Tuesday, September 30, 2014

Contracting to Boy Scouts

As a Federal contractor for decades, I have worked in and among small businesses, for them and against them; I have subcontracted work to them and have been a subcontractor to them.  I have also owned two of them.  So it can be said quite honestly that my work has not prejudiced me toward or against them, and it is absolutely true that my feelings toward small businesses and the topic of this piece are not in any way prejudiced by anything that would help or hurt me.

I do, however, believe it is time to revisit our government's position toward the utilization of small and socioeconomic-category small businesses.  I write this under the broad viewpoint that any government policy should have two key elements:
(1)  It should have a defined purpose and measurable objective within a greater goal
(2)  It should have a built-in end point when its goal has been accomplished

Let us review what the Federal government does.  In each branch of the government, the leadership develops goals for the utilization of small and special-category businesses.  These goals are passed on to the procurement staff and contracting officers to enforce, which means that when an agency wants to buy a product or service, there is some consideration that must be done as to whether the purchase should be set aside for small or special-category businesses.

Of course we can't go much further without defining some terms.  Just the word "small" is a combination of subjective and objective determination.  In the Federal context, this is done using the North American Industry Classification System, set up in conjunction with our Canadian and Mexican neighbors.  Abbreviated to "NAICS" (properly pronounced when it rhymes with "takes"), the system can be thought of as a long but simple table, assigning a six-digit code to every conceivable type of business.  For example, all the codes starting with "517" refer to companies that do telecommunications, and 517410 is the code for those engaged in "satellite communications."

The table of NAICS codes has three columns -- one is the code; the second is the description of the product or service a company in that code provides; and the third is called the "size standard."  The size standard is simply the cutoff point below which a company in that business is deemed "small", and that becomes the definition -- you're small if what you are providing defines you as small.  The size standard is expressed in one of two parameters, never both -- either a maximum number of employees in the company, or a maximum revenue average for the past three years.

The logic is that a small business is one with fewer employees.  In "service" companies, revenue reflects size, because the company is selling the hours of its staff.  However, in "product" companies, a small number of employees can generate huge revenues by comparison, so actual headcount is the metric, and product-based NAICS codes tend to use employee count as their size standard.

For example, those satellite communications companies in 517410 we noted are "small" if their average revenue for the past three years is $15 million or less.  By contrast, 517110 represents "wired telecommunications carriers", those who provide wired networks.  Although their industry is similar, they are evaluated by employee count -- such companies are "small" if they have fewer than 1500 employees.

As you can tell, the decision as to what NAICS code is used for a procurement is immensely important, and every government purchase must have one, even if the purchase is not being set aside.  If a contracting officer (CO) chooses a code that has a 1000-employee size standard, there are far more eligible firms than if they choose one with a $15 million standard.

Here's Rub #1: The Federal Acquisition Regulations ("FAR", spoken in hushed tones) govern every aspect of government procurement in awesome detail.  According to the FAR, the CO must make a decision on which NAICS code applies to a procurement based solely on the most dominant component of the procurement, and specifically without regard to size standard.  In other words, by law, a CO must look only at the "second column" of the table, find the product or service that most closely matches what he's buying, and assign the corresponding NAICS code from column one to the procurement.  Only then is the size standard (column three) pulled in.  Look at it this way: by Federal law, a contracting officer may not choose to assign a NAICS code to a solicitation he issues, using the size standard of that code as a factor in the decision.

That means that if not illegal, it is at least legally fruitless for a company to lobby a CO on an impending procurement to use a specific NAICS code -- unless the substance of the argument is totally about matching the product/service to be bought with the description under a NAICS code.  You can't say "this should be a 1500-employee code".  Of course, such lobbying happens all the time, and as many times as I've been in such a situation, I have ethically declined -- uniformly -- to discuss size standards with a CO as a rationale for picking a code.

Which, of course, brings us all the way back from Kansas City to the original point -- Why do we have small business set-asides in the first place?  Remember, I wrote about programs needing a defined purpose, a measurable objective and an end-point when the objective is reached.

I wrote in an earlier post about the absurdity of the District of Columbia having residence requirements for its city employees.  One of my points was that the government of the District is not in business to provide jobs for its citizens; rather, it is in business to provide essential services to those citizens.  Every penny it spends should be to provide those services as good stewards of the taxpayer dollar, meaning that it should hire the best available talent at the best price, and where that talent sleeps is of no importance.

The same logic applies here, somewhat.  At the Federal level, there is a concern for the economy being able to incubate businesses, which is why we have a Small Business Administration (SBA), at least when they don't overstep their bounds.  I will listen to arguments that it is appropriate for the USA to set certain procurements aside to assist in that effort (while they are being good stewards), although you'll have to work hard to make the case.  I do not, however, accept that the term "certain" in that last sentence is properly used, and I am myself "certain" that the set-aside program has gotten  corrupted beyond its ability to be evaluated.

Part of this is that I don't believe that the entire set-aside program has a sufficiently defined purpose, and certainly not a measurable objective.  The latter is evident; although every agency has goals, such as 30% of contract awards to small businesses (SBs), 3% for service-disabled veteran-owned SBs, so much for woman-owned, so much for "disadvantaged", so much for companies in "historically underutilized business zones", so much for Martian-owned, ahhh, you get it.  In order for those numbers to be meaningful, someone has to analyze what "right" is.  It doesn't make any sense to say that an agency has achieved its 30% target for small business awards if the figure of 30% as a goal was plucked out of thin air!  I respectfully decline to pat the back of a CO who has achieved a percentage goal that has no basis in rationality.

Obviously, lacking rationality, the set-aside program has no end-point for when it can be dismantled, and that itself is a problem.  When the government limits competition by imposing preference, the marketplace will adapt accordingly to take advantage.  We have, for example, companies splitting to remain under size standards; forming joint ventures with small businesses to capitalize on their size; doing all manner of legal actions to succeed.  The preferential category area has expanded as well; where a category "small disadvantaged" was created to assist businesses owned by black Americans, now that category includes Asian immigrants, Indian immigrants, African immigrants who have never faced discrimination, let alone slavery, Pacific Islanders, you name it.  At what point do we decide we no longer need to do that, and allow COs to buy from the firm offering the best offering at the optimal price, rather than the skin color of the majority owner?

We need to define the real purpose for setting aside purchases, and we need that purpose in a lot more detail and with a lot more challenge to it.  We need to identify those categories of purchase that make more sense than others (having small businesses build aircraft carriers is a bit inappropriate, and it scales from there).  We need to revisit the program to ensure it actually intends to address the defined real purpose.  We need to cease categorizing providers by skin color.

There is a cartoon by the brilliant Gary Larson, which I would love to see again; I remember it being on the wall of a company I worked at 25 years ago.  It shows a Boy Scout scoutmaster excitedly reading a formal letter to his troop of little scouts in scout uniforms with shorts, who are dancing around him and whooping and hollering in joy.  The caption read something like "In a shocking surprise, the Missile Defense Agency has awarded a $25,667,313 contract to build the launch technology for the MD-443 rocket to Boy Scout Troop 43 of McCook, Nebraska."

We're there.

Copyright 2014 by Robert Sutton

Monday, September 29, 2014

Brothelizing Derek Jeter

I believe it was told in Ted Williams' memoir "My Turn at Bat".  The story is that during a major league baseball game in the 1940s, an umpire was upset with the jeering he was getting from one bench, and finally had enough.  He walked over and threw the entire bench out of the game.  One coach, a quiet and respected gentleman went up to the umpire and said in so many words, "Look, I was sitting on the end of the bench and never said a word and you know that.  I've been in this game for thirty years and never gotten thrown out."  The umpire replied "I'm sure you didn't, and I'm sure you didn't say a thing.  But you know, it's just like a raid on a whorehouse.  The good go with the bad."

The good go with the bad indeed.  And so it is as we reflect on the career of Derek Jeter, which ended not with a bang but a whimper yesterday, a 58-foot Baltimore chop single and a celebratory removal for a pinch runner.  There is plenty of good to reflect upon; twenty years essentially without scandal even in the largest of fishbowls; an accumulation of offensive statistics that leaves him in the top ten on the all time hits list, participating in some excellent teams that won five championships.

Would that, of course, we could stop there.  But unfortunately, we cannot separate the good from the bad, and Yankee fans most particularly seem unable to do so.  Therefore, it is their sworn duty to create myth where no fact exists, and try to turn this offensive specialist into a fielder that he pretty much never was.

