Coyote Blog

Ace of Spades writes, in response to a NYT article on the death of a homeless woman:

In Sunday’s NYT there is a long article about a homeless woman who lived on a grate near Grand Central Terminal. She was seemingly intelligent, a Williams grad, and had a promising future snuffed out by mental illness....

What is ironic is that the majority (probably all) of the people involved and interviewed probably support the deinstitutionalization craze that has gripped America since the 1970s. I wonder whether a firm public policy of forced commitment would have helped this woman. My suspicion is that it would have. That is not to say that our institutions were wonderful, but an all-or-nothing approach makes no sense. We have moved the mentally ill out of sometimes awful psychiatric facilities into the revolving door of the street, prison and an early death.

I was among those who has opposed forced institutionalization.  The practice used to be rife with abuse, and when it was really being challenged in the 1970's it was with recent knowledge of how institutionalization for supposed mental health issues had been used in the Soviet Union as a tool against dissent.  And in a world where political partisans still routinely assign negative mental health diagnoses to their political enemies and have even suggested using mental health diagnosis-from-a-distance to unseat the current President, there is still a lot of possibility for abuse.  But seeing that most of those who would have been in state mental hospitals are now in prison or living (and dying) on the streets, I am open to having made a mistake.   I am still not sure, though, who advocates for such people who are without friends and family and would help guard against their abuse.

The "trick":

Democrats in the state House have proposed issuing $107 billion in bonds to backfill the state’s pension funds, which are short $129 billion. Annual state pension payments are projected to increase to $20 billion in 2045 from $8.5 billion—not including interest on $17 billion in debt the state previously issued to pay for pensions.

At the request of state retirees, a University of Illinois math professor performed a crack analysis showing how the state could use interest-rate arbitrage to shave its pension costs. Under the professor’s math, the state could sell 27-year, fixed-rate taxable bonds and invest the proceeds into its pension funds. This would supposedly stabilize the state’s pension payments at $8.5 billion annually, save taxpayers $103 billion over three decades and increase the state retirement system’s funding level to 90% from 40%. Can the mathemagician make House Speaker Michael Madigan disappear too?

I am mostly going to leave highways out of this post.  Most evidence I have seen is that the numbers do not actually show highway infrastructure to be getting worse.  To the extent highways are underfunded, in my mind it is because gasoline taxes paid by drivers and meant for highway repair and construction have been shifted to grand projects like light rail that get politicians excited but carry at least an order of magnitude fewer passengers per dollar spent than do highways.

But in worlds I am more familiar with - government transit agencies and parks agencies - there has been a real deterioration of infrastructure.   Systems like the Washington Metro clearly are falling apart and most public parks and recreation areas have huge deferred maintenance accounts that are growing every year.  California State Parks and the National Parks Service alone have deferred maintenance tallied well into the tens of billions of dollars.

Most of these agencies will argue the problem is -- wait for it -- that they are underfunded by their legislatures.  But this is not the case in my experience.  My company routinely takes over public parks that some government agency said were too expensive to remain open and profitably reopens them to the public -- not only keeping up with the maintenance but paying to catch up on all the maintenance the agency let slide when it was operating the park.

The problem is that most agencies, whatever their stated public purpose and mission, tend to be run for the benefit of their employees.  I understand some but not all the reasons for this, but it is simply an observable fact that this happens time and time again.  This means that the priority is to build up large staffs with good pay and large benefits and retirement packages.   Worse, the preference is usually to build up headquarters and administrative staff, rather than staff that actually does stuff like serve the public or fix things.  When cutbacks need to occur, the priority order always is: cut maintenance first; cut field staff actually doing useful things second; cut administrative staff only in case of the apocalypse; cut benefits packages never.

Deferred maintenance is the way that agency's can borrow without transparency and without any outside authorization to do things like maintain staff in the face of cutbacks.  In effect, the agency is borrowing against the infrastructure the public has built to help fund staffing levels and benefits.  What is deferred maintenance?  It is all kind of things.  It is having one out of three toilets in a bathroom break and just roping it off rather than fixing it.  It is allowing potholes to multiply in the road without repair.  It is constantly chasing more and more leaks in an underground water line and not just replacing it.  It is an acknowledgement that all manmade things have a fixed life.   Take picnic tables.  Let's say a type of picnic table in a campground, of which there might be hundreds, lasts about 10 years.  That means a responsible person should budget to replace 10% every year.  But what if we skip a year?  No one will probably notice if some old tables slide from 10 to 11 years old, and we save some money.  But really we are only borrowing that money, because we will need to do twice as many next year.  But then we do it again the next year, to borrow more, and the bill just increases for the future.  Before you know it, the NPS has $12 billion in deferred maintenance, a $12 billion debt for which there is little transparency and no legislative approval -- and the interest on which all of us in the public pay when we have to live with these deteriorating public facilities.

I have written about this many times, but here is what I wrote about Arizona State Parks several years ago:

At every turn, [Former Arizona State Parks Director Ken] Travous made decisions that increased the agency's costs.  For example, park rangers were all given law enforcement certifications, substantially increasing their pay and putting them all into the much more expensive law enforcement pension fund.  There is little evidence this was necessary -- Arizona parks generally are not hotbeds of crime -- but it did infuriate many customers as some rangers focused more on citation-writing than customer service.  There is a reason McDonald's doesn't write citations in their own parking lot.

What Mr. Travous fails to mention is that the parks were falling apart on his watch - even with these huge budgets - because he tended to spend money on just about anything other than maintaining current infrastructure.  Infrastructure maintenance is not sexy, and sexy projects like the Kartchner Caverns development (it is a gorgeous park) always seem to win out in government budgeting.  You can see why in this editorial -- Kartcher is his legacy, whereas bathroom maintenance is next to invisible.  I know deferred maintenance was accumulating during his tenure because Arizona State Parks itself used to say so.  Way back in 2009 I saw a book Arizona State Parks used with legislators.  It showed pictures of deteriorating parks, with notes that many of these locations had not been properly maintained for a decade.  The current management inherited this problem from previous leaders like Travous, it did not create it.

