the agencies which kept the $36,000 don't produce anything of value. Therefore your $40 grand was also used to pump up inflation and devalue the dollars you still manage to keep after taxes are deducted from your paycheck.

Such a deal! Still like this program?

Here's the really scary part: Cash for Clunkers is small change...imagine the bureaucratic friction inherent in government taking over some 20% of our free market economy....say perhaps the entire health care industry! You think an operation is expensive now? Wait till these geniuses start to manage things.

We Americans choose to spend hundreds of billions of dollars every year to keep ourselves healthy and alive as long as possible. As a people with a certain amount of disposable income, this seems a pretty good choice of what to spend it on. After all, you can't enjoy fancy cars or clothes if you're dead!

Imagine if those hundreds of billions, which now go nearly 100% to giving us better lives, were suddenly "filtered" through a government sieve that removed 90% of the production value of that money? It will be the death of healthcare quality and quantity as we know it.

Where we now pay $40,000 to crush a car...we could eventually spend enormous amounts of money to provide us with all the bandaids and aspirin we'll need for the rest of our suddenly shortened lives...but only if the government run health care system works as efficiently as everything else government does so well.

The Professor

Cash for Clunkers is the biggest Clunker of all!

The so-called "Cash for Clunkers" legislation is out of money after 4 days and those in congress who know nothing about basic economics are running around like the proverbial chickens with their heads cut off; screaming for more good money to follow the bad.

For those living in a closet, the program was designed to reach a couple of goals;
1) boost sales for the flagging auto industry...a good portion of which the government now owns after stealing majority interest away from the stockholders and pensioners.
2) get more people driving "politically correct" automobiles
3) force lower income people onto public transportation...or if unavailable...out of work and onto the government dole

"Whoa" you say...you never heard about goal number three? Duh...of course not...the manipulative demagogues in DC never spell out their hidden agendas clearly and plainly (hence the term "hidden agenda"). For those folks mentioned above (the closet dwellers) this agenda has been out there for a couple of decades...mother earth is weeping you know, and the enviro-nut types have been pushing everything from housing clusters, to public transport, and even to dramatic population reductions to help the old gal out.

Never mind the "old gal" has been hanging in there for more than 5 billion years and has survived everything the galaxy has thrown at her...THIS is a planetary emergency and drastic measures have to be taken!!! After all, the global temperature might rise by a degree or two in the next couple of hundred years...then again, scientists say it might drop by the same amount. NO MATTER...WE MUST PANIC NOW!

So Cash for Clunkers is just another stupid program to make the salivating nut cases out there think they are fooling us into acting the way they feel we're too stupid to act without them.

For those without an education in Economics...especially if you've fallen for the dealer sound bites about what a wonderful weekend they had and how they sold soooooo many cars the recession should be over lickety-split....allow me to pour a little cold water of reality on the situation.

Let's first create an example; a grocery store. Let's say the manager forecasts the next few weeks are "make it or break it" time and cash flow has to pick up or he'll have to close the doors.

He decides to make a bold move....everything in the store goes on sale 2-for-the-price-of-1 for one week only. As forecasted the store is packed the next week...people especially purchase all they can carry of necessity goods that don't spoil. Toilet paper...light bulbs...detergent...canned goods. The manager is ecstatic.

Then the following week comes along. Sales are suddenly down even more than before. A couple of weeks later, sales are still in the toilet...and the store closes its doors.

What happened? People pre-purchased stuff they knew they would need for the next few months, sometimes longer. They no longer have to go to the store...they have most everything they needed. Fresh goods, they still come in for...but everything else they're stocked up on, and did it at half price...reducing the store's margin below profitable levels.

Just because you pay half the usual price for laundry detergent doesn't mean you'll do laundry twice as often. You just store away the extra and shop less often.

It's the same with autos. If you've got a clunker, you're eventually going to trade it in for a new car...that's the normal option. By incentivizing you to trade it in next week, the dealer gets a deal now...which he would have gotten a few months down the road anyway. So now the deal doesn't come through the door at a later date. The dealer has gained nothing but an earlier sale.

Cars aren't like candy...if you get a great deal on candy you may eat yourself sick...then buy more. You won't go buying extra cars because of a sale...you'll simply buy your car when the sale happens.

Net result...despite the hoopla, no more cars will be sold than would have been sold otherwise. So what is the result? The answer can be found in the legislation...to be specific, that section that spells out the complete and total destruction of the car traded as well as its engine. The idea is to make sure that car is not available to anyone...period...no matter how well it may have still run or how many years it might have served a person needing cheap transportation.

How many cars are purchased for under the $4500 price ceiling this program can pay for a trade-in? Hundreds of thousands every year! They go to students, recent graduates, folks who need a second car for emergencies, military families, those down on their luck who need basic transportation to find and keep a job...most of us have been there. My first car, which I needed to get to my first job, cost a whopping $25 and I sold it a year later still running great.

That market place has taken a nose-dive! People have jacked up the prices for the most basic beater they have in their driveway. Recently I sold an old van, which I was simply tired of paying insurance for, at a price of $500. It wasn't pretty, but ran great, got over 20 mph, and didn't burn an ounce of oil between changes.

The man who bought it was unbelievably grateful...it was perfect for him. He'd just gotten a job as a contractor's assistant and needed something big enough for his tools that was dependable and affordable. It made me feel good to see him so excited and happy to find such a deal.

A person would be crazy now to sell a vehicle like that...it's worth up to $4500 in credit for a brand new car. Why should I care if a usable vehicle would simply be destroyed rather than help someone keep their job and pay their bills?

Any economist will tell you, even at first glance, this legislation is designed to hurt the low-income and struggling members of our society. There are a number of reasons those in power completely support this concept...some mentioned above...others having to do with increasing dependency, and therefore loyalty, to the nanny state.

I know...pretty cynical...this would be the first time in history a government tried to manipulate behaviour...not hardly!

That has been the history of governments for the last couple of thousand years...what a shock the US government is finally beginning to follow historical patterns. A lot of us have apparenty forgotten why our founding fathers established this nation in the first place...how we were supposed to break the historical mode of tyranny.

But how about saving the planet? Poor Mom Earth is still weeping you know! Here's a thought...how much energy goes into building an automobile? Actually, more than a life time of energy that will be saved running it if you're simply increasing the mileage by 5 or so mph.

When you crush a car which might have run another 50,000 miles or more, you're actually throwing away evergy that can be far greater than the savings you would experience with the new car over that 50,000 miles. Add to that the energy used to destroy the car and it's engine, and the toxic chemicals used to freeze the engine, and old Mother Earth is wondering what idiot thought up this scheme.

When the numbers are crunched...big surprise...this program creates more pollution and waste than it saves. Destroying autos that simply have to be replaced by industrial generation is not "green"...it's "brown"...and a very dirty brown at that. This situation does help illustrate how bright the enviro-nuts actually are of course.

This program does put money into the pockets of the middle and upper-middle class...money which the IRS will have to get back from them at some point of course...but people feel good up front. The "green" types will get all fuzzy and warm, there will be some positive publicity from those short-sighted folks in the media, and some folks will get a new car a bit sooner than otherwise....other than those "advantages" I'm still digging hard to find some reason to support this legislation.

I guess too many years in economics and business have just ruined my ability to fantasize a good result out of a stupid government program. Sorry about that...hope I didn't ruin someone's otherwise blissful day...

Go buy a new car...I know it always makes me feel better.

The Professor