The Nanny State Rules? – We Loose
March 9, 2008
Walter Williams’ recent article, Liberty Versus Socialism, reminds us that government control of our personal lives leads to a loss of liberty. Read his full post.
A fortnight ago, I wrote about Mississippi Legislature House Bill 282 that would have imposed fines or revoked licenses of food establishments that served obese people. Fortunately, the measure died in committee. State Rep. Ted Mayhall, one of the bill’s sponsors, justified it by saying that he wanted to bring attention to the fact that “Obesity makes people more susceptible to diabetes, which puts a further strain on the state’s financially-challenged Medicaid program.”
What other issues can put additional financial strain on state budgets? I can name quit a few, and Williams provides us with good food for thought. Read more
Bernake Calls for Reductions in Mortgage Principal
March 4, 2008
Outrage of the day. The fed chairman is suggesting that lenders actually lower the principal of mortgages for those having difficulty covering the rising costs of their subprime loans. Read more
Business Survival Depends on Three Critical Success Factors
March 4, 2008
About two years ago I took a graduate-level class – jammed into four days – on business operations. Drilled into our minds were the critical success factors for any business – service, quality and cost.
Since a co-worker is taking the same class this week, and a post I recently read on SigForum by author JALLEN deals with the same subject, I thought it timely to post here.
Provide service, on time all the time; at the lowest justifiable cost; at the highest justifiable quality. It’s a balanced triangle you see, and JALLEN sums it up quite well.
Every day the gazelle wakes up knowing that it must eat enough, and drink enough, and exercise enough so it can be faster than the fastest lion, or at least not be the slowest gazelle. If the gazelle doesn’t spend the time grazing, or going to the watering hole when it is supposed to, and spends too much time grab-assing in the meadow with its buddies, it risks spraining a leg, running out of hydration, not get enough to eat, and ends up a lion’s dinner.
By the same token, a lion wakes up every morning knowing that it has to be faster than the slowest gazelle or it will starve to death. It has to do its wind sprints, stay in top shape, get plenty of water, etc. If the lions spent too much time grab-assing in the meadow with the other lions, they might get hurt, bitten, etc, and be unable to run fast enough to catch dinner.
In other words, survival depends on doing things efficiently, wasting neither time nor resources, nor opportunities unduly. To the extent that businesses do this, they prosper and grow. A business that has too high a payroll for what it produces, exorbitant occupancy costs, too few or too many employees, too little capital, too many over-paid, fat cigar smoking Mercedes-leasing unproductive salesmen, etc., runs the increased risk of failure. If the managers fail to take note of changes in the marketplace, new developments, and therefore make stupid decisions, like investing in a new photo processing plant when the world is going digital, or a new buggy whip plant just as Henry Ford rolls out the automobile, etc. failure looms large, disaster, losses to the shareholder(s). To the extent the management anticipates change, plans for it accurately, gauges the demands of it’s customers and meets those needs efficiently, it prospers and grows.
Every one of the factors of production has to be present in proper proportion for the industry. Some industries are capital intensive, some are labor intensive. Too much capital and not enough labor is inefficient in a labor intensive industry. Insufficient capital for the needs of the business, too much labor, too costly labor, are just as deadly. Entrepreneurial ability, allocating the various ingredients in proper proportion, is critical to efficiency.
Wailing about some companies thriving while others do not is silly. Where is it written that one company has to operate less efficiently so that its competitors have an easier time of it? Where does it say that the Cowboys have to use a slower, smaller left tackle so the Packers can have a better chance of sacks, or that the Red Sox pitchers can’t use left-handed curveballs, because the Royals can’t hit them well?
Part of entrepreneurial ability is assessing the market, to figure out how many widgets can be sold, and at what price, and figuring out what widgets can be produced at what cost. Decisions have to be made about three main issues…. price, service and quality.
Is the business a Nordstroms? Very high cost high quality lots of service in sales, returns, customer satisfaction? Or a Costco, low cost, minimal quality and service, no salesmen, no credit cards, all cash, no carry out, etc. Some combination? If you try high cost and no service, that might not be optimum. The opposite might be just as disastrous for the return on investment.
This subject also fits well with current events, specifically the discussions about NAFTA, tariffs and “job security” between the Democrat candidates. I think they can learn quite a bit from the gazelle and lion, so can we.
When is Too Much, Too Much?
February 20, 2008
Walter Williams posted a great article that fits well with our blog’s theme, a primer for the conservative basics. He takes a close look at what something costs versus the benefits gained. A couple of examples are listed.