So where were those huge budgets going, if not to maintenance?  Well, for one, Travous oversaw a crazy expansion of the state parks headquarters staff.    When he left, there were about 150 people (possibly more, it is hard to count) on the parks headquarters staff.  This is almost the same number of full-time employees that were actually in the field maintaining parks.  As a comparison, our company runs public parks and campgrounds very similar to those in Arizona State Parks and we serve about the same number of visitors -- but we have only 1.5 people in headquarters, allowing us to put our resources on the ground in parks serving customers and performing maintenance.  None of the 100+ parks we operate have the same deferred maintenance problems that Arizona State Parks have, despite operating with less than a third of the budget that Travous had in his heyday.

Arizona State Parks has a new Director, but its the same old story.  They have complained about deferred maintenance in the parks for years, but when times are good (and I can tell you all of us in public recreation are having visitation records the last few years) they use the extra money to add headquarters staff and pay headquarters staff more.

State Parks, which receives no state general-fund money, saw a record 2.78 million visitors come to its parks for the fiscal year that ended June 30. The agency generated nearly $17.9 million largely from park fees, another record.

The result: Black has been generous with pay for people she has brought on staff. Some salaries are up to 32 percent higher than what her predecessor paid for the same positions. And she has approved raises of up to 25 percent for some carry-over staff as more money rolls into the agency's coffers....

Meanwhlile, records show [former director Bryan] Martyn's top two deputies were paid $110,250, while Black pays her top assistant $142,000 — 29 percent more. Black brought in a new development chief at nearly $105,000, a 32 percent bump over what the position paid under Martyn.

Black also boosted the pay of the natural-resources chief, who also worked for Martyn, by 25 percent, to $84,000 a year.

State Parks payroll records show Martyn, around the time he left, had 41 staffers making more than $50,000 [incredibly this is apparently personal staff, not the total headquarters staff]. Black had 58 staff members in March making more than $50,000. Black also brought in staff at higher salaries than what Martyn paid, giving some holdovers significant raises.

An agency spokeswoman said Parks is increasingpay to recruit and retain talent, and staffers are dealing with more visitors.

Black said she also has increased the pay of those in the field.

So, as we see some really good years in public recreation, Arizona State Parks is using the extra money to pay staff rather than address fundamental infrastructure issues.   Anyone want to guess what will happen when the next downturn comes?  Will administrative pay be cut?  Will headquarters staff be cut?  Or will maintenance be cancelled and parks closed?  Place your bets.

When companies or other entities get into debt holes they cannot climb out of, their debt is restructured and perhaps partially forgiven or even bailed out, but rules are put in place to ensure more responsible financial behavior in the future.  The same needs to be true of infrastructure spending.  These agencies got themselves into the deferred maintenance holes they are in.  They cannot get out without a bailout, but we should understand that it is a bailout of these agencies and there need to be conditions attached to the funding tied responsible maintenance spending by the agency itself.

I got some attention with a post the other day about an example of something I see constantly -- government employees unwilling to admit even the smallest error.

One reason is that even as someone who runs a company that partners with government agencies frequently, I am still an outsider and a member of the general public.  And government agencies train everyone in their organizations never to give any information to the public that is not fully vetted and controlled.  Government agencies have had their training budgets slashed, but the one training everyone still gets (along with diversity training) is training on how to reveal (or really, not reveal) information to the public.

But I think there is a more important reason for this behavior, and it is one I want to spend a bit of time on in part because it is one of my favorite business topics: incentives.   There is nothing in an organization that is harder to get right than incentives.  And this is doubly true of government agencies because most government agencies don't have, or don't choose to measure, any output variables.

What do I mean by output variables?  Organizations tend to measure both what I call input and output variables.   Let's consider a sales person.  An output variable is a business result, e.g. number of units sold, number of new customers added, revenue of products or services sold, gross margin of products sold, satisfaction rating from customers.  An input variable is a measure of how well process steps leading to that sale were completed, e.g. percent conformance to pricing guidelines, number of sales calls made, number of quotes produced.  If well selected, input variables tend to lead to the output variables but they don't in themselves pay the rent.

Because I am most familiar with them, I am going to use government recreation agencies like a state parks organization as an example.  I have yet to find a government recreation agency that measures its employees primarily on output variables, e.g. customer satisfaction of park visitors, fee revenue collected at park, net income of the park, change in deferred maintenance accounts, etc.  Instead their metrics are -- at best -- based on conformance to process, e.g. was the budget completed on time, was the planning process done right, was all necessary reporting done on time, etc.  I say "at best" because most government agencies have no formal performance metrics at all.  And this is where I get to my favorite incentives / metrics topic of all -- informal performance metrics.

An organization never has no performance metrics at all. They may have no formal, written standards, but every organization has to evaluate and promote talent.  If there are no formal standards, there have to be some informal or unwritten standards that are applied.  And I would argue from my experience that even when formal standards do exist, there may still be informal standards that are more important.

One informal incentive that exists naturally in almost every organization is "don't get caught in a mistake."  On its face this is one of those incentives that seem good -- sure, I would love to have an organization where no one makes mistakes.   But many companies have found that in competitive markets, allowing this informal incentive to become powerful can spell a company's doom.  It has at least two negative effects:  it limits honest communications, because people start hiding their mistakes which in turn keeps information from the rest of the organization that may need it; and it limits risk-taking, which is necessary for most companies to survive in competitive markets, because almost everything a company does to improve contains risks.  Powerful formal performance systems are one way to limit counterproductive informal incentives like this.  But many companies also put a lot of work into their communications and culture to help employees be more open to taking risks and making mistakes.   A vast portion of my communication with my own managers and employees are on this topic.  We try to make very clear the subset of mistakes that are career fatal and where we DO want risk aversion (e.g. racism, harassment, abuse, etc) and treat everything else as a learning exercise.  My response to one of my manager's mistakes is very likely to be, "sorry, that was my fault, I did a bad job of training you (or preparing you, or whatever) for that issue."

Recognize though that all of these corporate steps to head off problems with the informal incentive "don't get caught making a mistake" have largely been lessons of the marketplace.  Time warp back to the 1950's when American companies were fat and happy and not yet really faced with scrappy global competition, and you might well have found highly risk-adverse cultures where people were afraid of being caught in a mistake.  I do not have experience at companies like GM, but I would not be surprised at all to learn that risk aversion dominated the culture and that faced with market extinction, it has spent much of the time since the 1970's trying to purge this risk aversion from its culture.

