Bob Hayes Online

…and the skies are grey. I missed it when it came out, but Reason put out a survey of California’s budgetary figures for the last twenty years or so and the results are not encouraging for the “if only we’d tax more” crowd.

High points:

Since 1990, California’s spending has grown at a staggering 5.91 percent a year – a 180.9% increase. They’re almost tripling the government every twenty years. Population growth and inflation combined come to only 4.38 percent per year – meaning that spending growth has outpaced the population and cost increases. Even subtracting the population and inflation figures, there’s been an absolute growth of 35% – meaning that the government is a third bigger than it was less than a generation ago. Sometimes government has to grow (WWII) – but even liberal statists must recognize that a government that doubles in absolute size every lifespan isn’t sustainable.

Since 1990, general fund expenditures have gone from under $1500 per capita to more than $2500 per capita.

Oh, and by the way? If California had kept spending at 1990 levels plus proportional increments for inflation and population growth, they would have a $15 billion surplus this year.

And education spending has shared the upward trend. Since 1990, general fund K-12 spending has increased 191.5% – a 6.11% annual increase, outpacing both inflation + population growth AND the general fund  expenditure growth rate. (Higher ed spending trailed those figures, “only” doubling and growing at 4.18 percent a year.)

California’s problem is that they decided to grow the government more than  anybody was willing to pay for – not that greedy taxpayers aren’t willing to come across. The greedy taxpayers are coming across in huge numbers and with great big fat checks and with a strong upward growth trend (outside the current recession).

It’s just that the wishlist has grown even faster than their revenues.

Greg Mankiw has the scoop. Bottom line: Medicare’s administrative costs are $509 per patient. Private plan administrative costs are $453 per patient.

If true – I’d be wary of such a strong claim simply because it is so strong, and I’d like to see the opinions of other economists – then it’s a huge blow to an underlying premise of Obama’s health care reform ideas: that the state can do it better, and thus more efficiently. That flies in the face of conventional wisdom, as well as decades of living experience. If the state-paid clinic can’t provide health care at better prices to the American people than the private sector…why switch?

We don’t know how many hugs the free guy distributed, but this is an interesting example of marketing in action.

Bond market iffy for next US treasuries auction.

Gee, it’s such a mystery. Rip off bondholders in the Chrysler bankruptcy, then ask the market “hey, anybody want to buy some bonds?”

Yeah, sign me up for that deal, please. Also, I need some ground glass for my eyeballs, and how about a rough proctological exam while we’re making wishlists.

Are they trying to crash the economy so that they can get the public to demand solutions, any solutions – even crazy socialist ones?

A businessman finally dissents. Amen, Mr. Asness.

Obama thinks this is going to cow the business population so that they will go along with his socialist agenda. He’s probably right; business leaders have been pretty spineless through all this.

Yet, the business population and the investor population aren’t identical. Investors aren’t cowed, they’re scared shitless – presumably Obama isn’t going to gut everybody’s shareholder value, but where will the messiah’s finger next point? I’d say you’d have to be nuts to have money in health care, real estate, or transportation stocks these days. In any sector Obama thinks could do with some updating, shareholders are going to be running for the hills.

Many people seem to be under the impression that if the United States could attain energy independence, we could stop worrying about the war on terror/militant Islam because without our petrodollars, the mullahs would be out of cash. Would that it were so. Leaving aside the moral implications of abandoning a third of the world to rot under an oppressive theocracy, it’s not likely that the Islamic world is going to become economically incapable of bringing the war to us any time soon.

If we get rid of our dependence on foreign oil (a good idea on its own merits, so don’t think I’m arguing against that), we free up room in the consumption pipeline for Africa and Asia to increase their use of cars and other oil-burning technologies. Saudi Arabia is likely to stay rich no matter what we do; we might just make the multitrillion dollar investment to move America to renewable sources, but we certainly aren’t going to make the megatrillion dollar investment to turn China, Africa, India, and Indonesia (to point to the first four billion people who would like cars now, please) into Ecotopia.

So they will have leverage, despite the fact that we hypothetically-don’t need their oil anymore, because they will still have money and power. And quite likely nukes, since for some strange reason, President Obama’s hypercharisma has failed to convince Iran that they don’t need nukes because the community organizer has their best interest at heart, and we all know he doesn’t have the clankers to go after Iran in any effective way. Nuclear-armed states don’t need us to need their export products for us to be embroiled in conflict with them; the USSR had nothing that we needed.

And even if tomorrow morning Al Gore wakes up with a ready-to-go patent application for the Galt Engine and we all start generating a personal terawatt using nothing more than the morning dew, mild sexual desire, and bits of yarn, all THAT will accomplish is to launch the biggest boom in plastic production since Pamela Anderson went shopping for new boobs. Oil price crashes, plastic starts costing eight cents a ton to make, and we all start building plastic houses – and oil ramps right back up to $30/barrel. Plastic houses would be cool and all (I personally want them to make giant Lego bricks about 3′ long that people can snap together to build their own structures because that would be awesome) but would leave the ayatollahs with plenty of cash on hand.

