Public Employee Pensions

In my discussion about public education I suggested that the savings achieved through the use of my school model should be used to retire the gigantic and largely underfunded teacher pension programs.

As I gave the idea more thought, it occurred to me that the subject of public employee pension programs deserves a post of its own. I'll throw Social Security into the discussion since it forms the foundation of US retirement in general.

A few facts to get the juices flowing:

Social Security currently benefits 55 million Americans, has $2.7 trillion in the trust fund and, with the reinstatement of the full 6.2% tax in 2013, is funded with $735 billion in tax (half employer and half employee) as well as $110 billion in interest from the trust fund. It will pay out $789 billion. See http://www.businessweek.com/ap/2012-08-12/fact-check-social-security-adds-to-budget-deficit.

State and Local public employee pension funds in 2011 benefited 8.6 million Americans, have $3.1 trillion in assets, and were funded with $40.3 billion in employee contributions, $136.5 billion in government contributions (local & state) and $479.6 billion in interest on assets. It paid out $231 billion. See http://www.census.gov/govs/retire/.

Federal employee pensions cover the military as well as the civilian workforce (including congress).

Starting with civilian employees (including those who work for the military), federal pensions currently cover 1.9 million Americans and have zero assets beyond the "full faith and credit of the United States of America". The government paid out $78 billion. See http://www.fas.org/sgp/crs/misc/98-810.pdf for a description of the plan. See Table 2 of http://www.opm.gov/feddata/retirementpaperfinal_v4.pdf for the number of beneficiaries; it's a lot like Social Security except that the government pays the half that an employer would pay since the government is the employer. The plan is called the Federal Employees' Retirement System (FERS).


The federal Office of Personnel Management estimates the cost of the FERS basic annuity at an amount equal to 12.7% of pay. The federal government contributes 11.9% of this amount and the other 0.8% is paid by employees. There are three other employer costs for employees under FERS. Both the employer and employee pay Social Security taxes equal to 6.2% of pay up to the maximum taxable amount; agencies automatically contribute an amount equal to 1% of employee pay to the THRIFT savings plan (federal version of a 401-K); so where Social Security employers and employees each pay 6.2%, the federal government pays 19.1% to the employee's 7%.


The biggest differences from Social Security are the notion of an accrual rate in FERS, the program reform from the CSRS plan from 1920, the employer/employee contributions and the payout.

The accrual rate is the pension benefit earned for each year of service, expressed as a percentage of the salary base. Under FERS, workers accrue retirement benefits at the rate of 1% per year. A worker with 30 years of service will have accrued a pension benefit equal to 30% of high-three pay (average of highest three years' pay). For employees in FERS who have at least 20 years of service and who work until age 62, the accrual rate is 1.1% for each year of service. For example, a worker under FERS who retires at 61 with 29 years of service would receive an annuity equal to 29% of his or her high-three average pay. Delaying retirement by one year would increase the annuity to 33% of high-three average pay (30 x 1.1 = 33).

CSRS pension accrual rates increase with length of service. CSRS pensions equal 1.5% of high three average pay for each of the first 5 years of service, 1.75% for the 6th through 10th years; and 2.0% of high-three average pay for each year of service after the 10th year. This formula yields a pension of 56.25% for a worker who retires with 30 years of service. Fortunately, this plan has been being phasing out over the last 29 years.

FERS accrual rates are lower than the accrual rates under CSRS because employees under FERS pay Social Security payroll taxes and earn Social Security retirement benefits (although much more than the rest of us).

Members of Congress, congressional staff, federal law enforcement officers, firefighters, and air traffic controllers accrue benefits at higher rates under both CSRS and FERS than do other federal employees. Under CSRS, Members of Congress and congressional staff accrue benefits at the rate of 2.5% for each year of service. This results in a pension of 75% after 30 years of service. Law enforcement officers and firefighters accrue benefits at the rate of 2.5% for each of their first 20 years of service and 2.0% for each year thereafter. Under FERS, Members of Congress, congressional staff, law enforcement officers, and firefighters accrue pension benefits at the rate of 1.7% per year for their first 20 years of service and 1.0% for each year of service after the 20th year. These accrual rates yield a pension equal to 34% of the FERS salary base after 20 years of service and 44% after 30 years of service.