But in large part, a government organization doesn't face these market corrective forces.  If an agency becomes weak and senescent, it does not get competed into oblivion, it simply goes on and on.  Maybe it gets more tax money to make up for its inefficiency, or maybe it cuts somewhere (such as deferred maintenance in public parks) to make ends meet.   Which means that in most government agencies I have worked with, informal incentives -- particularly "don't get caught in a mistake" -- are extremely powerful.

Most people are familiar with the fact that the default government answer to anything new is "No".  But did you ever wonder why?  I have heard a lot of folks say that it is because government employees are jerks or lazy under-performers or have evil intentions.  But that is really not the case.  With just a couple of small exceptions**, people who enter government are no different than people who enter private organizations.  If they do things that seem bad, it is not because they are bad people but because their information and incentives cause them to do things we perceive as bad.  Take the case of saying "No".  Without any output metrics, most government employees have no incentive to say "yes".  There is no incentive to, say, generate 20% more visitor revenue in parks so there is no incentive to approve new visitor facilities or services that might generate that revenue.  And there is every reason so say "no".  "No" is almost always safe, particularly if one does not actually say "No" but instead say something like, "well, that is an interesting idea but we need to do X, Y, and Z intensive 20-year studies first."  There is virtually no way for any government employee to get caught in a mistake saying that.  So that is the answer most of us get from the government.

Coming back to the original question, I hope this helps explain why agency employees who don't admit error act the way they do -- they are not bad people, they are normal people reacting to a bad incentive.   Imagine in my business if I, say, reversed two numbers on one of the 25 state and local sales tax returns we file each month.  When pointed out to me, I have no problem admitting the mistake because I know it is easily correctable and that it has little to do with my true performance.  But in the government world, things are completely different.  They don't have output variables.  Executives can have full successful careers running parks where the infrastructure is allowed to fall apart, the headquarters become bloated, and visitation stagnates.  But they can be fired for getting something wrong in the process.  Not very often, but just enough pour encourager les autres, particularly in an environment where there are really no other formal metrics to override this fear.

**postscript:  I have found two ways that people who enter government are different from people who enter private business  (people are more different at the end of their careers after they have been shaped by the incentives and culture for a long period of time, but I am talking about upon entry into work).  First, people who enter government tend to prioritize security (e.g. good benefits, difficult to fire) over other aspects of employment.  Note that this just tends to reinforce the risk aversion to making or admitting a mistake even more.  Second, people who enter government tend to be more confident of government solutions to problems and more skeptical of private solutions than people who enter private business.  This latter is another reason why my company, that offers private solutions for traditional government functions, hears "no" a lot.

Our two largest Arizona public colleges are spending over $18 million in public funds just to get rid of their football coaches.

I use the words "public funds" knowing exactly what I am saying.  The schools dispute this, saying:

...no tuition dollars nor public money will fund the buyouts. Both universities have self-sustaining athletic departments

But this is total cr*p.  Money is fungible.  They can pretend that this money comes from athletic program revenues, just as certain electricity customers pay extra to say that their undifferentiated kilowatts from the grid came from a particular solar plan or windmill, but its not true in either case.  Marginal spending is paid for in the end by the marginal source of funds, and the marginal source of funds for universities is tax money.  That is $18 million that could have been spent for about anything in these public education institutions but was prioritized towards trying to upgrade the football coach.

When we operate public campgrounds, we are generally self-sufficient and can do most everything we need to do without any interaction from the government agency.  However, our contract or operating permits require that we submit and get approved an annual operating plan and a couple of other financial agreements.  Most of this is relatively pro forma because we start with the documents from the previous year and things just don't change that fast.

Last year, we had a number of areas where this did not happen.  The agencies we worked with were convulsed with staff shortages and organizational changes that meant that in many cases, there simply was nobody in the key positions that would do these tasks.

So this year, at least two of these locations have gotten staffed up and we have had good early contact with the key agency people.  However, in both cases, instead of saying something like "sorry about the poor response last year, but we had our staff transferred and then were caught short by the Trump hiring freeze which prevented us from filling these open positions for a long time", I get conversations like this:

Agency:  You did not get your operating plan completed last year.  You have a contractual requirement to get this done.  You need to do a better job this year.

Me:  Uh, I submitted the draft operating plan to your office on multiple occasions and never had a response.  Here are copies of at least 12 emails and letters with me begging for a response on our draft plan submission.

Agency:  So hopefully you can do a better job this year.

Update:  Here is my update as to why I think this happens.  Hint:  it is not because government people are bad, it is because they are normal people with bad incentives.

Name the field:  Housing, education, health care.  In most any industry you can name, the sum of the government's interventions tend to subsidize demand and restrict supply.  In health care for example, programs like Medicaid, Obamacare, Medicare, and others subsidize demand while physician licensing, long drug approvals and prescription requirements, certificates of need, etc restrict supply.

If you are wondering why, it turns out that most government regulatory processes are captured by current incumbents, who work to get the government to subsidize customers to buy their product or service while simultaneously having the government block upstart competitors, either foreign or domestic.  For example in housing, existing homeowners form a powerful lobby that limits housing supply through restrictive zoning while demanding that the government subsidize mortgage interest (as well as low-cost mortgage programs) and give special tax treatment to capital gains from homes.   The result in every industry is supply shortages and rising prices.

Yesterday, we saw another classic example.  Federal, state and local governments have spent billions of dollars over the last decades subsidizing solar panel installations in homes and businesses.  But now, they are also simultaneously restricting the supply of solar panels:

President Donald Trump is once again burnishing his protectionist bona fides by slapping imported solar cells and washing machines with 30% tariffs - his most significant action taking aim at the world's second-largest economy since he ordered an investigation into Chinese IP practices that could result in tariffs.

Acting on recommendations from US Trade Representative Robert Lighthizer, Trump imposed the sliding tariffs. Solar imports will face a 30% tarifffor the first year, then the tariff will decline to 15% by the fourth year.It also exempts the first 2.5 gigawatts of imported cells and modules, according to Bloomberg.

And... who would have guessed that Elon Musk would be on the receiving end of another government crony handout?  The patron saint of subsidy consumption will get yet another, as Tesla's solar city is currently building a large domestic panel manufacturing plant, an investment decision that makes little sense without tariff protection.