In the long run, readily-extractable hydrocarbons will always have significant economic value, even if nobody would dream of setting them on fire.

Why can’t newspapers make money?

Let’s reinvent the daily paper, with the idea of concentrating on the critical elements of what a paper needs to do.

What do you need in a paper?

It needs to be tabloid sized. A little bigger is OK, but I don’t need an umbrella or a windshield replacement, I just need to read the news. Sitting in McDonald’s, I don’t always have an acre across which to deploy the paper.

It needs to be on my door at 6 AM. I am not going to my computer, printing out a crappy 8.5×11 version and waiting six minutes while my inkjet chirrups at me. Bring me the paper. (And I mean bring it to my GD door, not leave it somewhere in the vicinity of the storm sewers.)

It needs to have the big news of the day, the global “big picture”. It needs to have the editorial opinions of the paper’s writing staff – honestly presented. Not just the editorial elite or the ownership – every writer needs to appear on the editorial page, so that we can hold the sons of bitches accountable for their points of view. You, the reporter heckling the President – did you vote for him? Did you vote for that congressman whose ass you just kissed with a puff piece? What do you honestly think of the health reform bill – do you even really understand it?

It needs to have good local news coverage – many times the amount devoted to national news. Minimal/adequate national, good state-level coverage and excellent local/regional material. The Internet will tell me what President McBama said, the paper can tell me what the mayor  said.

So front page should be the national news plus banners of any really earthshaking local stories. Second page should be the editorials. Third page should be the funnies. (Why do I put the funnies third? Because I can’t put them first or second.) Fourth page should be the funnies plus the features old people like, the crossword and such. (It keeps them from rioting about Social Security, so it’s worth the pagecount.)

The funnies should be large. That might mean only a couple of dozen on each page. I don’t care. There’s so much dross on the FP, you could start a dross-making business and make a fortune. (I apologize for that joke, but insincerely.) Just run the good ones.

Pages five through eight should be local and regional news. Page nine and ten are sports and entertainment news. None of these pages (1-10) have any advertising on them.

Pages eleven through sixteen are ads. Classified ads have space preference; if the classifieds don’t fill the space, banner ads fill the difference. Run PSAs if there are no ads. Local jobs should be the favored classified ad. Classified ad space is sold over the counter at a low fixed rate; banner ad space is sold on eBay or a similar online auction model on an inventory model; you can buy column inches that will run when we next have space for them.

We need four local reporters, one local editor, one national/state reporter who does hisher own editing – they’re just regurgitating Reuters, after all – and one managing editor to hang the whole thing together. We need a fresh-faced intern to handle customer service for the classifieds. We need one crotchety old bastard to walk around and bother people and tell them to quit pissing around with their email and get the hell back to work. We need one sweet-faced angel with people skills to be the publisher/editor in chief/grand high panjundrum of deciding what kind of coffee to order for the breakroom. (You can combine the latter two into one job if you find someone with the appropriate type of multiple personalities.)

That’s ten people for the editorial staff. They can bring their own computers to work. We’ll pay them $50,000 apiece the first year, so our editorial budget is $500,000. They’ll need an office. Ten people don’t need a whole lot of space. In Denver I can rent a set of offices for (checks Craigslist) for $2350 for about 1500 square feet, let’s call it $2500 a month. Add another $500 a month for all the telecomm stuff a paper needs – $36,000 for the year. It’s more space than we need, but we might expand quickly.

We will subcontract delivery, distribution, and printing – the “paper” means the people who create it, not the physical infrastructure of creation. It makes no economic sense for us to own our own press, so we will contract that out and just order our daily run from the printer who gives us the best deal. The paper will cost 25 cents on the newsstand, 50 cents delivered. The 25 cent delivery charge will go to the delivery contractor(s); 25 cents a delivered paper is an excellent wage for those guys and we will get outstanding response there.

So how many papers do we have to sell to break even? I confess I don’t know what it would cost to print up the paper as described – sixteen tabloid sheets, all B&W, on cheap but not shoddy paper. Ten cents a copy? That leaves fifteen cents to cover editorial salaries, along with whatever revenue comes in from the ad side. My budget above (which of course doesn’t cover every single thing, but which does hit the big ticket items) is $536,000 a year. Let’s call that $600,000 to give us some cushion. That’s 4,000,000 papers per year we’d have to sell – just under 11,000 papers a day.

There are one-man local circulars that can hit that. Is there anyone who thinks that you couldn’t sell 11,000 subscriptions to such a paper in Denver? Particularly if the paper’s focus and tone were friendly to its readers, and not highhanded preachiness? And then your ad revenue is just pure sweet gravy to ladle out on shareholders.