There's no getting around it, the American League awarded five of its once-treasured Gold Gloves to a shortstop who, in at least four of those years, was distinctly below the league average as a defensive shortstop.  Worse yet, given several opportunities to move him to a place where he could do less damage, the Yankees simply declined to do so.  At what cost?  Well, almost certainly an opportunity for the team to go out with a playoff spot (2014), although it's hard to say where else that might have had a tangible effect.

Ten years ago, as we were finally coming to grips with the fact that RBIs were not exactly the best way to gauge offensive value, defensive metrics in baseball were a bit primitive.  We knew that fielding percentage wasn't worth much (it told what you did with the ball when you reached it, but "reaching it more often" was more valuable than an error here and there), but weren't able to quantify fielding as well even though we had the data.

We have now been able to look at that data much more analytically, and more importantly (and sadly for the Jeterator community) have been able to quantify fielding on an ongoing basis and back into history.  The currency of baseball is runs, and the goal of pitching and defense is preventing them as the goal of offense is producing them.  We know from marvelous analysis that the two most vital offensive acts to producing runs are 
(1) Getting on base
(2) Getting multiple bases with hits at each at-bat
These are measured, in order, by on-base percentage (OBP) and slugging percentage (SLG), often combined by adding them to produce on-base plus slugging, or OPS.  Historic offensive forces like Ruth, Gehrig and Williams have career OPSs over 1.000.  An OPS over .800 is All-Star level offensively; over .900 is a great offensive season; under .700, well, you better have a good glove.

On the defensive side, we have finally been able to turn defensive analysis into the currency of runs based on range factors, zones of coverage, ability to get to plays, plays made, plays made successfully, etc.  Because there needs to be a reference point, the league-average at your position in the majors is regarded as the zero point.  Therefore, for the key composite metric, Defensive Runs Saved (DRS), a league average defensive shortstop (think Stephen Drew) has 0.0 DRS for the year, and that's actually good, especially at shortstop.

Note -- DRS by its very nature requires a lot of data and is vulnerable to sample size.  You don't look at DRS for a two-week period; it has almost no meaning.  DRS is a stat for a season or multiple seasons.

The reason it is important to convert defense to runs, by the way, is that it allows you to think in terms of wins in the calculation.  Generally, if you think that ten runs in one of these stats equates to a win, you're about right; that is the way the analysts have discovered the conversion maps.  If you think about it, it makes sense; every run does not mean the difference in a win or a loss.  Smarter folks than I have looked at this to make that equivalence.

Why the statistical wandering?  Because despite the fans' hagiography regarding Jeter's defense, and despite the five Gold Gloves, the sad facts are these.  Adam Dunn, the stone-handed slugger who also just retired, had the third-most negative DRS of any player in major league history -- 165 defensive runs below a league-average player.  Second on the list at 196 career negative DRS is Gary Sheffield, another slugging player who clogged outfields over a lengthy and productive career.  First among all players at every single position, at an astonishing 236 defensive runs below league average for his career is the one and only Derek S. Jeter (http://espn.go.com/blog/sweetspot/post/_/id/44294/a-few-notes-on-derek-jeters-defense).

We can take a lot of time explaining why this is, although there are some outstanding analyses of his lack of range (http://grantland.com/features/the-tragedy-derek-jeter-defense is probably the best), but that's not the point of this piece.

It is simply this: take the bad with the good.  Great guy, played on a bunch of good teams, historic accumulating offensive player, stayed out of trouble, hit as well in the postseason against tougher competition as he did during the season.  But while he made the plays that he got to, he got to far fewer than a shortstop should, and stayed a decade past his welcome at his position and possibly cost his team a postseason spot.

In the  book "The Yankee Years", Joe Torre notes that when the Yankees traded for the much-better defensive (and offensive) shortstop Alex Rodriguez in 2004, they never went to Jeter to ask him to move to third to make room.  Rodriguez volunteered to move, and that was that.  Jeter didn't go to the team (I wouldn't have either) to offer to move.  If we believe Torre, it was just that.

Now, Jeter may have actually believed he was a better defender.  Certainly there are parts of the book and other sources that suggest that before the 2009 season, it was suggested that he work on his defense, particularly his range to his left.  To his credit, he did, and had better numbers (a plus-4 DRS in 2009 vs. the -13 and -5 DRS the previous couple years), although it didn't take, his next three years were -8, -14 and -10.  But the references also note that he was surprised at the suggestion.  Apparently this news about his bad defense was, well, news to him.

When we do the "bad with the good" analysis, of course, you'll notice that I do not cite his offensive career numbers as a shortstop as a good thing, let alone mention them at all.  It is not a good thing.  It is not a good thing because his being positioned at shortstop for his entire career -- in only three of his 20 years did he not have a negative DRS -- was a detriment to the Yankees' chances of winning.  How do you celebrate over 3,000 hits as a shortstop if playing him there at shortstop was a mistake?  Whether it was his own intransigence or, more likely, the Yankee organization declining to risk the image, it hurt the team.

I cite his farewell year as the sad example.  The facts are what they are; the Yankees finished four games out of a playoff spot.  Having lost a chance at a playoff spot last week, they went 3-2 in their last five games, playing some non-regulars, but were also four games out on Tuesday when they were eliminated.  Derek Jeter finished the year with a -29 DRS, meaning that between his playing short and a league-average shortstop -- and they had Brendan Ryan and Stephen Drew on the team-- the Yankees lost about three games.  His .617 OPS was simply abysmal -- we look at a figure called OPS+ ("adjusted OPS") which compares a player to a standard 100, the league average offensively; 110 is good; 130 excellent and 150 or more a real star.  Jeter in 2014 was at 75 OPS+.

Sadly, there are four 2014 wins for the Yankees to be found between his defense and offense, and the numbers support it.  The Captain retired about a year too late for Yankee fans.

The actual good has gone; let us try not to make good where it does not exist.  Celebrate the player for what he did do, but please do not try to turn his flaws into virtues.

Copyright 2014 by Robert Sutton

Wednesday, September 24, 2014

Hannah and Al

The story of the University of Virginia student Hannah Graham, missing several days and subject to a major search effort, is all over the news.  We all pray that she will return, alive and well, to her family and friends, although the circumstances of her disappearance suggest otherwise.  She was last seen in the company of a rather scary-looking fellow who has been charged in her disappearance and is, as I write this, on the lam.

Where is Al Sharpton?  Surely Hannah Graham is perceived, at least for the moment, far, far more an innocent victim than the convenience-store robber and police assailant whom Mr. Sharpton tried to gain sympathy for after he was shot to death in Ferguson, Missouri.  Al is nowhere to be seen, and I wonder about what must be going through his mind, including what side to come down upon.

What indeed does go through the mind of someone who is far more charlatan than civil rights advocate?  To have pursued the whole Tawana Brawley matter even after a grand jury came down with a "nothing happened" finding is nothing short of corrupt; that he allowed others such as Johnnie Cochran to pay the subsequent legal settlement against him is equally corrupt.

So is Al sitting in his paid-for-by-someone-else living room trying to decide whether to show sympathy for the missing girl, or to head straight to Charlottesville and claim that the accused kidnapper is a "gentle giant" who wouldn't hurt a flea and is being accused only because of his race, race card race card race card ...

How does he pick his battles?  He can't possibly believe that anything happened to Tawana Brawley other than what she did to herself -- after being found out in the cold and claiming to have been raped and exposed for three days, she was determined not only to have been not raped, but to have just brushed her teeth.  But Al still went after the accused-by-Brawley policeman.

So he is either completely morally bankrupt or completely self-deluded into thinking he is actually doing something good.  Given that he appears oblivious to facts (the grand jury finding, the video of Michael Brown robbing the convenience store, the positive drug tests on him during autopsy), and is equally oblivious to public opinion that opposes him, I suspect the former.

The Al Sharptons of the world will go away when their audience stops paying their bills for them.  It seems impossible that he is capable of saying the things he does in the face of the facts, until you look at the crowds who allow themselves to be convinced that he is right.  When will they ever learn, as the song goes.

If he is sitting now, deciding whether to jump to the defense of an accused kidnapper and inject race into the case, we wonder if all he is thinking about is who will pay his bills for him.  Those who gather in the audience when he speaks, wherever he comes down on in this case, will answer that question.