I am seeing a lot of headlines today like "Furious Progressives Slam Democrats For Caving On Shutdown."  When Republicans were in the minority, their partisans used to accuse the R's of the same failure / weakness.  The reality is that there is only a limited amount that the minority party can do.  Democrats back in the day were unwilling to allow Ted Cruz to derail Obama's signature issue (health care reform) and Republicans seem unlikely to allow Democrats to do derail their plans on Trump's signature issue of immigration (as much as I would like to see those plans derailed).  I think reasonable people would like a system where the majority party sets most of the agenda but the minority party does not get completely shut out.  That is basically where we are, though you can argue over the balance.

I will ask the Left to remember that effectively it was they that established the precedent in people's minds that having the minority party shutting down the government over issues tangential to the budget itself was tantamount to the apocalypse.  Having established this precedent, Democrats have to live with it now that the shoe is on the other foot.  I also, by the way, seem to remember Progressives just a few years ago arguing that Congressional gridlock over issues like this was sufficient justification for the President to more forcefully exercise Executive power.  Pretty sure no one on the Left is arguing that today.

I think via Tyler Cowen, this abstract:

How can political actors identify which putative expert is truly expert, given that any putative expert may be wrong about a given policy question; given that experts may therefore disagree with one another; and given that other members of the polity, being non-expert, can neither reliably adjudicate inter-expert disagreement nor detect when a consensus of experts is misguided? This would not be an important question if the problems dealt with by politics were usually simple ones, in the sense that the answer to them is self-evident. But to the extent that political problems are complex, expertise is required to answer them—although if such expertise exists, we are unlikely to know who has it.

Private employees unions (I will leave out public employee unions from this discussion, as they are a different animal) enter the public discourse a lot less frequently than they did in my youth, say in the 1970's.  At that time, union power and actions and negotiations and strikes were very frequent stories on the evening news.  However, one thing I have noticed throughout my life is that commentators seems to be either all-in for or against unions.  I actually think the issues are more subtle, and that unionization is a mixed bag.

On the pro side, unions are basically free association.  It is the right of any set of individuals to band together for negotiating leverage.

On the pro and con side is the role of government.  Early on, the government acted to stop individuals from exercising their free association rights and forcibly break up unions and bar their activities.  Today, I would probably argue the government has slid the other way by writing rules to tilt negotiating power away from employers towards unions (the obvious counter to this is if it is true, why have private unions withered over the last two decades).

On the con side, and it is a big con, is the tendency of unions to push beyond just wage and working condition negotiation into advocating for productivity destroying rules (e.g. featherbedding, strict job categories, etc).  These productivity destroying rules have helped to undermine whole industries, and, ironically, the unions themselves.  They embody an inherent contradiction in that the wages gains the union wants require productivity gains to support, productivity gains which are impossible under union-preferred work rules.

Here is a great example of the negative side of these union rules, from a NYT report on why New York subways cost so much more to build than do similar projects in the rest of the world

It is not just tunneling machines that are overstaffed, though. A dozen New York unions work on tunnel creation, station erection and system setup. Each negotiates with the construction companies over labor conditions, without the M.T.A.’s involvement. And each has secured rules that contractors say require more workers than necessary.

The unions and vendors declined to release the labor deals, but The Times obtained them. Along with interviews with contractors, the documents reveal a dizzying maze of jobs, many of which do not exist on projects elsewhere.

There are “nippers” to watch material being moved around and “hog house tenders” to supervise the break room. Each crane must have an “oiler,” a relic of a time when they needed frequent lubrication. Standby electricians and plumbers are to be on hand at all times, as is at least one “master mechanic.” Generators and elevators must have their own operators, even though they are automatic. An extra person is required to be present for all concrete pumping, steam fitting, sheet metal work and other tasks.

In New York, “underground construction employs approximately four times the number of personnel as in similar jobs in Asia, Australia, or Europe,” according to an internal report by Arup, a consulting firm that worked on the Second Avenue subway and many similar projects around the world.

That ratio does not include people who get lost in the sea of workers and get paid even though they have no apparent responsibility, as happened on East Side Access. The construction company running that project declined to comment.

The article also touches on one of my frequent themes, about why Progressives still support huge public sector payrolls when these actually reduce the government services they are passionate about:

Public officials, mired in bureaucracy, have not acted to curb the costs. The M.T.A. has not adopted best practices nor worked to increase competition in contracting, and it almost never punishes vendors for spending too much or taking too long, according to inspector general reports.

At the heart of the issue is the obscure way that construction costs are set in New York. Worker wages and labor conditions are determined through negotiations between the unions and the companies, none of whom have any incentive to control costs. The transit authority has made no attempt to intervene to contain the spending.

“It’s sad, really,” said Lok Home, owner of the Robbins Company, which manufactured much of the tunneling equipment used for East Side Access. “Because if they controlled the costs, they could do twice as many expansion projects and still have more money for maintenance.”

Here in Phoenix, we use our fireplace pretty much once a year -- on Christmas Day, more as an aesthetic aid to the atmosphere and festivities rather than out of any real need for added warmth.  I bought a box of fire logs several years ago and there are still three left.

So of course the Arizona government, for seemingly the hundredth year in a row, has banned fires on Christmas Eve and Christmas Day.  They always have some story about some special weather condition or whatever, but oddly enough year-in and year-out these special conditions only seem to occur on Christmas.  Clearly, the ban is in place on these days because the government knows these are the only days people are interested in making fires, but the media every year credulously reports the situation like it is a total coincidence.

On several occasions, I have wondered why progressives continue to be so supportive of paying too many government workers too much at the cost of reducing the government services they seem so passionate about.  This is something I seen in the public parks world all the time.  Arizona State Parks, for example, has about half of its employees in headquarters buildings rather out in the field serving the public while at the same time paying these headquarters staff very high salaries.  This is despite the fact that the agency has tens of millions of dollars of deferred maintenance it refuses to address.

I see this story repeated over and over in the public parks world -- when forced to choose, government agencies will cut back on maintenance and services to protect total staffing numbers, pay, and benefits.

The New York Times found something similar in the New York Subway:

An examination by The New York Times reveals in stark terms how the needs of the aging, overburdened system have grown while city and state politicians have consistently steered money away from addressing them.

Century-old tunnels and track routes are crumbling, but The Times found that the Metropolitan Transportation Authority’s budget for subway maintenance has barely changed, when adjusted for inflation, from what it was 25 years ago.

Signal problems and car equipment failures occur twice as frequently as a decade ago, but hundreds of mechanic positions have been cut because there is not enough money to pay them — even though the average total compensation for subway managers has grown to nearly $300,000 a year.