I'm concerned that the payout is one tenth of the Social Security for one thirtieth of the number of beneficiaries: it pays out 200% more per person! What a racket!

Continuing with the non-civilian military (actual soldiers, sailors, etc.), federal pensions also cover about 2.3 million Americans (retirees and survivors) and have zero assets. It paid out $51 billion in 2010. See Page 2 of http://www.fas.org/sgp/crs/misc/R42087.pdf. Military benefits are different from traditional civilian government benefits because of the so-called "20-year cliff": if you're not in for at least 20 years, you get nothing (except GI Bill benefits).

For both military and civilian retirees, the government may also provide up to 4% (matching contributions by employee) of the employees salary to a THRIFT savings plan which is similar to a 401-K. This is only relevant to the discussion of how to pay for the benefits since the federal government must currently borrow this contribution as well.

So for a top-level view, which program would you rather be in?

• Social Security pays out $789 billion/yr to 55 million people for an average of $14,345.
• State and local pays out $231 billion/yr to 8.6 million people for an average of $26,860.
• Federal civilian pays out $78 billion/yr to 1.9 million people for an average of $41,052.
• Federal military pays out $51 billion/yr to 2.3 million for an average of $22,173; not really.

It seems clear to me that working for the local, state or federal government (federal clearly preferred) is the way to rack up those retirement dollars, at least until bankruptcy. One can clearly see the incentive to "do your 20" in one branch of government then move to a different branch and do it again; this practice should be outlawed.

One question that comes to mind is; why are federal civilian pensions so large compared to everyone else's?

I recall hearing the argument that government benefits (pensions) are bigger because salaries are lower than in the private sector. However, Figure 1 in the following link shows that for those with less than a doctorate, JD or MD, it isn't true. See http://www.cbo.gov/sites/default/files/cbofiles/attachments/01-30-FedPay.pdf. 

Another interesting fact from the same Congressional Budget Office (CBO) report is that the total wages paid to the 3 million civilian federal workers in 2011 was $200 billion. This means the average wage of the civilians is $66,667 versus the average wage of all other workers of $61,538 (based on $8 trillion in compensation in 2011 for a workforce of 130 million people).

So the answer seems to be that the lawmakers are watching out for themselves at our expense.

Similarly interesting is the fact that the total wages paid to the 2.5 million active and reserve military personnel was $100 billion for an average wage of $40,000; so the $51 billion in pensions is roughly 51% of the amount paid in wages even though only those who stay at least 20 years receive a pension. See the summary on Page 1 of  CBO document http://www.cbo.gov/sites/default/files/cbofiles/attachments/11-14-12-MilitaryComp_0.pdf.

Military pay runs from $1379/month for a newly enlisted GI to $15,647/month for an officer (General or Admiral) with 20 years. A General's pay hits $19,240/month after 38 years.

Aside from the inherent danger of soldiering, this is not a bad gig; Colonels make about $110,000 after 20 years and can retire at age 45 with a 50% pension (2.5% of average of best three years' pay for each year of service) and 70% of medical costs in insurance coverage.

You know what, I'm OK with that. The whole idea of government pensions goes back to the Revolutionary War and the gratitude the new nation felt toward it's liberators. They deserved it then and they still do.

I'm not OK with the civilian side of the equation. The average pension of $41,052 is 61% of their wage and they don't (generally) risk life and limb to earn it. Except for law enforcement field officers, intelligence field agents, overseas diplomats and actual firefighters, this is ridiculous. It seems to me that we should move these folks directly to Social Security and Medicare, no questions asked and there should be no complaints. If there are complaints then we, as their employers, should indicate the direction to the door.