Copyright 2014 by Robert Sutton

Monday, September 22, 2014

What-iffing the Assassination We Ignore

Reading, for decades, has been a pleasure confined only to time on an airplane, which has limited the types of books I have been able to read over that time to those which can be set down for a month without losing their essential story line.

And so, with more time on the weekends to unwind these days, I have been enjoying getting into a book here and there -- although, as is my wont, almost every one is about baseball, a topic which has attracted some immensely good writers and historians over time, and continues to do so -- Roger Angell, Leigh Montville, for example, and even an occasional find from a late author which I had not seen while they were alive.

In a recent email exchange with an M.I.T. classmate, we were very briefly discussing the U.S. President James Garfield, whose tenure was only a few months before being shot by an insane office-seeker and being doctored to death over the subsequent two months.  He referred me to a book on the matter -- "Destiny of the Republic", by Candice Millard.  Apparently unwilling to let it go at that, and possessed of uncommon generosity, he sent me a copy as a surprise.

One beauty of really good, well-researched historical books is that they provide the colorful details to events that may have occupied a paragraph's worth of our U.S. History II text in high school.  They continue to surprise us by reminding us that there is always more color than we originally were presented.

Among other topics, "Destiny of the Republic" is about the disaster that was late-19th Century medicine (had the physicians simply let Garfield alone and gone home, he would most assuredly have survived, as the bullet managed to evade any vital part of the President's body).  Alexander Graham Bell, in fact, has a starring appearance in the book, furiously working on a device to help locate the bullet for the lead doctor, who was, however, only interested in confirming his erroneous assumption about its path and limited the scope of the use of Bell's devices.

Another cameo is that of Robert Todd Lincoln, the son of Abraham Lincoln.  He took it upon himself to summon a doctor he knew to assist in Garfield's care, who would then take over aggressively and who ultimately had as much or more responsibility for the death of Garfield than the perpetrator.

I recalled from decades back reading that the assassin, Charles Julius Guiteau, had at some point after the shooting declared "I am a Stalwart, and [Chester] Arthur is President"; however, I could not have told you what a "Stalwart" was nor a "Half-Breed" (their opposition in the Republican Party of the time).  Miss Millard does a remarkable job of presenting the role this internecine war played both in the country and in the mind of the assassin, such as it was functioning.

Most particularly, the presentation of the President himself as an amazing individual and leader is truly stimulating -- his rise from poverty to being a professor and then a brilliant general in the War Between the States, to serving in Congress and becoming a terribly reluctant candidate for the presidency, gaveled to his seat when he protested his name being offered in nomination.

You do finish this book with a sense of what might have been had he lived and served his term.  There is a great difference in the mindset of non-fiction and historical fiction writers, no doubt, but I would be lined up outside a bookstore were Miss Millard even to collaborate with someone on the hypothetical of the subsequent few decades of the USA had there been a two-term Garfield administration.  Recovering as it was from Reconstruction, the South was still appreciative of the man that Garfield was, and we can speculate on the way the integration of American society might have progressed under the leadership of a man of such warmth and intelligence.

Try the book; it's a wonderful read.

Postscript: And so you may be wondering how two college classmates (who, by the way, hardly know each other) would have an email exchange about James Garfield, a topic which does not raise itself in daily conversation.  My classmate adds a brief and pithy quote of his to his email signatures, and on seeing that once, I relayed to him an interesting conversation with my late father.

When Dad was 94 in 2010, I came to visit him at his home near Ft. Monmouth, his last post for the Army where he had remained after retirement.  We drove through the town of Elberon, and I noted its distinction in that Garfield had been brought there in his last few days to try to recover.  I also mentioned, in passing, a quote of his -- that after being heckled during an 1863 speech while the war was still going on, then-Gen. Garfield had said on the podium "I have just come from fighting brave rebels at Chickamauga -- I will not flinch before cowardly ones" -- and finished his speech.

Dad replied "Wow, Chickamauga -- my house painter fought there."  Yes, as it turned out, when Dad was a child, the elderly fellow who painted the family house had told him stories of his fighting in that battle in 1863, although on which side Dad couldn't recall.  There we were in 2010, discussing second-hand tales of the War Between the States.  You can't make that up.

Copyright 2014 by Robert Sutton

Friday, September 19, 2014

Why the NFL Flap Should Trouble Us All

I am tormented by the difficulty in aligning my own moral compass with the various individual scandals which themselves are tormenting the NFL.  We have players knocking out their wives in elevators, whacking their children with switches, killing people and still getting statues to them built outside stadiums.  It's enough to make the media try to find a villain in all this, and demand that the Commissioner resign forthwith and posthaste (because that will surely remove the scars from Adrian Peterson's child and awaken the unconscious Mrs. Ray Rice).

But I am not tormented by the actions of the players.  We have a whole judicial system which was put in place by the Constitution to address such actions, and surely the Atlantic County, NJ Sheriff's office will look at the elevator video and ... OK, maybe they didn't think it was such a bad thing.  But it is their job to do so, and it is more than a bit surprising that the venom directed at the Commissioner of the National Football League is not directed at the sheriff.

What does torment me is trying to determine, on the grand scale of right and wrong, the actual role of the NFL in punishing its players for actions that are in no way connected with their actions on the field, in practice or any other milieu associated with their NFL employment.  It bothers me because I don't think there's an easy answer, and so the actions of the media in trying to lynch the Commissioner simply don't make sense, at least not yet.

Before we all leap to demand his resignation, can we at least have a national dialogue about what role an employer has when the employee does bad things no his own time?  There are two levels even to that:
(1) Does an employer have any basic obligation to punish employees on top of the judicial process?
(2) Does the punished employee have any recourse when such punishment takes place before the judicial process has run its course to at least an initial verdict?

If we set aside for the moment the notion that very public institutions like the NFL could have different standards, I think there is an argument that says that it is essentially (i.e., before "other factors") inappropriate for an employer to take action until a guilty finding is rendered.  In the Rice case, if he were a french fry cook at Burger King, as opposed to a running back for the Ravens, he would still be hip-deep in potatoes until a guilty plea or conviction, and even then there might not be a loss of work because the cars going through the drive-up wouldn't know that their salted spuds had been cooked by a convicted wife-puncher.  What, pray tell, would be his recourse from Burger King if he were to be fired due to the arrest, but then acquitted?

So why, then, is the NFL being taken to task?  For that matter, although union contracts complicate matters, why are not the head-on-the-platter calls being made for Ozzie Newsome, the Ravens general manager, and Rice's actual employer?  Is it because our societal iconoclasm demands the highest possible level of sacrificial lamb?  What role, actually, reverts to the organization to which the offender's employer belongs?

I don't have the answer, because it's not so black-and-white.  What is black-and-white is that the local law enforcement authority looked at all the video, heard the testimony of the punched fiancee-and-now-wife, and that he was indicted in March, but went into an "intervention program" that expunges the arrest if he keeps clean for a year.  He was released by the Ravens after the punch-out video was seen (and, in contrast to the Burger King analogy, there was a finding, though the punishment was negligible and expungeable).  The NFL has the former head of the FBI investigating, although to what end it isn't clear, and has indefinitely suspended him.

I'm open to anyone explaining what the employer's role is in this case, as long as the commenter will carefully explain the difference between Ray Rice the running back and Ray Rice the fry cook.

And as long as I'm on the subject, someone needs to tell Mrs. Rice that there's a part of this she doesn't get.  As willing as she is to absolve her husband of blame (some think she instigated the argument, though nothing warrants striking one's spouse), if he is not severely punished, the broken jaws of some number of future victims are on her head (OK, awkward metaphor apology).  Unfortunately, by him avoiding legal action to the extent he did, and her being so forgiving, they have just moved the line on the moral continuum in the wrong direction for an unfortunate number of potential wife-beaters, who will now have less deterrent to assault their spouses.  Mrs. Rice, if you don't see that, you don't get it.  You need to see that your heavy-handed husband doesn't get off unpunished and stop apologizing for him.

Copyright 2014 by Robert Sutton

Thursday, September 18, 2014

But Why Do I Have to Live There?

Here is one of those "Gee, really, why?" things that get you thinking sometime.

I do not live in the District of Columbia, avoid it as much as possible, and couldn't care less about most of what goes on there.  But because they are so prone to stupid city government, they offer us up examples of laws that make you ask what they were thinking.

