Social Engineering Design Dilemmas

Having worked thirty-something years as a design engineer, I have plenty of experience with design dilemmas. A design dilemma typically occurs when the project specification has conflicting requirements.

It is fairly typical for individual design requirements to be in conflict with each other; size, weight and power consumption are readily recognizable ones for today's electronic gadgets but the options are limited only by imagination.

As a simple example, a new cell phone design might have the most popular features, fit in the pocket and be light as a feather but the battery life is only 30 minutes and the requirement was for 12 hours. Since the design does not meet the battery life requirement, the phone would be considered to be of poor quality.

Quality is essentially the degree to which something meets requirements.

One of the most notable things I learned as a designer is that a good specification is hard to get. This is often the result of ambiguity, poor writing skills, lack of market understanding, wishful thinking and/or plain old stupidity. The results are both predictable and well represented. I read last week of a submarine design that weighed so much, it was feared that if it submerged then it would never come back up. Since it was designed to carry people, I think we'd all agree that the design was of poor quality.

Thankfully, the flaw was revealed before testing.

In my last post on Compassionate Conservatism, I took a detailed look at the fiscal cost of several social issues in the news and saw a Social Engineering dilemma with Welfare and Medicaid.

Rather than discuss it in that post, I felt it was worthy of a separate discussion.

Social Engineering 
Just as with what I'd call regular engineering, social engineering is not immune to design dilemmas. In fact, I'd say that social engineering is much more susceptible to them because, unlike regular engineering which is based on immutable physical laws, social engineering is based on people; people are unpredictable and may or may not even obey their own laws at any given moment. In addition, their (our) laws are constantly subject to change, repeal and/or conflict with the new laws written every day.

Finally, these laws usually deal with money, a very sensitive subject. Social Engineering is the politically correct term for using the government to redistribute wealth. It used to be called Socialism but that term has earned bad connotations.

Just in the City of Chicago, 150 new laws were put into effect this year! The most onerous ones are to increase taxes to pay for unfunded pensions for government workers; said funding having already been spent by the social engineers on unrelated items.

If regular engineering had this characteristic, my head would have exploded long ago.

Thank God that the Social Engineering graduates from Wossamotta U are able to digest and understand the interrelationships between these constantly changing laws!

But seriously, there is no such thing as a degree in Social Engineering; and that is a telling fact. Instead we have things like Political Scientists, Psychologists, Sociologists and Lawyers but, with all due respect, none of these would be called hard science; inferring methodological rigor.

This gets back to the problem of getting a good specification; a specification is a set of requirements. A basic tenet of a good specification is that each requirement must be succinct, unambiguous and testable. However, the process for writing Social Engineering requirements (laws) rarely, if ever, produces this result.

I've heard it said that you never want to see the processes for making either laws or sausages.

Here's the lawmaking process: an idea erupts in someone's head, a meeting is called, a draft is written and then all hell breaks loose before the committee report is written. Amendments that have nothing to do with the originally good idea are added because either the amendments would never be accepted alone or they are so heinous that they serve to kill the original idea. Then the report goes to the other house of Congress (or state legislature) for a repeat performance with a different cast. Then both houses try to find agreement while totally obscuring the original intent. If, by some miracle, agreement is found then the process repeats a third time at the executive level.

There's a derogatory phrase engineers use to describe a product that is a total piece of crap; we say it must have been designed by committee.

As an enlightening example, the US Constitution had 4,543 words in it's original form and has had 27 changes over the course of 226 years, the first 10 (the Bill of Rights) all at once. By way of comparison, the Federal Tax law contains nearly 4,000,000 words and changes more than once per day on average; and that's just one law! This fact gives me a new appreciation for the brilliance of the founding fathers and shines an unflattering light on how ineffective and inefficient today's social engineers really are.

I think I've made my point about the inherent dangers of Social Engineering so I'll move on to the case at hand; Welfare and Medicaid.

Recap
In my last post, I noted that about half of the country leans left so there are about 70 million liberals in the workforce. Given 23.05% in new discretionary income (from my plan) on the average wage of $62,000/year from 70 million liberals, this yields a fund of about $1 trillion/year to relieve poverty for 47 million, or about $21,276 each. Adding $345 billion in private charity (after an estimated 33% overhead on $516 billion) gives $28,600 each; roughly the same as my estimate for current government funding. The poverty level for 2012 was set at $23,050 (total yearly income) for a family of four. This gives that family $112,000.

Crazy but true I said. I said this because the result seemed completely out of touch with any requirements I could imagine. This got me thinking; what are the requirements?

Some research showed that Welfare (started by FDR along with Social Security) has been controlled by the States since the reforms of the Clinton administration; one of the main reasons he had a momentarily balanced federal budget. Medicaid is still a joint federal-state program although its origin, along with Medicare, is from the Great Society program of LBJ; probably the only socialist from Texas in America's history. Welfare comprises various sub-programs and these are discussed below. 


However, hours of research revealed no overarching principles, no financial goals (like maximum benefits or efficiency of delivery) and most importantly, no testing or exit strategies. This was both good and bad.

My plan has the exit strategy but more is needed to regain control.


