The management of scarce resources

[Mandy Muffin]

It must have been in 1956, during that first class I had in College Economics 101, that the definition of economics was drilled into my head: It is the management of scarce resources. When something is plentiful, who needs economics? If you can just go out in the morning and pick all the apples you want to eat,  you don't need to get involved in the economics of apple growing. Adam and Eve can attest to that, until one of them ate the forbidden fruit. 

I went on to MBA degree with plenty of courses in economic, with a specialty area of labor management that provided a rewarding career. But the initial lesson stuck with me. Everybody who runs a household or works for a  business sees this economic principle being applied every single day. The take-home pay goes down and we adjust our budgets accordingly. We manage scarce resources. We switch from steak to hamburger; we car-pool or combine trips, we trade in the family car a year or two later, and most of all, we find a way.

So I am appalled at the reaction of the federal government to the sequestration cuts. First, the cut backs were self-initiated, nothing a family or business would actually ever do to themselves on purpose. What kind of idiots shoot themselves in the foot?  Second, the cuts amount to about 2-5% of discretionary spending depending on who's numbers you look at.  I worked in business were every budget submitted was cut back by 10% at a minimum. We always found a way and never let it affect our mission.  We were a major defense contractor. 

But we hear the sequestration will cause layoffs in the federal workforce, prisoners being released from confinement due to lack of funds, firemen who won't put out fires and that terrorist will now be able to cross the border. Common!!! Quit the hype.

For the first time, some government departments will face scarce resources. All they have to do is use a zero-based budgeting approach and question each and every expense. As a defense contractor, my company was required to zero-base every budget we turned into the military.  I know as I was in finance at the time.   If you don't do zero-based budgeting, which much of the government does not do, department budgets get inflated beyond anything that can be imagined as they are padded year after year and the budgets are increased annually with the false assumption that everything in the budget is necessary. 

Many experts have concluded they can take out huge chunks of the cost of running our country and not miss a beat in carrying out the mission. Here is one expert on efficiency who promised such cuts:

http://www.humanevents.com/2011/06/29/mike-george-wants-to-save-you...

I worked under the Six Sigma system for a private corporation. There is no reason that a similar discipline cannot be applied to all government employees' productivity. The techniques are available. All they have to do is apply them.  I think the taxpayer deserves a government that is run efficiently.  I don't think the citizens of this country deserve to be told they won't get the services they paid for because of a 2-5% cut in non-military budget.  I would agree, that the military budget cut at about 9% is a bit more severe but many would say there is a lot of fat in that number too.  Many civilians have taken huge cuts in their personal finances over the past several years due to the sour economy. 

[Mandy Muffin]

There is a lot of history that suggests that public employee unions are not appropriate for government jobs.  http://www.nytimes.com/roomfordebate/2011/02/18/the-first-blow-agai...  They do not engage in collective  bargaining, as the concept of unions suggest, but just play politics trading votes and support for generous concessions.  THIS IS NOT COLLECTIVE BARGAINING IT IS POLITICAL BRIBERY.

But even with unions serious cost reduction efforts can take place if their is the stomach to do it.  Recent polls have shown that overwhelming majority of Americans believe the government should cut spending.  I believe the latest statistic I got from the AARP magazine was that 82% wanted some economizing by the federal government.  They just don't want it in their backyard, as the old adage goes. 

[MGDJ]

The problem with cutting Government lies in the unions.  Union membership in the public sector is more than 5X that of the private sector (http://www.bls.gov/news.release/union2.nr0.htm).  This, in my opinion, is how the sequester will hurt America.  The President will blame it on the Republicans for not making a deal, but it will ultimately be the unions that oppose these cuts and most likely strike, creating chaos.  Labor agreements hurt cost cutting efforts.  Government workers get better benefits and get paid more than private workers due to labor agreements like COLAs (http://www.downsizinggovernment.org/overpaid-federal-workers).  Unless unions are dissolved in Government work (which they should be), we will not be able to make substantial cuts. 

[Mandy Muffin]

Our company brought in one of the greatest statistician in the history of business, Dr. Ed Deming, to teach classes in statistical management.  I was privileged to spend 2 weeks under his tutelage. http://www.skymark.com/resources/leaders/deming.asp  Japan names it annual quality award after him.  "Close enough for government work," an expression in wide use in America, should not be tolerated by the American public nor the President of the United States, who is their boss.  Quality is job one.  No other standard should be acceptable.  When retiring Medicare Director, Dr. Donald Berwick, left the Medicare/Medicaid Director position is took a slam on the system declaring that up to one third of medical spending was a total waste of money.  But do we fix the system -- no,  because we are afraid of the political backlash.

[exedir]

Sigma requires measurement, or at least something to quantize otherwise how to prove improvement.  

in government work, patronage equals votes, that is what earmarks where for as to the rest, "good enough for government work".

The point of government budgeting isn't a matter of limits it is a matter of the amount of revenue or debt that be sustained as to what to spend.  As to the purpose of that spending, well, good intentions with constituents is the point, not good policy.

To expect more, is more than the public can bear, those that vote anyway.

[Mandy Muffin]

A STEP INN THE RIGHT DIRECTION:  http://money.msn.com/business-news/article.aspx?feed=AP&date=20... 

When it comes to delivering the product with a minimum of cost and a maximum of efficiency, I would imagine Walmart knows how to do that as good as anybody.  I remember we used the Walmart business  model in our company for a time.   So if this person is left to her own devices, the cuts should be coming soon.