I'm not talking about those "It's still on the books", anachronistic laws that have been around for 150 years and some weasel finds them and writes a column on them.  I'm talking about, well, ones like this:

§ 1-515.01. District residency preference for employees; District residency requirement for agency heads.
   (a) Notwithstanding any other provision of law, all District subordinate agencies, independent agencies, and instrumentalities [sic] shall use a ranking system based on a scale of 100 points for all employment decisions for positions equivalent to Career Service, educational employee, Legal Service, and Management Supervisory Service positions, as defined under § 1-603.01(3), (6), (13A), and (13B), and shall award each District resident applicant a preference of 10 points unless the resident declines the preference points. The 10 preference points shall be in addition to any points awarded on the 100-point scale.

So let's see what this actually says: the city that encompasses the seat of the United States Government, in deciding who the optimal candidate is to plow its streets, or defend its citizens, or program its computers, or staple its papers, actually concerns itself with where that candidate sleeps.

You know, and I know, and whoever wrote this abominable legislation knows, that it has nothing to do with how long it might take an emergency worker to get to his or her job.  Whether you live on the north side or the south side of Western Avenue doesn't make a difference; it's faster to get to parts of D.C. from parts of Maryland and Virginia than from some parts of D.C.

No; the purpose of the law is to implement by legislation the social concept that a non-zero part of the function of local government is to provide jobs for its own citizens.  I reject that notion in its entirety.

Government at any level serves at the pleasure of its citizens, solely to provide the minimum level of services demanded by those citizens at the least cost to its taxpayers.  If the citizens of Fairfax County, Virginia decide at the ballot that they want way more such services than those of Kootenai County, Idaho, they will pay for more of them and be taxed more.  Either way, however, it is their government's duty to provide the best such services for the budget their citizens have approved.

I contend that means that if I have $1 million in my budget to manage, say, the communications network of my jurisdiction, as a manager and hiring lead, it is my duty to the taxpaying citizen to obtain the best performers possible for the staff to do that job -- the best trained, the most experienced, the optimal usage of that budget for personnel to do the job.  As long as they are able to be on the job at the appointed times within the guidance of the personnel management rules, where they live is not relevant.

Our governments at any level (though this is really a local-government issue) are in business to provide services.  There is no argument that rationalizes mitigating the decision to hire the best performer by adding evaluation points to people based on residence.  This is strictly a political artifact put in to pander to voters.

If my local government were to try to persuade me it is doing the best with my tax dollar, I will be looking for competent and stable services provided, and evidence of how its hiring practices provide those by attracting the best value employees -- and the fewest of them -- wherever they can be found.  I don't care where they live, but rather what they do and how well they do it.  To think that there are governments that don't get that is frightening.

Some day we will get over the distressing thought that a government serving its citizenry does so by hiring more of them.  And some day most of D.C. will be part of Maryland and have to rip up their laws one by one, to be superseded by that State's wonderful ... oh yeah, right; it's Maryland.  Nothing will change.

Copyright 2014 by Robert Sutton

Tuesday, September 16, 2014

The Steady State IS the "Vision Thing"

I had written earlier about the dry, dry idea of Federal budgets being multiple years rather than the one-year mess they are now, and it got me thinking more about short-term vs. long-term vision.  We all recall President Bush (41) mentioning "the vision thing" as a laugh line for a few weeks.  But the "vision thing" is real, and if we allow ourselves to lose it, we are doomed as a country to be reactive rather than foresighted.

Here's what I mean.  If I were President, or had some other bully pulpit that got my voice out to the USA, I would be trying to explain the limits of central planning to a nation, in the course of trying to present the essential "why" of anything I did or proposed.

Most everything we try to do as a Government is ultimately related to trying to encourage or discourage activity in the course of Government doing its constitutionally-mandated job.  But we cannot encourage anything, or discourage others, absent a vision of what the best society we can provide is.  The problem today is that our candidates speak as if there were indeed some Utopian society that is actually achievable, the governmental counterpart of "the perfect being the enemy of the very good."  We wring our hands over things like income inequality, racial inequity, etc., as if there were a vision where all that goes away.

Here's my point: It never goes away.  It never goes away, because people are human, there are a lot of us, and while we were all created equal, at least in the USA, we were not created equally.  In other words, only a vision of America that accommodates the differences with which we were individually created makes sense.  If you believe that everyone was born with the same talents, innate abilities and intelligence, or are imbued from upbringing with the same work ethic, you might as well stop reading here.  Furthermore, if you believe that it is possible, let alone appropriate, to put everyone through some process that equalizes their intelligence, talent and drive, arrividerci.  You won't like what follows.

The best possible USA is not where everyone is the same person.  It is, from a governmental and societal perspective, where our individual limits are allowed to be approached as far as possible, where each person is able to, and motivated to, be the best version of themselves.  There are brilliant people and there are the stupid; there are the talented and the tone-deaf; there are the hard workers and there are the lazy -- and a spectrum of values on each curve.

Given that, there is a "steady state" that any vision of the best USA should entail.  We as a society can provide for the minimum education for all citizens and provide a society in which aspiration is heavily encouraged.  In that society, what is valued is priced higher; the contributions of the most intelligent, hard-working, enterprising and talented can provide the most to society and those people will succeed.  They will be admired and appreciated and will generally earn more than the less-gifted, less-talented and less industrious.

That said, this is not an elitist vision.  The tradesman may choose to ply his or her trade and be happy with that life, or can seek to build a larger and larger enterprise to the extent his capabilities let him control it.  The lawyer who is poor at her legal skills will not reach the height of her profession because her value to society is less than her who can argue points better.  Because we are different, we will succeed at different rates.

In this vision of the USA, nothing we do, no laws we pass, can violate the principle of incentivizing success.  We do take care of the invalid, the elderly, the incapacitated, those who cannot care for themselves because free societies do that, but we do not incentivize or subsidize sloth, laziness or unwillingness to work.  The exceptions will be discussed ad nauseam, but they should not distract from the principle -- we should envision a steady state in the American economy and society that accommodates the fact that we're not all the same.

The next statesman with the guts to stand up and say that Utopia is not happening here will be the first.

I recall an editorial some years ago by a leftist in the Washington Post, citing the stratification of American earnings and referring to the bottom 20% and their chances of reaching the top 20%.  He was trying to make some kind of "fairness" case and forgetting that by simple numbers, there will always be a bottom 20%.  In the best achievable case in the USA, the top 20% will be there because they produce a quantifiable value appreciated by American society to the point of willingness to pay for it.  In our steady state, that is the case.

As President, my early speeches would be to try to explain to America that people are different, and there will always be income inequality because there is value inequality.  I would be trying to move the country toward a steady state where its economy and society are the best they can reasonably be given those differences.  I may not say the words "Get over it", but that would be my point.  You're given what God gave you and what your upbringing encourages, and if you have an issue with someone else earning more, well, worry about your own case.  No one should be stopping you.

Copyright 2014 by Robert Sutton

Monday, September 15, 2014

Day is Not Night, and D.C. is Not a State

Today a bill will be introduced in the U.S. Senate by a senator from Delaware, obtain a number, be referred to a committee or whatever the Byzantine process in the Capitol Building entails, and then mercifully die neglected.  It would carve out a small area of what is currently Washington, D.C., that is currently only Federal buildings, the White House, Capitol Building, etc., and the remainder would be constituted as the 51st State, inanely titled "New Columbia" (hint to the good Senator: have you got another idea for a name that doesn't mess up the USPS abbreviations?).

As I always ask,
(1) What are we trying to accomplish here?
(2) Is this really the best way to do it?

Of course, as with anything conceived in Washington, the answer to #2 is "No", so let's look at #1.  If you are to believe its proponents, this has nothing to do with trying to stuff the Senate with two more Democrats, and nothing to do with getting another Democrat in the House.  That would be, well, politics.  The real, honest-to-God reason for doing this is to achieve representation for the half million residents of D.C. who currently do not have a voting House member and are not represented in the Senate at all, and whose city government is subject to specific oversight by Congress.

I am absolutely sympathetic to that fact, as I suppose everyone of both parties is.  Americans should have representation in their Congress wherever they live, and although it is the law, the residents of the District should be able to pass their own laws, however stupid they be.

And so ... what we should be trying to do is to achieve that end -- representation on a par with other Americans -- in the least intrusive and least expensive and complex manner possible.  Now, that latter clause will not appear in the bill, and shows nowhere in the articles in the Washington Post on the topic, because its advocates are not looking for simplicity and representation; they're looking for political advantage and more government.