Later they go into more detail about payrolls:

Subway workers now make an average of $170,000 annually in salary, overtime and benefits, according to a Times analysis of data compiled by the federal Department of Transportation. That is far more than in any other American transit system; the average in cities like Boston, Chicago, Los Angeles and Washington is about $100,000 in total compensation annually.

The pay for managers is even more extraordinary. The nearly 2,500 people who work in New York subway administration make, on average, $280,000 in salary, overtime and benefits. The average elsewhere is $115,000....

Union rules also drive up costs, including by requiring two M.T.A. employees on every train — one to drive, and one to oversee boarding. Virtually every other subway in the world staffs trains with only one worker; if New York did that, it would save nearly $200 million a year, according to an internal M.T.A. analysis obtained by The Times.

Several M.T.A. officials involved in negotiating recent contracts said that there was one reason they accepted the union’s terms: Mr. Cuomo.

The governor, who is closely aligned with the union and has received $165,000 in campaign contributions from the labor group, once dispatched a top aide to deliver a message, they said.

Pay the union and worry about finding the money later, the aide said, according to two former M.T.A. officials who were in the room.

They do not mention pensions.  Who wants to be there is also a looming unfunded pension crisis here?

I have asked this question before:

Taking the government's current size and tax base as a given, is there a segment of the progressive community that gets uncomfortable with the proportion of these resources that are channeled into government employee hands rather than into actual services for the public?

I don't think this is an unfair question.  People ask lots of unfair questions in politics that try to impose the questioner's assumptions and worldview on the respondent (You want open immigration?  Don't you care about terrorism?  You don't want a $15 minimum wage?  Don't you care about the poor?)  But I am honestly trying to ask this of Progressives from the Progressive worldview -- Increasingly privileged government workers, who typically make more in pay in benefits for less work than the rest of us, are claiming for themselves so many of the resources of the government that services and programs Progressives favor are being cut back.  In the Progressive oppressor-oppressed model, how does $100,000 pensions for government workers get prioritized over homeless shelters?

Here is another example:

We have written frequently over the past couple of weeks about the disastrous public pension funds in Kentucky that are anywhere from $42 - $84 billion underfunded, depending on which discount rate you feel inclined to use. As we've argued before, these pensions, like the ones in Illinois and other states, are so hopelessly underfunded that they haven't a prayer of ever again being made whole.

That said, logic and math have never before stopped pissed off teachers and/or clueless legislators from throwing good money after bad in an effort to 'kick the can down the road' on their pension crises. As such, it should come as no surprise at all that the Lexington Herald Leader reported today that Kentucky's 365,000 teachers and other public employees are now demanding that taxpayers contribute a staggering $5.4 billion to their insolvent ponzi schemes over the next two years alone. To put that number in perspective, $5.4 billion is roughly $3,200 for each household in the state of Kentucky and 25% of the state's entire budget over a two-year period.

I can only guess that the article does a poor job of describing the plaintiffs' argument.  Because the argument that the pardon power impinges on the separation of powers, presumably because it voids a judicial ruling, would be true of any pardon in all of history.  The Constitution seems to be pretty open-ended in granting this power.  As much as it is heartening to see Democratic Congresspersons suddenly develop a concern about Constitutional limits on government power, this seems like a big waste of time and money.

A slate of congressional Democrats is asking a federal judge to invalidate former Sheriff Joe Arpaio's presidential pardon and move forward with sentencing.

Attorneys for 33 members of the U.S. House of Representatives aired their concerns in a "friend of the court" brief filed in federal court on Wednesday morning.

The brief argued that U.S. District Judge Susan Bolton should toss President Donald Trump's pardon of Arpaio, 85, in the interest of protecting the government's division of powers.

"The presidential pardon upon which that motion is based is an encroachment by the Executive on the independence of the Judiciary," the document stated. "The amici urge the Court to defend jealously against that encroachment as the framers intended."

Democrats are having fun noting the hypocrisy (after all the focus in the last election on Hillary's email practices) of Trump Administration members doing official business via personal email.  I will leave them to their fun.**

But I will note that I am a huge supporter of FOIA and government transparency and from the very beginning I criticized Hillary Clinton's use of private email primarily because it was clearly done to evade government transparency laws.  We did not punish her for obvious violations, and we did not punish Gina McCarthy when she used private email as the head of the EPA to avoid public scrutiny of her contacts with environmental lobbying groups.  So we should not be surprised if lots of other people are doing the same thing.  Politicians would love to sweep all their private conversations under the rug if we let them.  We need to start charging people for this crime -- even one high-profile person to start pour encourager les autres would be a start.

** This is an example of the good side of partisanship -- someone is always in opposition.  Engadget never did a single article on Gina McCarthy or other Obama Administration officials evading FOIA through private email accounts, presumably because it was much more sympathetic to that administration.  But it does not like Trump so it is on the case.  Which is fine-- the watchdogs across administrations don't always have to be the same people, they just need to be there.

When I was at consultant McKinsey & Co, one of their philosophies in doing cost reduction studies was that you don't cut staffing without first cutting back the work.  Identify the activities that don't need to be done or can be streamlined, change the processes to match, and then cut staffing.

This, of course, is not the way it usually happens, even in good companies.  Most companies just whack staff counts by some percentage, perhaps across the board and perhaps weighted by intuitions as to where the company is fat.  In a good company with good managers and good incentives, the organization can generally be trusted to cut back on the least useful activities in response to the staff cuts.  But in bad organizations with poor incentives, one has no idea if high value or low value activities are being cut.  And in the government, you can almost be assured that when staff and budgets are cut, low-value activities are preserved while high-value core mission activities are cut.  In my world of public parks, staff cuts almost always lead to preservation of bloated headquarters staff while maintenance budgets and staff actually service visitors in parks is slashed.

And then there is this on new rules being imposed by the Trump Administration on NEPA.   If you want to know why infrastructure projects almost never get started and public lands are seldom improved, NEPA is a big part of the reason.  It is something that is desperately in need of reform.  But the Trump Administration appears to be making the same mistake I discussed above, cutting resources without cutting the work required:

Yesterday Greenwire ran a story about how one of the new political appointees at the Department of the Interior issued a memo requiring that National Environmental Policy Act (NEPA) studies (those Environmental Impact Statements you hear so much about) be completed in one year, and be no more than 150 pages long.