Welfare Programs

Cash allowance benefits for financial assistance are state regulated and allowances paid will also vary based on different criteria. However, an average expectation can be placed on a family of 4 receiving up to $900 for their TANF (Temporary Assistance for Needy Families) allowance. A single person household can expect an average of up to $300. This is a 33% incentive for being single so it represents a conflict regarding single parenthood.

I found that a basic guideline for the food stamp program (now called SNAP) is that an average family of 4 can expect an amount up to $500 per month for food stamps. This figure will greatly vary based on the age of the family members and medical needs. A single person household will show an expected average of up to $200 per month. Again, these figures are averages and not state specific but the arithmetic suggests a 60% incentive for being single; also not a great way to reduce single parenthood so this would be called a conflict too.

There is also a supplemental food program for women, infants & children (WIC) that provides $30.8 million to 58,108 participants in Connecticut. Hopefully, this program is administrated by the same people as SNAP and school lunches but I doubt it; this is a likely conflict with the notion of efficiency.

Child care benefits for Connecticut's 150,000 working poor max out at about $140 million/year; $933/year each. This includes Head Start, after-school programs and other programs. It seems to me that this stuff sounds like school so why is it a separate function? Conflict.

Utility assistance (LIHEAP) benefits in Connecticut max out at $575/year. This one looks to be in direct conflict with the federal and state fuel tax laws; one hand giveth while the other taketh away. This is a silly conflict since the fuel tax is about transportation and this is about staying warm in winter. Replace fuel taxes with mileage taxes and this benefit becomes needless since the cost of diesel (same as heating oil) drops by about $1/gallon (half a buck each for federal & state).

Housing subsidies (Section 8) in Connecticut this year for 1,000 families totaled $20 million. Meanwhile, the Federal Reserve is buying about $40 billion of distressed mortgages every month. This sure seems like a conflict but leaves me apoplectic since championing mortgage loans for unqualified buyers caused the mortgage distress and increased homelessness in the first place. This doesn't include the $13 trillion cratering of the real estate market that threatened to move a big chunk of the middle class into poverty.

Medicaid

Medicaid/CHIP benefits for Connecticut's 700,000 beneficiaries was $5.5 billion/year in 2010. I've already written that government has no right to be here as it is a conflict with the US Constitution. 

In fact, the Constitution disallows all of this.

Tallying the Benefits
One problem I had in researching this is that the documents don't refer to individuals; clients and beneficiaries are the nebulous terms used so it's hard to find the average taxpayer spending per person as in $1.35 trillion for 47 million Americans.

I'll add it all up using the reported benefits.

Benefit            Total                Beneficiaries
SNAP          $201 million            33,531 families
WIC            $   31 million           58,108 women, infants and children
TANF          $362 million            33,531 families
Child Care    $  18 million          150,000 children
Utilities         $ 115 million          120,000 families
Housing        $   20 million          1,000 families
Medicaid      $ 5.5  billion          700,000 people

Total            $ 6.24 billion

A couple of things leap off the page:

• Medicaid dwarfs everything else at 88%
• The total is far less than the total in the state budget (see below)
• The national figure of $1.35 trillion adjusted by population should be $15 billion

The other thing is that the number of Medicaid recipients is about 180,000 higher than the expected number of poor people for our population; further research reveals that most of these are folks with disabilities (10 to 13% in Connecticut).

This is a useful result because it explains the seemingly unchanging 13% poverty rate that I discussed in my last post; people are not really poor as much as they have a disability!

It is also fairly shocking to me. I obviously know that disability happens, I just never knew the extent. The numbers are similar around the world, it's not just Americans feeling entitled. We are a much more fragile species than I had ever imagined; easy pickings for you Darwinists.

I think that even the mean-spirited conservatives might be more willing to support this stuff if it was marketed that way; a sick child or Grandmother in a nursing home will gather much more support than the proverbial welfare Mom; why did I have to expend so much effort to discover this?

Enlightenment
The theme of this post was supposed to be: how do we reconcile the current $28,723/person taxpayer spending on poor people ($1.35 trillion divided by 47 million people) with the wages of the neighbors that subsidize them.

More to the point; how do we get societal harmony when a family of four, subsidized with $114,893, lives next door to the average Joe Taxpayer who makes $62,000 but essentially pays a subsidy of more than $14,000 (23.05%) to them?

But now I know there are really two camps of poor people; poor people and poor people with disabilities. I was under the impression that Medicare covered disability and it does, but not the long term care that some require. Isn't this yet another conflict since Medicare is for older citizens and long term care is a part of that?

It's hard to tell from the benefit distribution but it looks like Connecticut has about 216,000 poor people and about 484,000 people with disabilities, 38.5% of whom are employed and 6% of whom require long term care and consume roughly twelve times as much as those who don't require such care ($43,296 versus $3,694). This is quite different from the assumption of $28,723 each. It also represents a greater population of those in poverty than the national figure of 47 million suggests even though we are said to be one of the richest states.

Those are the raw nuumbers, now look at the social engineering portions of the state budget.