Were they not looking for political advantage and more government, they would immediately see the least intrusive, least expensive and least complex manner available: take the remainder of D.C. that is left after the Federal district as proposed in the bill is excised, form a new Congressional district and return the whole kit and kaboodle to the great State of Maryland whence it came, and add an offsetting congressional seat in Idaho or Utah or somewhere else reliably Republican.

Everyone without an agenda can see the benefits:
(1) All the residential citizens of "Washington, Maryland" get their congressman -- with a vote
(2) They get two sitting senators with some seniority 
(3) The "representation" problem and the political balance problem are solved
(4) The new city in Maryland no longer has congressional oversight
(5) The citizens of the new city have only to create a city-level government, which exists already
(6) No massive tax needs to be passed to create all the agencies and bureaucracy a state requires

And let me add one other item.  The new congressional district is residential and has no industry to speak of, meaning no tax base other than property and income taxes.  If it were to be a state, its residents would have to be taxed so heavily that they would soon flee to neighboring Maryland (and some to Virginia).  The costs of government would be immense for such an area precisely because it is so Democratic; Democrats believe in government and they believe in entitlement.  That's a combination that leads to high budgets and taxes -- and high taxes without an industrial base to support them are a recipe for flight.
So here's the thing.  If the actual reason is only about representation and apolitical (and, dear Lord, we know it is not), the desired outcome should be the simplest, i.e., annexation by Maryland.  That what is proposed is probably the most complex, expensive, most burdensome on the residents, tells you that the proponents couldn't care less about the enfranchisement of the citizens, and are only in a Senate-stuffing frenzy.

We see through you.  We truly do.

Copyright 2014 by Robert Sutton

Friday, September 12, 2014

America's Got Talent; It Just Mixes It Up

I am sure that Mara Justine Platt, who was eliminated from the America's Got Talent TV show this week, is a very nice girl; she certainly seems to be on TV.  I'm not going to be particularly kind in this post, but it should never be construed as directed toward her, or even her singing skills, which some day may be very good.  I wish her the best and hope that she is able to get the training a 12-year-old should get to determine if she actually has a really exceptional talent, since you really could never tell from the performances on the show.

Full disclosure: I have my own history with AGT, believe it or not.  A few years back, 2008 or 2009, a group with which I sang for many years was invited to audition and compete on the show (yes, there are invitations).  That group was a men's chorus of 80-100 at the time when all were on stage, and were four-time International Chorus Champions, so it can be assumed that we were really good, with or without me.  The first audition was in National Harbor in the Washington, DC area, and I could not attend due to conflict.  Due to, or despite my absence, we passed the audition and were next to compete in New York a few weeks later for the actual judges, who at the time were Piers Morgan, Sharon Osborne and David Hasselhoff.

This time I could perform, and about 75 of us bussed up to Manhattan late at night, were housed in a depressingly cramped hotel, and rehearsed a condensed version of "New York, New York" complete with our typical choreography for the piece, to fit a 90-second mandated window.  We went on for the judges in a large theater that was almost empty, save the judges, and did our thing in white tie and tails.  Morgan was not impressed, referring to it as "cheesy" which, in fairness, 75 guys in tailcoats singing and dancing certainly was.  Mrs. Osborne pointedly noted, however, that "I like cheese with my hamburger" and voted "yes", as did Hasselhoff, though without any similarly pithy statement.  Two votes out of three, and we were through to the next round, which would be in Las Vegas.

Here's where I must dismiss your thoughts of "sour grapes."  The chorus as a whole consisted almost totally of men who worked for a living -- military, contractors, professionals, corporate executives, dentists, etc. -- who would have had a bit of difficulty aligning our schedules even to all be in Las Vegas for two days, let alone drop our professions and relocate there to be an "act", were we to have won.  We knew that, surely the producers knew that, and among ourselves we wondered aloud about that part of it once we went from "Hey, neat, they want us to sing at National Harbor" to "We made it to Vegas!"  We were not an act, per se, we were a very well-trained local chorus that just happened to be comparable in talent, as a unit, to those acts which also were going through.

Some time later, we were notified that no, we would not be invited to compete in Las Vegas.  We weren't told precisely why, but we assumed that they recognized that we were structurally not a real candidate for what they were looking for, and had we won, they realized that maybe only 20% of us would have been able to relocate and proceed.  Having in truth gone as far as we would have wanted, we breathed a collective sigh of relief and went on our merry ways; I retired from the group in 2009.

This brings us all the way around to Mara.  Miss Platt made it even this far only because of a judges' save -- have you noticed that the viewer voting seems to get the right talents put through, but the judges' saves invariably pick the wrong act?  If you have not seen her, she is a 12-year-old girl singing songs whose lyrics are better sung by a 25-year-old, and that is really the point of this piece.  First, we have to distinguish hard among the girl's actual talent (her singing ability), her presentation of the song (songs are stories with a theme, whether a lyrical one, a rhythmic one, etc.), and the choice of song.

As a performer of long standing, I am maddened by the people who told her what to sing and how to sing it -- or let her choose.  Much like the eminently forgettable 12-year-old who actually won the first AGT, Mara's performance was overwhelmed by:
(1) Facial expressions portraying emotions that no 12-year-old girl has the experience to feel
(2) Voice inflections and range choices that obscured the lyrics and distracted the listener (and no, I'm not even talking about the sound system in the semifinals)

In show business, the relevant term is "suspension of disbelief."  This is the principle that when you sit in an audience, you start by knowing you're in an audience.  Since the performer is conveying a story to you, you will innately disbelieve them until they bring you into the telling of the story, "suspending your disbelief."  It is suspended until the performer loses their hold on you, which needs to be after the end of the performance.  If something happens to distract you during it, your disbelief kicks back in and you are left with an unsatisfying experience.

It is up to the performer to maintain the suspension of disbelief and eliminate the distractions.  This is where I cannot forgive the judges for their elemental lack of understanding of the principle.  Mara has some things going for her, such as a strong vocal instrument and at least the knowledge that a performer has to show some passion.  Unfortunately, the distractions in her performances repeatedly re-inject disbelief into the audience, whether the very low pitching of large parts of the songs into ranges she does not yet command or, more tragically, the attempts to show emotions of pain, love disappointment, whatever, that a 12-year-old cannot credibly portray.

I cannot tell you what she should have chosen as a competing repertoire, but that wasn't it.  Her songs had lyrical themes, and the lyrics did not apply.  Matching the expressions and somewhat immature vocals of a 12-year-old against more sophisticated emotional content is one of those distractions that leave us disbelieving.

I do not condone the celebration of this presentation of her abilities.  If American music has descended to a point that any portrayal of the X most talented Americans includes an under-developed voice accompanied by what can only be called age-unsuitable visuals (hey, I know a lot of words but this one stumps me), so be it, but it is hard to support.  The first season's winner (still can't recall her name) was the same type of performer, except that not only were her visuals appallingly unsuitable for her age, but her vocals were full of "huh, huh, huh" sounds.  She was clearly coached by someone to imitate some pop tart of 2005 or whatever year it was, but any talent she actually had was obscured by the attempt to be something she was not -- 25 years old.

I have other criticisms of the show itself, but I'm willing to sit back and be entertained by the stage that it is -- a competition that should be among immensely talented performers heretofore hidden in the bushes or backwoods of America, for the heart of the people.  Let the performers grow up a bit first.

Postscript ... As those of you who actually watch the show are aware, there is another 12-year-old who actually was put through to the finals by the American vote.  His name is Quintavious Johnson, although there should be a law against tacking that name onto a poor, defenseless baby.  That said, I am at a loss to explain why young Mr. Johnson bothers me far less than young Miss Platt; in fact, while I wouldn't pay to see his act, I do enjoy his performances.  Both are 12, both are singers performing lyrics too advanced for their age as far as being able to emote them without distracting the audience.  Yet Mr. Johnson has gone through, Miss Platt has not, and it feels quite right that this was the outcome.

I can only surmise that while Mara was trying to be 25 and failing at it, Quintavious was trying to be a 12-year-old imitating a 25-year-old, and succeeding.  I hope that makes some sense to you as I try to clarify.  Quintavious was playing the role of a 12-year-old, while Mara was being a 12-year-old.  There's a difference, possibly in the sense of self-mockery as entertainment.  We reacted to him playing the role of the juvenile singer, so we were not distracted by thinking he was trying to be 25.  I wish him luck, and hope that he spends the next few years quietly learning his craft so he can perform excellently for decades.