Let’s apply cost versus benefits to anti-terrorism expenditures. Wyoming has two major cities: Cheyenne, its capital, with 53,000 population; and Casper, with 50,000. Federal and state homeland security anti-terrorism expenditures in 2007 totaled $6,673,910. What is the risk of Wyoming being a terrorist target and, if so, what is the expected cost in terms of human lives and property?
Dr. Williams’ mention of anti-terrorism expenditures got me thinking. Billions of dollars have been made available for homeland security funding at the federal, state and local levels for many years. What determines the pattern of spending from year to year, place to place?
After Sept. 11, the city of New York received billions to meet the terrorism threat. Dollars were spent on just about everything you can imagine, and maybe rightfully so. Firetrucks, special vehicle command posts, computers, weapons, monitoring systems and other hardware were purchased and brought online.
In 2005 and 2006, after sustaining funding levels for the first few years, the federal government realized that enough was enough. New York City was put on notice that the previous funding levels would not continue. Bloomberg, Clinton and Schumer all went nuts. From the Washington Post, June 1, 2006:
“As far as I’m concerned, the Department of Homeland Security and the administration have declared war on New York,” Rep. Peter T. King (R-N.Y.), chairman of the House Homeland Security Committee, told the Associated Press. “It’s a knife in the back to New York, and I’m going to do everything I can to make them very sorry they made this decision.”
The problem I have is that Senators Clinton and Schumer demanded the cash flow continue, and used the threat of terrorism to bash the Bush administration for cutting funding. “We will not be prepared”, they said.
Bull feathers – and here’s a good analogy for you. If your town needed two new fire trucks (hardware) to prepare for the worst, and I gave you two million dollars to go out and buy those two trucks, would you need two million dollars next year too? Nope, you wouldn’t – you already have the damn trucks!
Liberal politicians do this all the time, and it must stop. Who said that only Republicans use the threat of terrorism to grow the size of government?
More on the Temporary Stimulation Package
January 31, 2008
As you may know, the bill that came out of the House did not include any extension of unemployment benefits. Now, the Senate committee reviewing the bill wants to add a temporary plan for an extension of benefits.
Michelle Malkin has a source who is a staffer in one of the House sub-committees who forwarded her some research concerning past “temporary” extension of benefits, that turned out to be not so temporary. Socialism at it’s best!
Great information:
Unemployment benefit program 1991-1994
Original proposed program length: 8 months
Original estimated cost $7 billion
Actual length: 29 months
Actual cost: $39 billion
Number of extensions: 5
Unemployment rate at start of program: 7 percent
U rate at end: 6.4 percentUnemployment benefit program 2002-2004
Original proposed program length: 10 months
Original estimated cost $9 billion
Actual length: 29 months
Actual cost: $26 billion
Number of extensions: 2
Unemployment rate at start of program: 5.7 percent
U rate at end: 5.8 percentUnemployment benefit program 2008
Original proposed program length: 11 months
Original estimated cost $10 billion
Actual length: ? months
Actual cost: ? billion
Number of extensions: ?
Unemployment rate at start of program: 5 percent
U rate at end: ?SFC [Senate Finance Committee] documents suggest the “temporary” extended unemployment benefits program would operate only through CY 2008 and cost $10 billion. But these sorts of programs never work out that way.
- RS reports that no “temporary” extended benefits program created since 1970 has expired without being extended
- Programs created in the 1980s and 1990s were extended 6 and 5 times, respectively.
- The prospects a temporary program created today will expire at the end of 2008 as the SFC proposes – with the window of eligibility shutting two days after Christmas – is both dubious and would be without precedent in the last generation.
Even if it operated only as long as the “average” program created since 1980, a “temporary” program created now will be paying extended benefits in mid 2010.
- The average duration of extended benefits programs created since 1980 is 30 months.
- If a program started in February 2008 and paid benefits for 30 months, the final payments would be made in July 2010.
- The total cost of such a program would likely be $30 billion or more.
If prior extended benefits programs began when the national unemployment rate was as low as 5.0%, these “temporary” programs would have operated for decades.
- The U.S. unemployment rate was 5.0% or higher in every month between January 1974 and April 1997 – more than 23 years in a row.
- Today’s 5.0% rate is below the average of the 1970s, 1980s, and 1990s.
- During the Clinton Administration (1993-2000), the average unemployment rate was 5.2%.
- According to a 2007 report by the Congressional Budget Office, today’s 5.0% unemployment rate is the same as the “natural rate” CBO will use “both currently and for the 10-year projection period through 2017.” Put another way, according to CBO today’s unemployment rate is “normal” not “high.”
- Creating an extended benefits program now will create a precedent to repeat this action every time the unemployment rate reaches this historically modest level. That will cost billions of dollars and encourage more and longer unemployment.
Wow.