If there were ever any doubts that the Trump Administration minions have absolutely no idea what they’re doing, this should put them to rest. Ostensibly intended to “streamline the regulatory process”, blah, blah, blah, its effect will be precisely the opposite; this one memo will delay and stop more projects than anything the environmental community has ever come up with. The activists may be livid, but I promise you that their lawyers are going, “Yee-ha!” I certainly would be if I were still doing NEPA cases.

The NEPA and the hundreds of court decisions interpreting it are painfully clear on how detailed an EIS has to be. Putting artificial and arbitrary limits on an EIS will make it so much easier to show how the EIS does not “take a hard look at the environmental consequences,” contain “a detailed statement of any adverse environmental effects” of a proposed project, etc.

A while back I asked progressives:

Taking the government's current size and tax base as a given, is there a segment of the progressive community that gets uncomfortable with the proportion of these resources that are channeled into government employee hands rather than into actual services for the public?

No response to date.  This is not a rhetorical question.  I am honestly curious if progressives worry about the percentage of government budgets that go to government workers, or if there is a progressive argument for this (despite the fact that it seems to be starving the actual programs progressives support).

I was reminded of this when I read this article from Steven Greenhut:  (hat tip maggies farm and their links roundup)

Municipal governments exist to provide essential services, such as law enforcement, firefighting, parks and recreation, street repairs and programs for the poor and homeless. But as pension, health-care and other compensation costs soar for workers and retirees alike, local governments are struggling to fulfill these basic functions.

There's even a term to describe that situation. "Service insolvency" is when localities have enough money to pay their bills, but not enough left over to provide adequate public service. These governments are not insolvent per se, but there's little they can afford beyond paying the salaries and benefits of their workers.

As a city manager quoted in a newspaper article once quipped, California cities have become pension providers that offer a few public services on the side. It's a sad state of affairs when local governments exist to do little more than pay the people who work for them.

Not surprisingly, the union-dominated California state legislature has been of little help to local officials dealing with such fiscal troubles. The state pension systems have run up unfunded liabilities, or debts, ranging from $374 billion to $1 trillion (depending on the financial assumptions one makes). But legislators have ignored meaningful pension reform. This has forced local governments to cut back services or raise taxes to meet their ever-increasing payments to California's pension funds.

It's one thing to ignore the plight of hard-pressed cities and counties, but now legislators are trying to make the problem a lot worse. Assembly Bill 1250 would essentially stop county governments from outsourcing personal services (financial, economic, accounting, engineering, legal, etc.), which is a prime way counties make ends meet these days.

 

A key thrust of Nancy MacLean's book on the great Koch / Buchanan / libertarian conspiracy to destroy democracy is that public choice theory is all about protecting and cementing elite privilege under the law.  This is actually exactly opposite of how I have always viewed public choice theory -- public choice theory tends to show how well-intentioned "public service" programs tend to get co-opted by a few powerful people for their own benefit.  See "ethanol mandates" or "steel tariffs" or "beautician licensing" or any number of other programs.  But I am not conversant enough to really make this case well.  Fortunately, Steven Horwitz (pdf) has done it in his powerful critique of MacLean's book.

The intellectual error that is most frustrating, however, is her understanding of the relationship between public choice theory and questions of power and privilege. As Munger (2018) points out in his review, MacLean is an unreconstructed majoritarian. She genuinely believes, at least in this book, that the majority should always be able to enact its preferences and that constitutional constraints on majority rule are ways of protecting the power and privilege of wealthy white males. That’s the source of Democracy in Chains as her title and her argument that public choice theory is a tool of the powerful elite. As Munger also observes, normally such a view would be seen as a strawman as no serious political scientist believes it, not to mention that no democracy in the world lacks constitutional constraints on majorities. In addition, one must presume that a progressive like MacLean thinks Loving v. Virginia, Roe v. Wade, and  Obergefell v. Hodges, not to mention Brown, were all decided correctly, even though all of them put local democracies in chains, and in some cases, thwarted the expressed preferences of a majority of Americans.

For public choice theory, constitutions protect the citizens from two forms of tyranny: tyrannies of the majority when they wish to violate rights and tyrannies of coalitions of minorities who wish to use the state to redirect resources to themselves by taking advantage of the logic of concentrated benefits and diffuse costs. Buchanan’s political vision is, in Peter Boettke’s words, a world without discrimination and domination. Constitutional constraints, for Buchanan, are a central way of ensuring that democracy actually protects rights by preventing the powerful from exploiting the powerless and that political decisions involve the consent of all. Constitutional constraints make democracy work for all citizens – they do not put it in chains.

When MacLean argues that public choice is a tool to protect privilege, she gets it exactly backward. Public choice shows us how those with the power to influence the political process can use that power to create and protect privilege for themselves at the expense of the rest of the citizenry. Public choice’s analysis of rent-seeking and politics as exchange enables us to strip off the mask of bogus “public interest” explanations and see a great deal of political activity as socially destructive exploitation of the least well-off. To borrow a bit from the left’s rhetoric: public choice is better seen as a tool of resistance to oligarchy than a defense thereof. It helps us understand why corporate welfare remains so common even as so many see it as a problem. Public choice also helps to understand the growth of the military-industrial complex and challenges public interest explanations of that growth. One can tell similar stories about immigration policy and a number of other issues of that concern modern progressives. Public choice theory sees the battles over Uber and Lyft as the powerful government-licensed taxi companies fighting to protect their monopoly privileges and profits against upstart entrepreneurs better meeting the wants of the public. This provides an excellent illustration of how public choice theory can explain political outcomes, and why the theory is useful in understanding how the powerful can victimize the less powerful. Public choice theory, properly understood, is a tool of critical thinking that enables us to deconstruct political rhetoric to see the underlying forces at work that are allowing those with wealth and access to power to use politics to acquire and protect their privileges and profits

As Arnold Kling might say, and Horowitz himself posits in different words, libertarians spend so much time obsessing over the freedom-coercion political axis that they miss out on ways to engage those on the Oppressor-Oppressed axis.  Public choice theory has a lot to offer Progressives, as it explains a lot about how well-meaning legislation with progressive intent is often co-opted by powerful groups to enrich themselves.  Sure a lot of public choice theory is used by libertarians to say, essentially, burn the whole government to the ground; but there is a lot from my experience in public choice literature that should speak to good government progressives, academic work using public choice to think about better designing programs to more closely achieve their objectives.

Per the WSJ:

This is what happens when a major American state lets its bills stack up for two years.