I do wish the same for Miss Platt, but I hope concurrently that she is able to attract a completely new set of advisors who will keep her out of the spotlight until she matures to the point of visual credibility -- and pitch her songs in a range she can actually produce.  I do like her and think she is a very polite young lady.  But if I'm going to listen to a singing 12-year-old, I either want to see amazing precocity or an act.  Mara did not have either, and America voted properly.  God bless her.

Copyright 2014 by Robert Sutton

Thursday, September 11, 2014

Flatness Cures Spaghetti

This one is not about food.

Apparently this week I am focused for some reason on some issues that are out of season or currently suffering from the "exception proving the rule" -- or at least will be as soon as the Yankees are eliminated from contention in the the MLB wild card.

We are now five months distant of the hated day of 15 April, upon which we typically raid our bank accounts, borrow from friends, pull dollar bills from all the hiding places in the house, and lump them up to send to that paradigm of information protection, the IRS, to pay our taxes.  The next day we cry in our soup, and start shoving dollar bills into the same cracks and crevices to prepare for the year hence.

Having spent many years as a successful COBOL programmer (after being a medical student and an opera singer), you may infer that:

(1) I must be very old
(2) I am familiar with the concept of "spaghetti code."

On the assumption that you, dear reader, are not only unfamiliar with the term but cannot see the relationship between spaghetti and taxes, let me explain.  "Spaghetti code" is a computer programming term, probably now long out of favor, from the days when a "program" was a series of instructions telling the computer what to do, how to accept input from a screen or console, where and what to print or display, and a huge set of "if A then do B" kinds of statements.  Each instruction is represented in a line of code, and those programs could run easily into hundreds or thousands of lines of that code.

Because things change, over time the programmer -- or his successor -- would need to make changes to the code, over and over again, until at length the program may still have been doing what was desired, but had become a series of patches that would take, over time, exponentially more time to unravel by the next repairing programmer than would be taken simply to start the program afresh under the then-current rules.  The code of such a program, patched until it hurt, was called "spaghetti code" as a metaphor for all the internal pointers in the code going here and there that weren't in the original, like a bowl of spaghetti.

The astute among you will realize that the true badness of spaghetti code was its irreparability -- that it would be far, far more cost-effective to start over again, writing high-quality code in the most current language, representing the rules then in place rather than maintaining all the fixes and reversals since originally written.  If you take this to heart, you will start, from this day forward, to identify spaghetti code in multiple aspects of your life, generally having nothing to do with programming.

I will offer you perhaps the most prominent such example: The United States of America currently has some 74,000 pages of laws and instructions governing the payment of taxes.  I dare not speculate on how many of those pages are devoted to amending the amendment of prior amendment to US Tax Code ABC:XYZ sub paragraph 4(c).  Remembering that the cure for spaghetti code is to start all over, I would propose that some intelligent lawmaker stand up in the House and declare that it is time to start all over again.

As a systems analyst -- yes, I have done that a lot as well -- I am well trained to focus on the end state and design systems that get you there.  Do we think it possible to arrive at that end state collectively without descending into dreadful partisanship?  I actually think so, because my end state differs from what yours may be.  My end state is quite simple:

We have achieved the optimal personal income tax system when we define that rate structure which maximizes revenue from the income tax.

I am avoiding the linkage between taxation and spending there, because for our purposes they are separate.  Logically, we should determine the number of dollars needed for the government for the next 4-5 years (as I wrote earlier) and figure out how to get them.  But more spending (or less) doesn't change the essential relationship between tax code and revenue -- there is a tax structure which will maximize the revenue to the Government and it is not affected by the budget; it is only affected by the economy, meaning that optimal structure's incentives and disincentives.

I quote Jack Kemp: "If you tax something, you get less of it, and when you reward something, you get more of it."  Therein lays the spaghetti.  Congress has used the tax code over its approximate century to force actions and drive behavior rather than for its primary purpose, to maximize revenues.  Unfortunately, by taxing activities such as industriousness and savings, we discourage them.  This is, however, an income tax, and if indeed we are to have such a thing, we must create it in such away that it minimizes the disincentives to work and savings.

A few years ago, for example, I was very interested in a role as an evening-class instructor to teach a couple classes in computer science at a nearby community college.  Although it wasn't for the money, once I realized that I would be paying over 50% of my income to various governments -- the marginal rate would have been about 38% to the USA, and more than 12% to Virginia and Social Security, it became not worth the separation from my family.  That was a service that was not created, let alone taxed, because the disincentive from tax rates was too high to create the service.  Those taxing authorities received, in fact, nothing for this service that died a-borning.  As Mr. Kemp properly noted, if you tax something, you get less of it.

I have intentionally stated that the purpose of the code is to raise the optimal revenue.  We understand that there is a logical curve -- if we taxed at a rate of zero we would eliminate any disincentive to work, but produce no tax; conversely, if we taxed at 100%, no one would work as there would be no purpose to it -- all revenue would go to the Government (the Laffer curve).  The desired outcome of a tax code, no matter what it taxes, is to maximize the transactions being taxed (the sole exception being such as cigarette taxes, whose revenue impacts are secondary to the public health benefits of taxing smoking into its well-deserved oblivion).

The problem suffered by the imposition of a Congress in this matter is that they have to be re-elected, which means they have to say and, unfortunately, do things contrary to the actual best interests of the public.

One such notion is that "fairness" plays a role in tax simplification.  According to the fairness proponents, the higher-income individuals (who are inexplicably called "rich" or "wealthy" even though the tax code currently stands as a major obstacle to anyone's further accumulation of wealth) should pay a higher percentage of their income in taxes.  However, fairness is also an obstacle to obtaining the optimal tax rate, since the economy of countries and households alike doesn't behave the way the fairness proponents would like.  More fairness generally produces smaller revenues, since (q.v. Mr. Kemp) progressively higher rates discourage the transaction of wages, and drive those precise individuals best positioned to tax avoidance into doing just that.

And so, rather than the feel-good-but-self-defeating notion of progressive taxation, we simply provide two rates -- one of which is zero.  Yes, that is correct, the optimal structure of the tax code, after eliminating all deductions as Congressional meddling and social engineering, would have two and only two defining numbers: the exemption and the rate.  The exemption is the amount of taxable income (wages, interest and taxable distributions from investments, gambling, etc.) which is, a priori, exempted by each filer from the first dollar of such income.  The exemption is the sole capitulation to the fairness doctrine, and leaves the "working poor" (i.e., those with incomes lower than the exemption) working only for themselves and not for the Government.  The rate is the percentage of each and every dollar beyond the exemption to be paid as income tax.

For example, in such a case where the exemption is $30,000 per year and the rate 20%, an individual making $25,000 would pay zero, and one making $50,000 would pay $4,000 (20% of the amount earned beyond the $30,000 exemption).  A household with a working spouse at $50,000, a non-working spouse, and two children would pay the same $4,000 as a single filer at $50,000, lest the Government be seen as subsidizing children (or lack thereof).  The tax code would reduce to perhaps a single page (a reduction of 73,999 pages and the attendant hernias associated with its carriage).

I want to stress that this approach is more progressive than the current code!  That is absolutely true.  By implementing a taxpayer exemption and eliminating any brackets thereafter, the effective percentage of taxation increases from a $30,000 income (where it is 0%) smoothly up to Warren Buffett territory (where it is essentially 20%).  Although the marginal rate after $30,000 is always 20%, our example family at $50,000 is only paying $8,000, an effective rate of 8%.  An individual earning $150,000, on the other hand, would pay $24,000 in taxes, for an effective rate of 16%, double that of the much lower earner.  It confounds me how anyone would regard this type of "progressive taxation" as not being superior to the multiple-bracket version.

The tweaking allowed by Congress could only be in regard to the exemption and the rate.  The exemption is simply to defend the lowest income and could rise if needed, but the brake on such expansion would be that it applies to everyone, including those making substantially more.  The rate could go up or down, but the brake on it would be that the elimination of subsidies and deductions would mean that we would ultimately approach the rate producing optimal revenues, at which point we could simply stop, knowing that even if we were to need additional revenues (for, say, a war or for some future President to create a Department of Umpdesquat), the tax code could not produce it.