I'm also not OK with the state and local pensioners taking an average of $26,860 in yearly retirement benefits. State and local governments employ 14.4 million people full-time and 4.8 million people part time for wages of $840 billion ($768 billion for full-time). This gives an average full-time wage of $53,334 so pensioners are pulling down a bit over 50% in retirement. While I'll admit the average wage here is 14% lower than the average wage in America, I don't think it justifies the higher retirement benefits. See Fact #2 at http://www.cbpp.org/cms/index.cfm?fa=view&id=3261.


I'm concerned that the payout is one third of the Social Security for one sixth of the number of beneficiaries: it pays out nearly 100% more per person. Again, what a racket!


Some local governments are allowing themselves to be bankrupted by these ridiculous retirement benefits; this is childish behavior since everyone suffers for the benefit of a few. Some state and local governments are changing their laws to deal with the reality of the fact that these benefits are simply not sustainable without increasing government spending beyond the existing 43% outlined in the preface of this blog. The federal government must do the same.

Just pushing all of these people (with the exceptions noted) into Social Security will enable about $40 billion of extra payments on the national debt. The $3 trillion in the combined local and state assets could be used to pay down the debt as well (before Congress spends it on something else). The states and local governments would have the burden off their backs, the national debt would be reduced and the inequities I've just described would be gone.

Meanwhile, my school model would still be producing a $300 billion/year surplus. This will contribute another $75 billion in federal income taxes that, together with the $40 billion of state/local employee contributions and $14 billion of federal employee contributions could be used to bolster the Social Security trust fund and provide unemployment benefits and retraining for the thousands of displaced principals my school model produces.

And finally, the best part: the $300 billion in school savings plus the $24 billion in federal pension savings (12% of $200 billion) and the $96 billion in state/local pension savings (reducing government contributions to the same level as employee contributions) tallies up to $420 billion per year. This is a real reduction in spending of 6% of GDP across all of American government, reducing the total to 37% of GDP.

National Debt

America needs to eliminate our $16 trillion debt.

The yearly cost of the national debt is $280 billion.

Our elected officials talk about deficit reduction like it's a good thing to allow the debt to continue to grow without bound. I'm talking about becoming debt-free.

With the debt repaid, the Social Security trust fund will receive $2.7 trillion (the amount “borrowed” by congress when times were better), ensuring its solvency.

We also get back the $2.1 trillion congress has borrowed for other stuff we couldn't afford to pay in cash.

Here is my proposed solution.

• Increase the tax rate for those with adjusted gross incomes greater than $350,000/year to 50% on all income (both income and capital gains). This generates another $300 billion/year (on top of the $60 billion recently levied as part of the fiscal cliff deal) to pay off the debt (and only until the debt is paid off).
• Put teachers & parents back in charge of K-12. This saves $400 billion/year yielding another $80 billion/year in debt payments. See my blog on the subject for details.
• Renegotiate trade agreements that balloon trade deficits and export jobs. This shaves $400 billion per year off the trade deficit, increases consumer spending by the same amount (since the jobs come back to America) and increases debt payments by another $80 billion per year.
• Ban resale of consumer debt. This forces the banks to service their own loans and prevents another mortgage meltdown from happening. It will also prevent meltdowns from credit card debt, student loan debt, home equity debt, etc..
• Break up the mega-banks and make it illegal to bail out them or any other private company again in the future.
• Pass a bill to replace the foolishly discarded Glass-Steagall Act and repeal the Graham-Leach-Bliley Act to prevent the banks from becoming "too big to fail" again.
• Allow the current debt payments to continue as they are: $280 billion/year.
• Pass balanced budget amendment. This prevents the politicians in Washington from shirking their responsibility.

These actions contribute $800 billion/year toward our $16 trillion debt so it can be repaid within 20 years.

After 20 years, we’ll have an $800 billion/year surplus, a solvent security net, a properly educated workforce, higher employment from repatriated jobs, significantly reduced opportunities for the banks to get us into trouble again and a reigned-in Congressional appetite for spending our money.