Hospitals, doctors and dentists don’t get paid for hundreds of millions of dollars of patient care. Social-service agencies help fewer people. Public universities and the towns that surround them suffer. The state’s bond rating falls to near junk status. People move out.

A standoff in Illinois between Republican Governor Bruce Rauner and Democratic Speaker of the House Michael Madigan over spending and term limits has left Illinois without a budget for two years. State workers and some others are still getting paid because of court orders and other stopgap measures, but bills for many others are piling up.

...Susana Mendoza, the state’s Democratic comptroller, is in charge of doling out limited funds to organizations demanding payment—a job she likens to handing out crumbs to starving children. She predicted unpaid bills will soon top $16 billion. “It is almost hard to say those numbers out loud because they seem so insane, but that’s where we are right now,” she says.

For reference, the entire tax revenue of the state of Illinois is just $32 billion a year, so even if the government were to close tomorrow and fire everyone, it would still take 6 months of taxes to just catch up on the bills.  And you can bet this does not include the most common form of borrowing done by most government agencies -- deferred maintenance.  Pretty much every government agency in the country at every level of government does not fully fund the maintenance of its capital assets (from parks to school buildings) preferring instead to fund the maximum salaries and retirement benefits for the maximum number of headquarters staff.

By the way, you may notice at the budget link that the proposed budget still calls for $6 to $7 billion a year in deficit spending, and does not include any provision for catching up on Illinois's sky-high $130 billion in unfunded retirement benefits (a number that represents a full 4 years of tax revenues).  Illinois is functionally bankrupt, and the only good news is that Illinois favorite son Barack Obama is no longer in the White House to bail them out.

Over the last several years, when the successes and failures of the PPACA/Obamacare/Health Care reform entirely accrued to Democrats, the Republicans fought against market stabilization funds as unwarranted subsidies for insurance companies.  My understanding is that the original PPACA included a market stabilization method, but it was written as being revenue neutral - ie funds from insurers who had healthier than average subscriber pools would be transferred to insurers who had sicker subscribers.  But soon, all insurers were losing money and premiums were rising and insurers were dropping out of the exchanges.  So President Obama transferred money from other sources to give extra market stabilization funds, e.g. subsidies, to insurers.  Republicans fought this action in the courts.  There was a principled position that Obama's actions were not legal, but Republicans were also happy to see the PPACA failing.  If Democrats in Congress could have made any one change to the PPACA last year, it likely would have been to increase these stabilization or subsidy funds, which I presume the Republicans would have fought.

Now, it is clear the public and the media is going to hang any future PPACA problems around Republican necks.  Whether this is fair or not is almost irrelevant -- one can see from Republican actions that they feel this to be true, at least in the Senate.  Because now Republicans are proposing market stabilization subsidies that are likely higher than Democrats would have even dreamed of asking for:

When the Congressional Budget Office (CBO) releases its estimate of Senate Republicans’ Obamacare discussion draft this week, it will undoubtedly state that the bill will lower health insurance premiums. A whopping $65 billion in payments to insurers over the next three years virtually guarantees this over the short-term.

Indeed, Senate Republican staff have reportedly been telling members of Congress that the bill is designed to lower premiums between now and the 2020 election—hence the massive amounts of money for plan years through 2021, whose premiums will be announced in the heat of the next presidential campaign....

Section 106 of the bill creates two separate “stability funds,” one giving payments directly to insurers to “stabilize” state insurance markets, and the second giving money to states to improve their insurance markets or health care systems. The insurer stability fund contains $50 billion—$15 billion for each of calendar years 2018 and 2019, and $10 billion for each of calendar years 2020 and 2021. The fund for state innovation contains $62 billion, covering calendar years 2019 through 2026.

This goes against pretty much all of the principled reasons Republicans opposed Obamacare in the first place, but given the choice of following principle or using our tax money to help buy another couple years in power, both parties will always make the second choice.  Of course, being given all that they would have wanted last year, the Democrats will likely not sign on for this as they don't want to bail Republicans out any more than Republicans wanted to bail Democrats out.

As most of you know, my company operates public recreation facilities for a variety of public agencies under concession contracts.  These contracts are mostly similar to each other in their structure, but one key difference among them is the contract length -- we have both short-term contracts of say 5 years and long-term contracts up to 30 years.  When we have longer-term contracts, we are expected to do all the maintenance, even capital maintenance such as repaving roads and replacing roofs (more on that approach here).  The US Forest Service tends to prefer much shorter contracts where they retain responsibility for capital maintenance -- this tends to work out as we pay a higher concession fee on these (since we have fewer expenses) and the Forest Service has a process to use the concession fee to perform capital maintenance.  In fact, generally the FS asks us to do the maintenance because it is way easier for us to get it started (avoids the government contracting processes) and then we get credit for our costs against the fees we owe.

Anyway, I have a fair amount of experience with performing small to medium-sized infrastructure projects on public lands.  Here are a few examples, starting from the sublime and proceeding to the ridiculous, of projects we have not been able to proceed with and why.  In all these examples, my company was going to fund the project so availability of funds was not an issue.

• In TN, we had already begun an expansion to add more campsites to an existing campground, a project already approved by our government landlord.  A disgruntled ex-employee, on his way out, claimed we had disturbed a rock pile and he thought the rock pile was some sort of Native American artifact.  Despite the fact there was no evidence for this, and that the construction was no where near the rock pile, construction was halted and my contractor had to go home while an investigation was begun.  As we speak, scores of acres surrounding the campground have been put off-limits to development until the rock pile is thoroughly studied, but of course no funding currently exists to study the rock pile so it is not clear how long this will take.  I am proceeding internally on the assumption that we will never be given permission and am cutting losses on materials bought for the project.
• In AZ, we operated a snow play area in what was essentially a gravel pit.  The slopes we used were what was left from years of mining gravel, and essentially the whole area had been disturbed.  We wanted to add a real bathroom to replace scores of portable toilets and to bring power to the area rather than use generators.  All the work would be performed on already disturbed land in the gravel pit.  We were told we could not proceed without a NEPA (National Environmental Policy Act) study to assess environmental impacts of the work, which could easily take years or longer if its results got tied up in the courts, as they often do.  Since the government had no money or manpower to do the NEPA study, it was pointless to even try to proceed.  This year, without the ability to construct necessary facilities for visitors, we exited the concession contract and the Forest Service has not be successful yet in finding anyone else to reopen it.
• In CA, just this week, I was discussing two maintenance projects with the government in a series of campgrounds we run near the Owens Valley.  In one, we wanted to dig up a water line that runs under a dirt road to repair a leak.  In the second, we desperately needed to replace some leaky roofs on bathrooms.  Both projects are now delayed.  In the case of the water line, digging up the road was going to require an archaeological study - yes, any digging basically requires such a study, and there is no exception for utterly absurd situations like this.  We eventually decided to open the campground without water this year, to the detriment of campers.  In the other case, the replacement of roofs on some old 1950's campground pit toilet buildings (think bathrooms at a highway rest area but not as nice) have to first be evaluated to make sure they are not historic buildings that should be protected.  Since this is a safety issue, I used up my favors on this one to try to get it to proceed.  In my experience, once a building in a park or campground has been labelled historic, that is pretty much its death sentence.  It becomes impossible to do any work on them and they simply fall apart.  For example, years ago there were some really neat old travel cabins in Slide Rock State Park in AZ.  I tried to get permission to fix them up and reopen them, but was told they were historic and they had to wait for special permissions and procedures and materials.  Today, the cabins are basically kindling, having fallen apart completely.