"But I depend on the mortgage interest deduction," you say.  No, no, you do not.  You depend on a stable tax rate.  If my tax bill under the current law is $10,000 with a mortgage interest deduction, but would be $9,000 under an exemption-and-rate flat tax, why would you fight for such a system?  In fact, if my tax bill were the same, I would still fight for the flatter tax, if only because Congress has no business stating in law that buying a house is preferable to renting one (and, yes, one page of law is preferable to 74,000).

A million-line program rife with spaghetti code is disastrous not only because it is nigh impossible to decipher, let alone amend, but because it perpetuates an approach totally inconsistent with whatever the contemporary reality is.  Tax code, like programmed spaghetti code, inevitably reaches a point where it is best discarded and replaced with, as I am fond of saying, what we would do if we started today from scratch, under today's rules, with today's capabilities in today's realities.

We would never have built today's 74,000 pages of garbage from a blank slate if we started today.  It has long since diverged from its goal of raising enough revenue to run the Government.  Why does it make any sense to maintain it in that form?

Copyright 2014 by Robert Sutton

Wednesday, September 10, 2014

It's About Tomorrow, Not Today

Twenty-one days from now the U.S. Government will begin a new fiscal year, FY15, as soon as it celebrates the old one by dumping as many borrowed dollars as possible on anything it can legally (or mostly legally) spend them on up to their FY14 budget limits, lest their allocation be truncated for FY15.  This dance goes on annually and has since probably the G. Washington Administration.

If it troubles you even a bit that this is done not just with taxpayer dollars, but also money we have to borrow from places like China, you're not alone.  The logic escapes me that we do not provide incentives to federal officials for operating under their budgetary allotments.  In reality, what do we want from those officials?  There should be two desired results:

(1) Accomplish the mission of your office successfully during the FY by every assigned metric.
(2) Do so at the least cost possible to the taxpayer.

That #2 is universally ignored is why I used the term "should."  And yet, as surely as ISIS is targeting U.S. interests here and abroad for destruction; as surely as Putin is counting countries to add to his vision of "Novorussiya" ("New Russia") and possibly including us as a longer-term subsumation target; another deadly attacker is at our doorstep -- nearly $18 trillion in debt owed in part to some of the very nations devoted to our loss of world leadership, or to worse.  The current Administration's claim that it is reducing the debt is a fatuous bowl of nonsense, meant to use one figure -- the decrease in the growth rate of the national debt due to the sequester -- using words that would make you think we were actually reducing the debt itself.  Hint: we're not.

Since they're quite depressingly unable to approach surplus, they naturally do not discuss the mounting debt as if it were a national crisis on the scale of ISIS or the like, but I trust you don't need an economics lecture to understand the Niagara we're headed toward in a wooden barrel.

OK, we get that the Administration has no interest in fiscal responsibility (read: balancing the budget and gradually eliminating the debt).  Such common sense would blunt their efforts to make as many people as possible dependent on Government, even though, as Margaret Thatcher so pithily said, socialism fails because it eventually runs out of someone else's money.

I, on the other hand, put on my "If I Were President" hat, and find two major initiatives I would pursue in day one of the IIWP Administration.

First, I would not only appoint to my Cabinet people of credible expertise in their field, but charge them with developing a corporate disincentive to spend money.  If you give me $10 million as a budget line item and tell me as manager of that mission element that I have that amount to accomplish my mission, then in the absence of instruction to the contrary, I'm going to spend that $10 million and maybe ask for more later in the year.

Conversely, if you tell me that I have $10 million, but if I can meet all my mission goals and spend less, I will be incentivized as the law allows, then I will approach the task with dual goals -- getting the mission done and finding ways to do it for less.  Can five smarter/more experienced/more creative people paid a little more do what eight were doing last year?  Hire or promote the five, and let the eight go.  Every single Cabinet official would be implementing his/her own program to accomplish this -- with zero rewards unless the mission is accomplished through assigned metrics.  As stern as that sounds, we will get nowhere without a collective understanding that, as Mitt Romney said in one of the debates in 2012, every cent we spend as a Government needs to be evaluated as to whether it is worth borrowing it from China.

The second is harder, because it's legislative, but is groundbreaking if it can be accomplished.  We need to change to a five-year budget cycle.  As we approach FY15, you, I, my late grandfather and most two-year-olds know that we will not have a real budget for the year.  Congress will keep the Government operating through the "continuing resolution" (CR) process rather than passing bills that provide actual budgets for the Executive Branch departments.  The bills funding Government will slog through Congress until maybe halfway through the actual fiscal year, something will get agreed upon, and the oh-so-vital Departments of Things Like Labor will be able to operate in their oh-so-vital roles.

How much time is Congress occupied by this charade?  What great things could be accomplished if they were actually not overwhelmed by budgetary ... OK, never mind on that one.  But is it not possible that we could set the budget cycle to four or five years, establishing the spending limits and guidelines and then operating under them?  We ask the senior officials in the Departments to spend huge amounts of time drafting up their budget requests and, as soon as they're done, moving immediately to the next year's requests.  Would we even need as many senior officials if the budget cycle were quadrennial or quintennial and 80% of their time were spent doing their job as opposed to begging for money?

There is nothing magic about a one-year cycle, and it obviously is not working.  It promotes the use-it-or-lose-it mentality that causes spending dumps every September.  It occupies countless man-weeks of civil service time (paid for by borrowing from China) better spent elsewhere -- or not at all.  It ties Congress up in knots most of the year.

And most interestingly, by knowing what we plan to spend for 4-5 years, we can work on tax policy meant to produce the amount of revenue necessary to run the Government, no more, no less.  I can't speak for you, but IIWP, I would much rather have Congress trying to figure out how to write tax code that would produce the right amount of revenue than finding new ways to spend it.  But that, my friends, is tomorrow's entry.

Copyright 2014 by Robert Sutton

Tuesday, September 9, 2014

Economic Bullying in MLB: Does 2014 Defy It?

The news media today, not just the sports media, are all over the Ray Rice wife-beating case, trying desperately to make it sound like it is somehow political, and that one side or other actually comes down on Rice's side on this.  This is even though there is no "right" side -- he is grotesquely and criminally wrong for assaulting his wife, and she is morally blind in asking the world to leave their marriage alone, forgetting that the absence of severe punishment to her husband would give a generation of young fans the idea that women are disposable chattel and striking them might some time be justified.

So moving on to the elder sport, I'm taking a moment to write on a topic that would seem better covered in 2009 or even earlier: the economic disparity in Major League Baseball (MLB) is pathetic, unfixable, and needs to be properly adjusted to ensure long-lasting competitive balance.

This is a topic that rears its head much more often in years in which the New York Yankees commit close to a half-billion in guaranteed salaries, buying out most or all of the quality available free agents in the marketplace.  They did that in 2009 and effectively bought a world championship, the only one of this Century.  They also did that in 2014, and are apparently not going to sniff the playoffs.  That does not make my argument any less relevant.

Since the mid 1990s, one team has led the league in salary commitments every year but one (1998), and if you've read this far you know they play in the Bronx.  During the first decade of the 21st Century (the "Naughties"), not only did they lead every year, but with payrolls around $180-200 million, they often led the 2nd-place payroll by so much that the gap between New York and Payroll #2 was bigger than a dozen teams' whole payrolls.  That the Dodgers have now caught up with the Yankees in payroll for 2014 only means there are two behemoths where once there was one.  It does not void the argument.

Why is this the case?  It is the simple confluence of several factors: the Yankees' enormous revenue advantage due to their location and ownership of their own network; the lack of a specific salary cap in MLB (mildly but inadequately offset by the "luxury tax"); and the philosophical distinction between MLB and, say, the NFL, the latter regarding itself as a league with common goals of success while the former maintains economic separation between its teams.

At the risk of putting up a strawman, the argument against doing anything about this generally includes points like:
(1) The owners of even the small-market teams are billionaires; they should step up and compete for free agents like the Yankees do
(2) The Yankees don't win the Series every year, shoot, they aren't even going to the playoffs this year
(3) The small-market owners just pocket the luxury tax/revenue-sharing funds rather than spending them on players.
(4) Etc., etc., etc.  Just read a Yankee fan comments section; it'll all be there.