This proposal balances my deficit elimination by adding more revenue, but once the debt is repaid the ridiculous tax rate for the highest bracket can revert to the Clinton era rate of 39%.

Again, you may not agree with my choices but we need to fix this and resume our place as world leaders.

Federal Spending Deficits

America needs to eliminate government spending deficits.

Imagine if you had been borrowing an amount equal to half of your income for the last 12 years. When you suddenly stopped after spending all of the borrowed money on stuff with no tangible value and were faced with the debt, that would suck, right? Well, here we are.

The yearly cost of the federal government is equal to the yearly federal budget deficit: $1.3 trillion.

The rest of federal spending is on entitlements and debt payments. Cutting entitlement spending is a non-starter: Americans pay for these programs because they make sense and are no longer a Ponzi scheme (well, maybe medicare is but we'll fix that).

While we can’t eliminate the entire federal government, we have to dial it way back. Piecemeal changes won't do it, we have to dig deep.

My proposed solution:

1. Cut the following departments:

• $73 billion; Energy - For this kind of money, we should have workable fusion by now. Instead we have radioactive waste piling up all around the country. We have a crumbling power grid that uses aluminum wire instead of copper: this was OK when energy was cheap, not now.
• $43 billion; Education - We're not even in top 10 of world rankings so I can't say we're getting much bang for these "invested" bucks; see blog entry on this subject.
• $14 billion; Commerce - With huge trade deficits year after year, whose side are they on?
• $19 billion; NASA - Tough cut for an engineer like me but we have bigger problems.
• $12 billion; Interior - This is a giveaway except for the national parks. Give the parks to EPA.
• $73 billion; Transportation - With highways crumbling, bridges failing, trains dying in bad weather and jets flying into skyscrapers, I'm not seeing value. Give air traffic control to DoD.
• $13 billion; Labor - Government is supposed to protect us all and yet government employees are unionized? This agency is obviously useless. There is also a conflict of interest since a government agency is helping to drive up the cost of government.
• $26 Billion; Agriculture - This agency is a big giveaway to big agriculture.
• $43 billion; Homeland Security - We have DoD, CIA and FBI so this is just a duplication of effort. The idea was to share information but it took 10 years to find Bin Laden?
• $48 billion; HUD - Our urban centers are a mess, real estate values have plunged and foreclosures are at an all time high. Again, I don't see value.

We’ll keep Treasury, State, Justice and Defense: the original four. We’ll also keep HHS, the VA and the EPA. Savings is $321 billion.

2. Cut DoD to pre-9/11 levels. Savings is $300 billion.
3. Ban profiteering on healthcare. Savings up to $400 billion; see blog entry on this subject.


Steps 1-3 shave about $1.02 trillion/year of the $1.3 trillion/year deficit.


4. Eliminate the rest of the Bush Tax cuts. This raises $350 billion/year.


Budget balanced with a small surplus to help with underfunded Medicare and Medicaid. This, when combined with the new 3.8% tax on unearned income for rich folks and the abolishing of healthcare profits will take the Ponzi out of healthcare.

Also a semi-balanced approach: big cuts to reduce bloat, industry kicks in and taxes restored to earlier levels.


Not everyone will agree with my choices but the intention is to show the scale of what's needed to eliminate deficit spending. Any serious attempt to meet this goal will cause some pain but to stay on the deficit path will be worse.

This is the first step. We still have a big debt that also needs addressing.

Healthcare

To fix healthcare in America, we have to start with the profits

A study of publicly available financial statements for several health insurers shows that they are taking roughly 30% profit.

Medicare operates on a much debated 4% margin. Detractors say that since so many beneficiaries are receiving end-of-life care, the costs are higher so the percentage consumed by overhead appears lower. To me, that's a great argument for a single-payer system since it reduces the average cost per beneficiary since more would be younger and healthier. If private insurance worked that way, we’d save hundreds of billions of dollars per year.

Don’t believe me? Check the financials yourself: Here are the ticker symbols I used: LOW, CVH, AET, UNH, CI, HNT, HUM, PFG, AFL.