Get 100,000 subscribers, and you’re rich.

A paper built on this “value” model could expand, easily keeping its costs the same per copy and increasing the value per issue. There are doubtless inflection points on such a paper’s growth curve where redesigns could lead to better margins and better reader experiences – I don’t foresee where those would come, but presumably they’d be detectable once you were in business and talking to customers every day.

Obviously this business plan is less than complete. But offhand it looks profitable, and to just be hugely hubristic and dare the gods, easy. It’s a lot smaller than the paper of yesteryear – but the space that paper took up in the memesphere has been filled by other media. The paper will remain, and will remain important, but the profitable papers will be small in organizational size, lean in operation, and tightly focused on their local markets.

Advocates of a federal solution to the economic crisis based on spending a great deal of money point out that we spent our way out of trouble during WWII. They are right. We did. It worked.

The problem is, we were able to do it because our federal government was so small. It did less, and much of what it did was done well. In comparison to its European competitors, however, it was rather small and unimportant – dingy, even. Our government was poor but honest.

Expanding a competent organization and increasing its power can, indeed, have a positive economic effect, especially when the competent government is faced with a powerful and effective outside enemy – there’s no luxury of wasting resources when the Nazis are at the door.

We currently have powerful enemies – terrorist regimes and groups worldwide – but they aren’t nearly so effective as the Nazis. We’re not in danger of being taken over by Osama Bin Laden, so our government has the luxury of taking things a little less seriously and being a little bit more wasteful.

And while elements of our government are quite competent at what they do, there isn’t a huge unused reserve of “competence” out there in the economy like there was in 1939. Our economic machine is running, broadly, at capacity now in productive terms, and long may it continue to do so – but some huge federal expansion now would be mostly cancerous and parasitic – three tumors for every healthy cell built up.

We no longer have a poor but honest government that can be assumed to use additional power or resources for the benefit of all. It would be nice if we did, but we don’t.

Our current situation, in fact, can fairly be described as the dark warning that should have been delivered to Washington in the 1930s: “Sure, you can grow out of your current problems. This is what you’ll look like when that’s done.”

First off, Happy New Year.

Second off, WTF? This ad is on the top of the Drudge Report as of this writing. God knows where else it’s been placed.

In no particular order:

1) You’re not welcome. Give me my tax money back, you corporate whores.

2) You didn’t have any money, so you begged for the taxpayers to bail you out, and they did (against the popular will), and the first thing you do is spend a bunch of money on an ad THANKING THEM? You know, my folks gave us some money to help us buy our house (thanks!) – I’m pretty sure that if we’d taken a couple grand of that money to put up a billboard in our town saying “Thank You!”, that they would have been pissed off. Because they gave us the money for a house, not for PR stunts. Chrysler’s money, ditto.

3) With public relations and economics skills like these, no wonder your company is in the toilet. It deserves to be in the toilet. Fail now, and get out of the way.

(Sorry, Joanne. But you know I still love ya.)

Imagine a network of rail/bus/street/streetcar/parking nexi, distributed over a metro or semi-metro area.

Each node in the network is connected to at least one other node, so that the network is completely routable; there might not be direct connections from every node to every other node, but there is at least one indirect path from each node to every other node.

To access the system, individual travelers (and possibly cargo shipments with handlers) access a node by whatever means they wish – parking their car there (for a fee), and registering at a computer kiosk similar to the ticket sales machines and booths common to current conventional mass transit systems. Each traveler indicates (on a computerized system) their intended destination, and their bid for the trip – i.e., how much they will pay for the trip. They could also signal mode preferences (I’d rather take a cab over the river than the train) or book future travel (I know I will want to get on the train back home every day around 5:15.) The transit authority would set the minimum prices and maximum prices, or might choose to allow free bidding. Passengers could also access the system from home or public computers with Internet access.

The owners and operators of the conveyances on the network – whether trains, buses, cars, streetcars, hovercraft, or what have you – act as independent contractors on the network. The transit authority will no doubt have a registration, screening, and inspection role to play in the supply- side access to the market. Each contractor will monitor, in real time, the expressed demand within the network and route their capacity accordingly; the real-time monitoring will permit conveyances to signal acceptance of conveyance terms to groups of people at a time and “snap up” those customers – first come first serve. Once a passenger accepts the terms (“a train will take you to the Napoleon Hill station and will arrive within four minutes; the fare is $2.00″), the kiosk charges their credit card or accepts cash and makes the sale. The negotiation process could take place at the kiosk, or via the traveler’s own independent communications device. The kiosks themselves would constantly show the average prices for various trips on the network, allowing travelers to be aware of the going market rates for the travel they wished to buy.