I want to address the first three up there pretty quickly, even though the disposition of those arguments is actually fairly subtle.  Well, #2 isn't very subtle -- getting to the World Series requires navigation through a challenging playoff system, and winning it yet a further round.  The true test of long-term success is not how many rings you win, but how often you put yourself in position to do so by making the playoffs.  Once you get to the playoffs, as Oakland GM Billy Beane argues, it's a crap-shoot.  The sample size just isn't large enough; not enough games to make, sustain or deny an argument.

OK, there is a subtle part of #2.  A team with a virtually unlimited payroll budget ends up with long, expensive contracts committed to players who historically don't finish them well.  One risk of that approach is that periodically a set of such players will age simultaneously, leaving the team vulnerable if it does not maintain its farm system well (q.v. the 2014 Yankees) and provide replacements.  Those longer contracts can only start when the player is a free agent, which is normally at around age 29-30, meaning that injury and age-based decline becomes a risk before the contract is halfway done.  An unlimited payroll budget is great, but it does take intelligent planning and not a reactive nature.

The "owners are billionaires" path (#1) is hard to explain to some people, because most fans fail to distinguish the books of the team organization-cum-corporation from the wallet of the owner.  Carl Pohlad, the expansively wealthy late owner of the Minnesota Twins, was constantly berated for not diving into the free-agent marketplace, despite owning a team in the mid-to-small market revenue scope.  "Why", fans would ask, "doesn't he dip into that massive bankroll he's got ...?".

I can only answer this way.  Imagine you owned 100 shares of GM stock.  GM decides it needs to build a plant in Bug Tussle, Arkansas, and sends you a bill for $3,665.54 as your share of the cost of the plant.  You are, after all, a shared owner and need to share the costs of the company, right?  OK, that's not going to happen, but you get the point.  GM can't build that plant unless its own revenues and profitability allow the expense.  Likewise, a Minnesota baseball team that takes in $200 million in a season cannot devote $180 million of it to player salaries alone and still pay the stadium, the staff, the operating costs, the minor leagues, etc.  To ask owners -- well, to expect owners to fund player salaries from their pockets is to betray a sorry understanding of the workings of contemporary business.

The #3 argument is different in that it's more an outcome.  Why do we think the small-market owners are not spending on free agents?  Look, it is patently obvious that a handful of teams -- two now, 4-5 at times, but that's out of 30 -- are able to bid the price of free agents up to where only that handful of teams can create a roster with even one such player, let alone five or more.  Moreover, the risk created by a small-market team investing 25% or more of its maximum player budget in one free agent is immense -- injury, blocking minor league players at that position, etc.

For $40-60 million, you can build a team based on predominantly farm-sourced players (Miami is doing that for less), trading 2nd or 3rd-year arbitration players to replenish the farm system.  How often is such a team going to be in a position where using the luxury tax funds will bring in that one missing talent from the free agent marketplace?

Suppose the Marlins were almost there for 2014, but just needed a second baseman.  Are you suggesting that they should have paid the ultimate market value for the top second baseman free agent available, Robinson Cano?   Cano signed for $240 million for ten years.  The Marlins' payroll for 2014 is $47 million; adding Cano would have made $24 million of a $71 million payroll committed to one player of 25.  Does it make economic sense either for the team to take its revenue-sharing funds and put it all on one player?  Does it make sense for the owner to put his own money into such a signing?

Let me give you two options.  Teams can succeed because of competent organizations making smart drafting choices, smart trades, wise allocation of funds and free agent signings.  Teams can also succeed by papering their payroll with unlimited funding such that they can't help but luck into a bunch of bought players far better than the average at their position.  The former is the National Football League.  With its salary cap, there is economic parity -- the only way to succeed is competence, and the same teams that are consistently successful -- New England, Denver, Seattle, San Francisco -- do so with excellence in their organization.  The latter is Major League Baseball, replete with economic bullying, where those who make the playoffs consistently -- New York, Boston, LA, Anaheim -- are those with the revenues to bully the smaller clubs in stocking rosters; where the small markets succeed only periodically when a couple adjacent seasons of drafting come together in an excellent team that cannot be held together.

I couldn't care less if a salary cap in baseball meant that the largest teams made absurd profits.  Baseball needs a system where competence, not revenues, drives success.  That cannot come soon enough, and in a year where all that doesn't seem to be playing out as I described, it's just as valid.

Copyright 2014 by Robert Sutton

Monday, September 8, 2014

The Myth of the Moderate

As we launch ourselves headlong into midterm elections here in the USA, the editorial pages are themselves launching their biennial complaint, lamenting the dearth of the so-called "moderate" candidates.  There are few words in news-speak that have less meaning than "moderate", and here is why.

Ask yourself what you think when you have the news on and are paying perhaps 53% attention.  A few dusty synapses click, and your subconscious decides they are talking about people -- voters, candidates, whatever -- who have middle views on the issues of the day, and therefore can achieve consensus in an otherwise over-polarized Government.  You think that, because that is the narrative the media want you to have -- that there are actually such people in politics.

The natural inference is that we should seek those candidates, and that the voters should vote for them.  But what voters?  What issues?  What candidates? When you elevate your attention level to close to actual concentration, you realize that the moderate hypothesis is a myth; that we cannot elect them because they don't actually exist.

Here's why.  While our subconscious and the unthinking media try to make you think that there are people with middle views, those who are not broadly conservative or broadly liberal have mixed views, and that just is not the same thing.  The outcome is that no so-called "moderate" can achieve anything like enough of a voting base to win anything above dog-catcher.

Let's look, to illustrate, at ten fairly significant issues of the day.  By "issues", I'm talking about the underlying attitude of a voter, that would tend to show up in a binary question if the person were backed up against a wall and forced to answer, and if the question were to be reduced to a black-or-white one.

1) We are the world's policeman, or we should keep our nose out of other nations' internals.
2) If you increase tax rates you will raise more revenue, or you will suppress the activity and lose revenue.
3) Unions are vital to worker rights, or they have achieved their need through legislation and thus outlived their usefulness
4) The Federal Government should take over as much of the economy as possible, or take as little as possible
5) The Constitution's "powers not delegated" clause moves every governmental function to the states other than the specific ones laid out for Washington, or it is flexible and the states have very little independence.
6) Affirmative action is necessary to achieve diversity, or it is simply reverse racism in disguise.
7) Abortion is murder, or a fetus is the biological property of its mother to be handled only as she sees fit.
8) There is a maximum individual tax rate that any American should ever have to pay regardless of income, or there is no limit and if the law says someone could have to pay 90% of their income in taxes, that's OK.
9) The Federal Government has a role in education, or it has none and education is the purview of the state and local governments.
10) There is a Judeo-Christian moral compass upon which the US relies, or we must recognize the differing morality of other religions (or atheism) in this country even if they are counter to US or local law.

Now, you may think there are actually options between each of the "or" clauses in these ten, and you'd be right.  But the point is that, if forced to, everyone would be able to identify a conviction or, at least, a sympathy, with one choice or the other in these or any other dozen topics you might bring up.

I did not put the choices in any order, but you will see that the answers any one person would choose would tend to assort -- the low-tax person would more likely be of the "abortion is murder" side, and the "affirmative action is racism" side, etc.  Let's say we look at the answers and call one of them "C" for typical of a conservative, and one "L" for being typical of a liberal.  In a population of 1,000, undoubtedly at least 800 will have at least 70% of their forced answers all being C or L, and fewer than 200 will be split 50-50 or 60-40 between the two.

That 20% of the population, though, is where the media make their mistake.  Let's say, for argument's sake, that someone in questions #1-5 comes down  on the "C" side, and on questions #6-10 on the "L" side.  What do we call that person?  You guessed it -- a "moderate".  Now the guy living next door comes down "L" on #1-5 and "C" on #6-10.  What do we call that guy?  Well, we have to call him a moderate, too.

So we have two people the media would call "moderate", who have no more in common than two people, one who is all "C" and the other one all "L".  Please explain to me how a single "moderate" candidate can expect to get the votes of both of those people.

They key in all this is that the voting populace actually assorts its views into two poles, because the upbringing a typical American has will push him or her toward a value system that tends to be conservative or liberal.  Those elements which mellow that commitment to one side or the other are so individual that by the time a person migrates some of their views toward the opposite pole, their voting tendency will be their own, and the odds of mapping to some "moderate" candidate quite slim.

The media can decry the lack of moderate voices all they want, but there's a good reason that their outcry doesn't produce candidates with the possibility of winning anything.  There is no "third pole" around which sufficient people gather to produce a candidacy.

Copyright 2014 by Robert Sutton