Healthcare delivery operates the same way but profits at hospital management corporations are even larger, near 40%. Here are the ticker symbols I used: HCA, CYH, THC, UHS, AGP, WCG, VHS, HMA, MOH, LPNT, TMH, MD, HWAY, IPCM, HMSY.

I’m not saying that doctors, nurses and other healthcare workers are overpaid. To the contrary, their contributions to society outweigh their compensation.

In addition, many hospitals are non-profits.

However, the potential upside of a 40% reduction in Medicare and Medicaid expenditures (Part A - hospital charges) is HUGE at all levels of government: roughly $400 billion/year at the federal level alone.

In fact, since  Medicare Advantage plans cover about 20% of all Medicare beneficiaries, and these plans are effectively subsidies to private insurers, there's another 7% reduction on the table if profiteering is banned. Further, in 2006 enrollees in Medicare Advantage Private Fee-for-Service plans were offered a net extra benefit value (the value of the additional benefits minus any additional premium) of $55.92 a month more than the traditional Medicare benefit package; enrollees in other Medicare Advantage plans were offered a net extra benefit value of $71.22 a month more. This puts even more on the table since Medicare itself is only $100 per month and the program pays out $155.92 to $171.22 per month to the private insurers. This looks to me like a direct 30-35% subsidy for insurance company profits!

In addition, while writing  my post on Public Employee Pensions, I discovered that federal employees' health insurance plans (more than 200 of them!) are all offered through private insurers to the tune of $47 billion per year cost to taxpayers, $15 billion is profit. This has to be about the most idiotic thing I've ever learned about government finance.

This doesn't include the 30% savings on health insurance premiums for the rest of America. This will increase employment and boost tax revenues: win-win.

The insurance companies can still make their shareholders rich with all of the other types of insurance: life, homeowners, disability, auto, just to name a few.

I don’t fault the drug companies: they pay to invent drugs and as entrepreneurs they deserve their compensation. I just wish they’d stop advertising (that goes for lawyers too, but I digress).

Obamacare has the beginnings of a fix with the Medical Loss Ratio (MLR) provision of the law but much more can be done. A fair health care insurance law would enforce an MLR on both insurance and delivery.

Speaking of MLR, since insurers raked in 30% of more than $1 trillion in premiums, why were the rebates only $1.1 billion instead of $30 billion? We all know that congress is mathematically challenged but this is blatantly obvious.

To summarize, the profiteering on healthcare is unconscionable and is costing the US economy trillions of dollars.

Public Education

Before talking about publicly funded education, it is worthwhile to review the thinking of the founders on the subject. They all recognized the importance of effective education. 

“There are two educations. One should teach us how to make a living and the other how to live.” - John Adams

"I consider knowledge to be the soul of a republic, and as the weak and the wicked are generally in alliance, as much care should be taken to diminish the number of the former as of the latter. Education is the way to do this, and nothing should be left undone to afford all ranks of people the means of obtaining a proper degree of it at a cheap and easy rate.”  - John Jay

“The best mans of forming a manly, virtuous, and happy people will be found in the right education of youth. Without this foundation, every other means, in my opinion, must fail.” - George Washington

“Educate and inform the whole mass of the people... They are the only sure reliance for the preservation of our liberty.” - Thomas Jefferson

"I know no safe depository of the ultimate powers of the society but the people themselves, (A)nd if we think them not enlightened enough to exercise their control with a wholesome discretion, the remedy is not to take it from them, but to inform their discretion by education. This is the true corrective of abuses of constitutional power." -Thomas Jefferson

"If Virtue & Knowledge are diffused among the People, they will never be enslav'd. This will be their great Security." -Samuel Adams

This is the sort of thinking that argues in favor of public education and I agree with it. That said, I don't think that the founders of this country envisioned the public school system in its current form.