Recognize that these are projects entirely without NIMBY, funding, permitting, licensing, or procurement issues.  But they still face barriers from government rules.

In response to PBS's airing of Andrew Coulson's pro-school-choice documentary, Brett Robertson of Media Matters writes:

Why would a public broadcast channel air a documentary that is produced by a right-wing think tank and funded by ultra-conservative donors, and that presents a single point of view without meaningful critique, all the while denigrating public education?

Well, if public funding means that PBS should not air anything critical of public institutions, its time to end the public funding.  Robertson simply confirms what critics have been saying for years, that public funding makes PBS an agent of the state, and there is not much we need less today than state-sponsored television**

** I will add that I watch way more PBS than the average person and donate to it every year.  I often don't agree with their editorial policy and if it really ticked me off enough I suppose I would stop donating.  My opposition to state funding of PBS has nothing to do with my enjoying its product.  Ironically, I actually think that it might be worse without state funding because I think the shaming about lack of balance that goes with the funding tends to put a small brake on its management's tendency to go hard Left.  But that is irrelevant to the principle that state-funded media is a bad idea.

I thought this Megan McArdle interview of Yuval Levin explained a lot about how the Congressional budgeting process has gone off the rails.   It does not blame anyone as somehow guilty of being bad actors, but merely looks at shifting incentives for parties and legislators and how these have gotten us where we are.  One example:

The process began to decay in the mid-1990s, when something very important changed in Congress. After 40 years of Congress understanding itself as an institution run by Democrats, with Republicans exercising power by putting pressure on internal Democratic divisions (and making demands in return for giving votes to measures that couldn’t quite get enough Democrats), Republicans took control.

When Republicans took control, Congress didn’t settle into a new partisan pattern, but instead settled into a sense that control could switch with the next election -- always.

So it's not that Republicans failed to run the budget process, but that both parties started thinking very differently about Congress. Now, the minority party tends to think the imperative is to keep the majority from getting anything it wants, instead of making trades in order to get something from its own to-do list, because that list would be much easier to achieve after the next election if control changes hands. And the 1974 process is a poor fit for that set of incentives.

Some Conservatives are miffed that Trump is apparently not going to move the US Embassy in Israel to Tel Aviv

In March 2016, addressing the American Israel Public Affairs Committee conference, Donald Trump said that, as president, he would move the U.S. embassy in Israel to Jerusalem. Trump called that city “the eternal capital of the Jewish people.”

Now, however, President Trump has decided to keep our embassy in Tel Aviv. A senior White House official explained: “We don’t think it would be wise to [move] it at this time” because “we’re not looking to provoke anyone when everyone’s playing really nice.”

This promise to move the US Embassy in Israel is evergreen, and is always broken.  A similar promise by candidates such as Barack Obama to declare the Ottoman treatment of the Armenians to be genocide is another promise of symbolic action that is never actually implemented in office.  These mostly symbolic gestures are really powerful in campaigns, because they will tend to energize certain groups and make them more likely to vote for you.  But it turns out that each of these actions would tend to tick off unpredictable, scary, violent parties, the negative consequences of which might well outweigh the benefits of the gesture.  Even ignoring violence and irrationality, these actions impose an opportunity cost, likely limiting progress on other diplomatic fronts with these same parties.

This is why the vast majority of actual government actions reside in the lower left square in the framework below -- don't believe me?  Look at the legislative output from any particular session of Congress.  The vast majority of the actions taken are to declare some special day, a low-cost symbolic action meant to make some group feel warm towards some politician.

I have sent the following question to a number of Progressives. I have yet to hear anything back.

I have been following the story about UC possibly hiding funds as a sort of rainy day fund in accounts because several years ago I worked with a lot of folks (e.g. Ruth Coleman) at California State Parks who lost their jobs when accused of the same thing.  But looking at the story, the part that really appalled me was this from the auditor's report:

​The last few years UC has been begging and pleading for $50 or $100 million extra so they could enroll more in-state students, when the office of the president, if this is presented correctly, seems to be bloated by perhaps $400 million.  God knows what the administrative staffs of the individual universities look like.It appears what we have here is a conflict between more output of government services to the public, which I might call an ideological imperative of the Progressive left, with protection of government workers and their pay and benefits, which I might call a political imperative.

I am wondering if the Left's near absolute political support for government workers is undermining what I might call the good government impulses on the Left.  My involvement with CA politics is mostly in parks, but I know that there are a number of fundamental reforms that could allow the parks agency to do a lot more with their current budget, in fact perhaps even start getting at working down deferred maintenance logs, but these were torpedoed as non-starters because they would involve job losses and changes in work rules.  I am not saying they were discussed and defeated, I am saying they were stopped immediately as pointless to even discuss.

I don't agree with Progressives on the size and scope of government, but leave that aside.  Taking the government's current size and tax base as a given, is there a segment of the progressive community that gets uncomfortable with the proportion of these resources that are channeled into government employee hands rather than into actual services for the public?  Or is there a progressive argument for larger-than-needed government staff and higher-than-necessary pay and benefits (e.g. a city on the hill argument where the government is setting a higher standard that perhaps the benighted private employers will someday more closely emulate)?