From the state budget:

Economic Development              $    129 million
Developmental Services              $ 1,105
Mental Health & Addiction         $    875
Social Services                           $ 6,447
DCF                                          $    973 

Total                                          $ 9,529 million

The names used in the table above are the budget line items that cover the Social Engineering benefits described above; they were identified mostly by a process of elimination. The names are obscured; they don't make it easy to trace the money and you'll see why.

This says that it costs $9.52 billion to deliver $6.24 billion, a 53% overhead. To me, this indicates poor quality in the administration of these programs.

By the way, $9.52 billion is just shy of half of the entire state budget of $20 billion. We also put $7.4 billion in education, $2 billion in debt payments and the rest for actual government in addition to an unhealthy amount of borrowing.

More importantly, $6.24 billion is 2.48% of state GDP; so why do we spend 9% of national GDP on it? This suggests that even though Connecticut, one of the worst-managed states, delivers its version of social engineering with an embarrassing 53% overhead, the nation delivers with a 263% overhead; talk about poor quality!

Given Connecticut's 3.5 million residents and assuming its workforce is similar to the US workforce overall at about 44% of population (138/311 = 44.4%), the state has 1.6 million workers. Given total workforce compensation of about $8 trillion, the average income is $57,971. I have used $62,000 up until now because, at one point, the employment rate was a bit lower. It's higher now but I'm using the same compensation for lack of newer compensation data.

Assuming as before that half are liberals and my plan puts 23.05% back in their pockets, this gives a fund of 800,000 workers times $57,971/worker times 23.05% or $10.69 billion. Since this is $4.47 billion more than current benefit spending in Connecticut, the liberals can keep 9.63% more of their gross incomes even if they pick up the whole tab.

However, given an influx of $3.88 billion from private charity (Connecticut's share, adjusted for population and a 33% overhead on $516 billion), the liberals really only have to shell out $2.34 billion so they can keep 18% more of their gross incomes if they pick up the whole tab.

Interestingly and importantly, if the charitable donations could be delivered without overhead, they would cover 93% of the whole thing!

This brings up the important point about testing. The Medicare program is frequently praised by liberals for its efficiency; it delivers with a 1-4% overhead. If they understand the idea of efficiency, how can they fail to measure the horrific inefficiency of these programs?

How to Fix Poverty Outside of Government
So, we now know that it really takes just 2.48% of GDP to cover the current (and apparently, forever) costs of poverty.

The big problems are:

• How do we deliver the cash with less than, say, 1% overhead?
• How do we verify that the beneficiaries are eligible?
• How do we verify that the charges of service providers are valid?
• How do we keep the government's hands off the cash?
• How do we protect the personal information of the beneficiaries?

The Treasury already knows who the poor people and service providers are and its all set to accept and deliver cash by Social Security number or Vendor ID so that takes care of the first two problems.

Medicaid (through Medicare) already has a list of acceptable charges for services and the state rules for Welfare benefits are written down; use them (after fixing conflicts) to develop and test an automated process and require validation by the recipients over the Internet with DoD-level encryption. That would address the third and fifth problems.

The cash could be donated to a blind trust accessible by only a program proxy at the Treasury, only for this purpose and only by the verified automated process. That would address the fourth problem.

Taxpayers could enable the IRS to deliver a taxpayer-selected percentage of their income to the fund via an entry on the tax return; I would happily donate 2.5% in exchange for the 9% I currently pay.

Summary of Solution
Poverty programs are unconstitutional but are still beneficial to society as a whole.

Of course, eliminating these programs will put hundreds of thousands of state and federal employees out of work. However, freeing up $795 billion in inefficiency should have the effect of reabsorbing them quickly in the private sector since this move puts 9% more (of the 23.05% total) of everyone's gross income back in their pockets; about $6,000 per average worker. $795 billion funds a lot of average jobs and augments a lot of people's retirement plans.

It is probably true that most of the preexisting charity is for things unrelated to poverty abatement. However, if folks are already giving 6.4% of their gross incomes (16.1% of net income), I have little doubt that they'd be willing to part with 2.8% more given the nearly 10% windfall this idea produces.

Administrating these programs outside of government has several side benefits:

• Government administration is obviously, by the foregoing arguments, inefficient.
• The programs are unconstitutional though still good.
• The programs lend themselves to automation; fraud and abuse notwithstanding.
• Running them outside of government obviates political dissent and improves societal harmony.
• Running them outside of government reduces the cost of government by $1.35 trillion (22%).
• Running them outside of government reduces the cost to society by $795 billion/year.
• Running them outside of government reduces election-year shenanigans.
• Reducing the cost of government reduces government corruption; less money to covet.
• Eliminating them from government is a big step toward simplifying the tax code.

In Memorial

I lost an old friend, Ed Thompson, today. We'd been friends for nearly 30 years. Ed was the father of my wife's dearest friend, Brenda Berigan, Grandfather to Brenda's twin daughters Kim and Erin and Great Grandfather to Kim's son, Lucas. Ed also served as proxy for my father-in-law, Tony, at our wedding.

Ed was one of the nicest guys anyone could ever hope to meet. I'll miss him.

Rest in peace.