The object of publicly funded education was and still should be to create and maintain an informed electorate with so-called grammar schools. These schools taught (English) grammar and bookkeeping (arithmetic) since these are the skills necessary to make a living and participate in social interactions like government. I would add science since we a technological society. I would also add history since those don't study it are doomed to repeat it.

The publicly funded schools of today energetically attempt to exceed these essential requirements and, as a result, fail to meet them. We were 23rd in science, 26th in math and 15th in reading in 2009. These rankings dropped to 23rd, 31st and 17th respectively in 2012.

http://ourtimes.wordpress.com/2008/04/10/oecd-education-rankings/

Do we give kudos for science instruction to have remained mediocre? Do we double-down on reading and math instruction? No, we simply pay more and expect a different result. I believe that this is akin to the textbook definition of insanity. Check out this graph:

http://www.intellectualtakeout.org/library/chart-graph/inflation-adjusted-cost-k-12-public-education-and-percent-change-achievement-17-year-olds-1970

The graph shows a cost growth of 200% with flat achievement. Meanwhile, teacher's pay growth was 11% (see Table 1.1 in the URL below).

http://www.sagepub.com/upm-data/7319_odden_ch_1.pdf

There is no non-absurd way to explain this except to say that the increased cost is not going to the teachers or the students. We need to reinvent publicly funded education.

Connecticut alone has over 568,000 students in K-12 consuming an average statewide expenditure of more than $14,000 per year, per student. That is nearly $8 billion/year on the table in Connecticut yearly. About $600 billion/year nationally. And it doesn't include the fact that 10% of all K-12 students attend privately funded schools.

I have a classroom-centered school model for which $5,000/student/year is sufficient.

My model requires a teacher, students, teaching tools (books, computers, etc.), classroom space and utilities (heat/air, electricity, transportation, janitorial, internet, etc.).

My model does not provide food since that sort of program exists elsewhere (food stamps) and should not be duplicated with educational dollars. I am not a fan of the "general fund" model of government finance. 

Assume that an average class size of 25 is chosen: one more than the federal recommendation to make the arithmetic easy. This would provide $125,000 in funding per year per classroom: my budget.

Pay the teachers well at $85,000 per year (average): much more than the current average of $60,000 since they will become entrepreneurs running their own “businesses”.

Let’s look at teaching tools (books) first. The range is from $40 for high school English to $120 for high school chemistry. Let’s go for a conservative $100 per text with 5 texts needed per student per academic year. This costs us $6,250 for 25 students with new books for all every other year. I chose high school texts as a benchmark because they cost more than elementary texts. We can also buy 25 new computers for each class for $10,000 every other year ($5,000 per year cost to classroom).

Now let’s look at rent. A classroom for 25 students needs about 16 square feet per student or 400 square feet. At $28.5 per square foot per year (utilities included), this would cost only $11,400 per year and since it is leased, the landlord is responsible for maintenance & upkeep. Leased space avoids the costs of city-owned schools. Of course, the property listed below is in Westport, CT, one of the most expensive markets in the country.

http://www.loopnet.com/Listing/17155033/1-Morningside-Drive-North-Westport-CT/

A monthly bus pass costs $47 in Connecticut. One for each student for 9 months each will cost $10,575 although I'd be shocked if a lower price could not be negotiated. Lets call it $7,000.

We can conservatively have teacher, classroom, utilities, computers and books for $115,000 per year out of $125,000 available.

You might ask: what about guidance counselors, nurses, substitutes, etc.?

Well, if these are spread out cost-wise over say, 100 classrooms, we have $1 million left in our budget for them. These folks' services are not used by all students every day.

The model needs someone to manage the shared resources (substitutes, nurse, etc.) and also manage enrollment for 100 classrooms of various subject matter: I suggest mandatory English, history, math and science for four days each week. The fifth day would comprise "electives" with the caveat that at least 25 student want the elective each year or the teacher will accept lower compensation. The elective category also includes special needs classes.

This "superintendent" visits each class a couple times per year and can meet with each teacher online as required. We could similarly provide for shared nurses, counselors, computer technicians and a few truant officers to take care of the students who misbehave.

