Friday, March 22, 2013

The Peter Principle

The Peter Principle holds that in a hierarchy, members are promoted so long as they work competently. Eventually they are promoted to a position at which they are no longer competent (their "level of incompetence"), and there they remain, being unable to earn further promotions.

Peter's Corollary states that "in time, every post tends to be occupied by an employee who is incompetent to carry out its duties" and adds that "work is accomplished by those employees who have not yet reached their level of incompetence."

"Managing upward" is the concept of a subordinate finding ways to subtly manipulate his or her superiors in order to prevent them from interfering with the subordinate's productive activity or to generally limit the damage done by the superiors' incompetence.

Having just reviewed the budget proposals from the (republican) house and (democrat) senate, it occurred to me that this must be the principle at work in our nation's capital. Only an incompetent group could look at what's happening here and around the world and produce a pair of budget documents so blind to reality.

We all know that the federal government is spending well beyond it's means.

We all know that if we were allowed to save the money now confiscated by government, we'd get a much better return on it for our retirements.

We all know, especially with the recent publication of Bitter Pill in Time Magazine, that we are getting ripped off by the healthcare industry (I also showed that in my post).

We all know that politicians do what they do to get elected, not to improve our lives.

We all know that government spends 39% of every dollar.

We all know that wealth enables us to have government and that government creates no wealth. The path we're on leads to a huge government and no wealth creation; it must end in failure.

We all know all of these things and yet we stand idly by watching these buffoons waste the fruit of our labor year after year. I think it's time to start managing upward.

The senate budget looks just like the White House budget from last year: it proposes an increase of the national debt by $7 trillion over the next 10 years while increasing revenue (taxes) by 89%. All this with an economy limping along at a 2% growth rate. This is Exhibit A in my case for incompetence. 

The scary yet hilarious part is that they use the word invest 304 times. This is scary because the senate considers pissing our money away to be an investment and also because the word invest never makes an appearance in the Constitution. It's hilarious because we all know that invest is a none-too-secret democrat code word for spend.

At least some people got a return from investing with Bernie Madoff, none of us will.

The house budget looks just like last year's house budget. No surprise since it was written by the same guy. It proposes an increase of the national debt by $4 trillion over the next 10 years while increasing revenue (taxes) by 88%. All this with the same 2% economy. This is Exhibit B in my case for incompetence.

In the press, it is widely reported that this budget balances after 10 years. I'm seeing a deficit in every single year including the tenth one. I also see an upward trajectory at the end. I don't know what arithmetic led to the reports of balance but, then again, it's the media and we know they're just mouthpieces these days. I just can't figure out why a balanced budget would seem fearful outside of DC.

I'm also not clear about why the 2013 revenue points in the two budgets differ by $26 billion. We're in 2013 now so shouldn't there at least be agreement there? Granted that the discrepancy is only 1% but how can they blast JP Morgan for $6 billion when they can't add any better? This is Exhibit C in my case for incompetence.

The President's budget looks similar to the senate budget; $7 trillion more added to the debt, revenue increased by 93% (higher than house or senate at 88%) on the same 2% economy and the shocker: Medicare outlays projected to grow by 87% despite the supposed cost-savings of Obamacare (I don't use this term as a pejorative; the President said he liked it during the debates, remember?). There's a vote of confidence! There is also an unhealthy abuse of the word 'invest' here.

Combining this plan with the President's recent call to make mortgages more available to those with bad or weak credit suggests that the next four years will look as bad or worse than the last four years. Swell, although I've always wanted to visit Greece and now I get to forego airfare!

Neither proposal shows what happens when (Israel and) we bomb Iran back to the stone ages, get into a ground war in Syria and have 10 more hurricane Sandy-like events in the next 4 years. These are political documents aimed at a disenfranchised electorate through the eyepiece of a biased media that profits from the idiocy of it all.

Government needs to get out of the safety net business.

  • They promise retirement cash and we stop saving.
  • They promise subsidized healthcare and costs skyrocket in unfathomable ways.
  • They promise subsidized college education and tuition goes up.
  • They promise minimum wages and prices go up.
  • They promise subsidized housing and the housing market craters.
  • They promise regulation and the frequency of financial meltdowns increases.
  • They promise free food and the number of recipients increases.
  • They promise union support and now unions dominate the government workforce.
  • They promise more investment in K-12 and we fall further behind in world standings.

I could go on but I expect that the pattern is quite visible; most government-designed solutions cause more problems than they solve. In addition, the failures occur most often when the government strays from the Constitution (every case listed strays from it).

In my previous post I showed a way to keep government spending flat while paying our way out from under the promises made by the previous groups of incompetents in Washington. The plan I proposed ends with a flat federal tax of 3.75% of GDP and a national debt of zero or better.

Both of the plans proposed by Congress will increase both taxes and the national debt. Neither plan attempts to reduce the scope of government; no surprise since the authors have a vested interest in maintaining the status quo.

Dear reader, I implore you to contact your government representatives (1 congressman and two senators) and manage them upward. By this, I don't mean to imply that they are your superiors, only that they think they are.

Tell them that their (stated) intentions are laudable but that they are on the wrong path. Tell them that 39% is too much overall and that even 20% for the purposes of the Constitution is way too much. Tell them that you can do better without their investments. Tell them that a good plan allows for contingencies and that their proposals don't. Tell them that it is impossible to increase revenue by 88% in a 2% economy without raising taxes on you. Tell them that capriciousness with entitlements is unacceptable and that they should pay up and get out.

I sent  the following letter to our congressional delegation, to the president and also to the house budget committee:


Senator Blumenthal,
Senator Murphy,
Congressman Himes,

We are on the wrong path. We should take advantage of the dip in birthrates following the baby boom to end entitlements.

Cut government back to the original four: Justice, State, Defense and Treasury. Cut Defense back to pre-2001 levels.

This national government will cost about $600 billion/year (20% of current revenue). Use 50% of current $3 trillion revenue to fulfill entitlements for those above 45 years old except that those below 45 will no longer pay FICA: let them save for themselves. Use 30% of revenue to pay off debt.

Debt gone in 20 years. Entitlements gone in about 40 years. $5 trillion surplus for a 'rainy day'.

Taxes then drop to below 5% of GDP. No loopholes, no deductions, no tax credits and no entitlements. A flat tax and everyone pays, no exceptions. Government back in the hands of the people, not special interests.

Doing the same thing at the state and local levels will drop government spending from 40% to 10% of GDP. This will also increase the wealth of all Americans by putting 30% of their income back in their own pockets.

Surely you know that when government says it will pay for a thing, the hands come out and the market cannot correct it.

Promise retirement cash and we stop saving.
Promise subsidized healthcare and costs skyrocket in unfathomable ways.
Promise subsidized college education and tuition goes up.
Promise minimum wages and prices go up.
Promise subsidized housing and the housing market craters.
Promise regulation and the frequency of financial meltdowns increases.
Promise free food and the number of recipients increases.
Promise union support and unions dominate the government workforce.
Promise more investment in K-12 and we fall further behind in world standings and now I pay nearly $20k/kid in Shelton when teacher retirement and ECS are added to local education spending.

Please, fix this. I can supply details upon request.

Martin N. Hoffmann
Shelton, CT

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