Post No. 84: Despite Bad Economy, Welfare Rolls Not Growing (Huh?)

© 2009, the Institute for Applied Common Sense

We call ourselves the Institute for Applied “Common” Sense, and yet we often find ourselves trying to make sense of things.

We believe that instead of being distracted by the superficial symptoms associated with problems, we should “dig deeper” to identify the underlying causes.

Just last week, we discussed the state of the art of various alternative automotive technologies. We noted that the problem is not with the science or the technology, per se.

After all, one could theoretically assemble a group of engineers or scientists to achieve virtually any technological goals, although not necessarily with the desired speed or preferred ease. (More significantly, it’s a timing issue, or simply put, do we have it when we need it, or when we want it, or when we choose to think about it?) Or as the Logistician often notes in his presentations, "whether they were 'sufficiently motivated.'"

In discussing the auto industry, and the government’s involvement (both past and future), we tend to focus on the nature and structure of our governance (management) model in this country, and the limitations associated with it.

The model’s inherent limitations were one of the main reasons that we cautioned against the development a national health care system, at least as currently being discussed. Quite simply, we believe that America does not have a governance model, or mindset (at least not at the present time), to be able to competently run such a system for 300 million subscribers.

Fortunately, we are not alone in our views this time around. This past weekend, C-Span2 Book TV aired a discussion about government’s inability to respond to the needs of its citizens. The title of the program was, “The Next Government of the United States: Why Our Institutions Fail Us and How to Fix Them.”

That is also the name of the book written by Donald Kettl, a leadership and government professor at the University of Pennsylvania. Kettl argues that the government has emerged into “interlocking public-private-nonprofit systems that lack adequate governance, a clear government role, and any central control.”

Hmm, what a radical position.

What should be very clear by now is that we have been using our tax dollars, some three trillion of them in the last 12 months, to fix the wrong things. [Pop quiz: Do you know how many zeros are in a trillion?]

We may all still be sitting around the same Monopoly board, but we are no longer all playing by the same rules.

Wall Street has used at least twenty billion of our money as bonuses because they claim that they “need to keep the best people.” On Wall Street, people are still considered an asset, regardless of their performance.

On the other hand, General Motors and Chrysler are using a good part of the twenty billion they received to get rid of their people (people who, by the way, are building the best quality cars and trucks in automotive industry history), because they think they can find someone who will do the work cheaper.

Does anyone else see a cost versus price problem here?

Is this the new definition of value added?

Apparently, the sense is not “common.”

With tongue only slightly in cheek, Michael Lewis (the author of Liar’s Poker, The New, New Thing, and Moneyball, among others), wrote in the September 5, 2007 edition of Bloomberg News, as follows:

“So, right after the Bear Sterns funds blew up, I had a thought: this is what happens when you lend money to poor people. Don’t get me wrong; I have nothing personally against the poor. To my knowledge, I have nothing to do with the poor at all. It’s not personal when a guy cuts your grass; that’s a business. He does what you say; you pay him. But you don’t pay him in advance. That would be finance. And finance is the one thing you should never engage in with the poor. (By poor, I mean anyone who the SEC wouldn’t allow to invest in my hedge fund.)” [Italics added.]

The best and the brightest of our Business Schools have nothing but contempt for Jack Welsh and Steve Jobs. In their view, those poor fools build things, meaning they have to share their income with (and think about) workers, suppliers, and bankers. They are playing Monopoly by the old rules. [Ha, ha, ha.]

You see, to those less sophisticated ones of us, it now appears that the new rules are not about making things, but making money.

The idea apparently is to divert as much money as possible into Free Parking, land on it, and get on to the next game. For some, this must be the new definition of “business relationship."

There is no other way to make a constant 20% on your investments, and a resulting $20 million annual bonus.

If you want to borrow some of the money these new wave financiers (who have slaved and toiled so hard) have under their management, you have to get rid of as many of your workers as possible… to get your future margins up.

That you can’t build anything without workers is beside the point, Watson. They will package your loan and sell it to the Chinese before you exhaust your existing inventory.

The problem is that 18th century steam boat physics proved ultimately (although it was challenged at the time) that when all the passengers and crew run to one side of the boat, you’re “most likely” going to have difficulty “going forward,” as Wall Street likes to say.

And so it was with a great deal of interest that we noted an article entitled “Welfare Aid Isn’t Growing as Economy drops Off” in the February 2, 2009 edition of The New York Times.

BEFORE you read it, stop and consider the most logical explanations for why this might be occurring.

The mere fact that anyone would have to read that article to make sense of it strongly suggests that….

If you think that the welfare situation doesn’t make sense, whether “common” or not, try understanding the opposition by some to the “Buy American” provision in the stimulus bill currently being debated.

We’re not particularly well-versed in either micro or macro economic theory. However, whatever route we chose to reach this point, where it has become problematic for us to suggest that we buy our own goods, should be “revisited” so that we do not venture down that path again.

It obviously wasn’t a straight one.

It may make “economic sense,” at this point in time, to the intellectuals and those who stand to benefit. However, it just seems to us that it defies the “common sense” of the common citizen.

We guess that this is just one more thing that the “common man or woman” does not understand, the silly people that we are, along with derivatives and swaps.

We truly apologize for not understanding those vehicles. Simply color us "unimaginative." Apparently, a lot of our politicians and the politically sophisticated understand them, and we guess that is all that matters.

Imagine a parent being told, “Instead of choosing to focus on taking care of your kids, and buying lemonade from their stand, you should be cautious and continue to purchase the lemonade made by the kids of some distant relatives living abroad, because to do otherwise might come back to haunt you, and, oh by the way, it may actually be in YOUR best interests.”

We, the unsophisticated, suspect that macro economic principles applicable to the global economy are far more complicated than dealing with one’s little family. But try explaining that to the common man or woman whose taxes are paying for the corporate bailouts.

Simply put, addressing societal problems is evidently complex stuff, but even a homeless guy (or perhaps someone on that dreadful welfare) knows that a patchwork of band-aids, applied in haste in the ER, rarely stops the bleeding, although it might allow the attending to send you on your way.

When you get results from an initiative, which are diametrically opposed to what you expect the program to accomplish, you should consider returning to the drawing board.

Finally, to quote that bearded friend of ours from days long past:

“Horatio: He waxes desperate with imagination.

“Marcellus: Let’s follow. ‘Tis not fit for us to obey him.

“Horatio: Have after. To what issue will this come?

“Marcellus: Something is rotten in the state of Denmark.

“Horatio: Heaven will direct it.

“Marcellus: Nay, let’s follow him. [Exeunt.]”

© 2009, the Institute for Applied Common Sense

Editorial Note: This “whatever” was the product of collaboration between The Laughingman and The Logistician. Believe it or not, we originally thought that we were going to chat about welfare, but it evolved into this. For those of you failing to make “sense” of it –well, we guess that you just had to be there….