Superintendents would be super-teachers, not bureaucrats. They would be paid at the high end of the scale because they will have earned the respect of their peers by having done what they do at an exceptional level of skill.

As for the teachers, and this is crucial: their word in the classroom is law. No disrespect. No nonsense. All backed up by the parents. Publicly funded school is not day care.


No pensions: publicly funded school employees will use the same social security, medicare, etc. as everyone else. They can get health benefits through a large, nationwide pool of over 3 million or, better yet, self insure to avoid the 30% profit that insurance companies will charge.

Communities can use the (HUGE) savings afforded by my model to get out from under their pension and retirement health care liabilities before returning the difference to taxpayers.


The curriculum shall meet world standards so our kids learn the same stuff as their international counterparts. The results can be easily measured by a standardized exams. 

This approach also resolves the theoretical tenure issue since if a teacher does not produce results, the parents who care (and let’s assume that this is a majority) will enroll their children with a different teacher. 

This approach should also be agreeable to free market thinkers since this is how a free market should work.

Preface

Welcome all readers.

There are many things that I think could be improved with the way we do things in America. That said, I don't think I can rightfully complain unless I first try to offer solutions.

Having tried the "Letter to the Editor" route with my thoughts on institutional fiscal reform in America with little satisfaction, the concept of a weblog came up over dinner with family on my birthday.

We discussed the potential reasons why there were no feedback letters to my letters. It made no sense considering that my letters addressed controversial subjects like public education, healthcare reform, public pensions, deficit spending and the national debt.

After becoming sufficiently lubricated with a few bottles of Franciscan Merlot, we came to the conclusion that in a decidedly 'blue' state like Connecticut, my fiscally conservative views were being summarily dismissed as a solitary voice in the storm of unapologetic liberal journalism.

Hence the title of this weblog.

I am in favor of social liberalism (http://en.wikipedia.org/wiki/Social_liberalism) except where it interferes with fiscal conservatism (http://en.wikipedia.org/wiki/Fiscal_conservatism).

The fiscal idea behind the US Constitution was that a single national government would be more cost-effective than a fistful of state governments (13 at the time). In fact, I was certain that I had read in the Federalist Papers (a series of articles in favor of the US constitution) that the founders thought the federal government should cost no more than any of the state governments alone. I contacted a Federalist scholar and he assured me that I was mistaken.

Nevertheless, the cost of the national government is certainly higher than any single state and is also higher than all 50 states combined: this year we'll spend $3.8 trillion on the federal government and $1.5 trillion on all 50 state governments (plus another $1.6 trillion on local governments). This adds up to 43% of GDP.

I think that if a survey were taken of the founding fathers regarding this possibility, the poll would reflect nothing short of incredulity. If they were further polled regarding a federal government debt larger than seven years of total government revenues (not GDP) they'd petition George III to come back and brand the grand experiment an abject failure.

Not even with so-called "entitlement" spending removed, can the framer's expectations be met. Entitlement spending was about $2.3 trillion in 2012 if you include medicare, social security, food stamps, veterans benefits and federal government employee pensions.

I have nothing against any of these concepts except for the ineffective way they are delivered and the fact that some of them need exist at all.

The object of this discussion will be the examination of government institutions from "outside the box" in order to show how they can be delivered for a price that taxpayers are both willing and able to pay.

I use the cliche "outside the box" not because I love business cliches but because I am not affiliated with government at any level: I am merely one of the governed. I am also a taxpayer and I say 43% is way too much.

I will start with an outsider's view of public education. Education is probably the most important thing government does. It is also one of the most costly in dollars and the one on which the rest depend: an educated electorate is necessary for a popular government that wishes to eschew dumb laws.

You may correctly ask why a retired engineer's ideas have any bearing on the economics of government institutions. I can only request your patience and objectivity for a guy who has spent a lifetime solving problems.

So, if you can lend me an ear, please stay tuned to this voice in the storm.