The experience from the point of view of a traveller would be something like this. John enters the Union Station transit terminal and hurries over to the nearest free kios. He has a hot date, and wants to get to the Lincoln Tunnel terminal – just one block from his girlfriend’s apartment – as quickly as he can. Punching in “Lincoln Tunnel, and make it snappy.” He sees that the train ride most recently has gone for $3.50, the train will arrive in seven minutes, and the transit time will be half an hour. Not good enough – but a cab company offers to pick him up immediately (they have a car already at the station) and get him there in twenty four minutes or less for $27.00. He accepts, swipes his card, grabs the receipt that tells him to go to cab stand B and get in cab 974, and hurries away from the kiosk.

The next customer at the kiosk, Mary, arrives with her daughter and a crated dog in tow. Mary is heading for the veterinarian, and has an appointment there in an hour. She’s not in a big hurry, and she doesn’t want to spend a lot of money. On the downside, the vet is four blocks from the nearest terminal, and Mary does not want to carry this dog four blocks in the July sun. There isn’t a train service to her vet’s terminal (the tracks haven’t been laid yet by the rail companies – but Mary does check the box to indicate that she’d be interested in rail service if someone decides to make the option available) but the bus takes just 40 minutes and costs only $2.00 for Mary, $1.00 for her daughter (kids ride for half price on most conveyances, a marketing tactic almost universally adopted), and an additional $2.00 fee for the dog crate. Mary books the bus ticket and splurges on an additional $5.00 to cover the quick cab ride from the destination terminal to the vet’s office.

(In one alternative timeline, when Mary and family return from the vet the total fare ends up being $17.00, because now it’s rush hour and the bidding for rides is hotter. In another timeline, the dog has to stay with the vet overnight so Mary and her daughter take in a movie and dinner out to avoid the rush hour, and come home much later for $5.00 total.)

A third customer – a married couple this time, Phyllis and Phil, arrive for their regular commute. It’s mid-afternoon, but both Phyllis and Phil work an odd shift as CD duplicators at the local software company. They punch in their standard commute settings on their iPhones and quickly confirm a $3.00 bus-ride to work, and hasten on their way – nothing fancy, they do this every day and the fare is always about $3.00. Today there’s one change, though – Phil also remembers to buy a ticket for his dad, who’s coming to visit for Saturday dinner the next day. He locks in a great deal on the 60-minute train ride for his father, with a bus ride to cover the six blocks between Phillis and Phil’s apartment and their home terminal, and e-mails the ticket information and confirmation code to his dad before taking the escalator up to the bus loading area.

By utilizing a bidding model, and publishing the average bid amount information, both passengers and conveyance providers have exact and accurate information of the demand picture at any given time. Given most urban infrastructures, it would seem a logical first assumption that much, if not all, demand could be profitably met by transit companies. Full buses and trains make money, and the classic problem of mass transit has been the need to have large quantities of the equipment running at low capacity in order to provide service at a particular time of day. Under a bidding model, people wishing to take trips that other people don’t want to take will have to bear the costs of their relatively expensive choices or needs. Alternatively, people with those needs could trade time for money, by waiting longer periods in order to accumulate more bidders for a particular ride. (“There might not be anyone else needing to go over to the little-used Junktown terminal, but if I wait a half an hour, I bet a few more people will show up.”)

This would also be a highly profitable model for the conveyance companies, while also promoting vigorous competition and eliminating the kind of ill treatment of passengers that “you’re stuck with us” mass transit authorities are notorious for providing. If train company A will not provide good service to the people wishing to make a trip, then bus company B is certain to spot the opportunity (“look, a whole wad of unmet bids from Johnson Street – let’s snag those and send a bus over”) and scoop them up. Customers equal money in this model – and customers who want to represent more money in order to get better levels of service are free to do so.

I would anticipate the development of several tiers of service providers, in fact – from luxury cabs to utilitarian jitney bus companies – in order to capture the entire transit market. There is so much diversity of demand and desire that a similar diversity of providers would spring into existence, funded by the real demand for real service.

The main peril that I see in such a system is that established conveyance companies would engage in regulatory capture of the transit authority and try to keep out new competition. I would mitigate that risk by building free competition principles into the charter and structure of the transit authorities themselves – for example, by establishing an “open audition” policy by which any comer could offer services on a trial basis within the system (indicated clearly as such), so that the more adventurous travel patrons could “take a chance” on the newcomer and quickly establish a bona fide track record. There are other ways of keeping competition open, but all of them in the end rely on a demand for free competition from the transit customers themselves.

Municipalities or areas that wished to subsidize travel for their poorer citizens would, of course, be free to do so. However, my suspicion is that this model would drive down the costs of travel for nearly all travelers – with the exception of those who under current systems enjoy high level of service in areas or times of low demand. Those folks, it should be acknowledged, would end up paying more or enduring worse service.