A new survey paints a more nuanced picture of public attitudes about government and business …

To hear the politicians in Washington talk, the American people are either looking for government to solve society’s ills … or they want government to butt out completely.

2013 Public Affairs Pulse SurveySuch black-and-white perspectives rarely turn out to be accurate … and now we have additional proof in the form of a May 2013 telephone survey of ~1,600 adults living in the United States, conducted by Princeton Survey Research Associates for the Public Affairs Council, a leading professional organization for public affairs executives (nonpartisan).

Among the key takeaways of the 2013 Public Affairs Pulse survey research:

  • Trust in business:  Three out of four respondents feel that major companies generally do a good job of “providing useful goods and services,” and two-thirds also believe they’re doing a good job of serving their customers.  But by similar margins, they also believe that companies should take on more responsibility in providing community services like quality education, affordable healthcare, and food banks.
  • Government regulations:  Opinions are split;  a slight majority (~52%) feels that government regulation of business “usually does more harm than good” … but ~44% believe that “regulation is necessary to protect the public interest.”
  • Trust in government declines with age (and familiarity?):  A majority of Millennials give the federal government favorable scores, compared to ~44% of Gen Xers and just 35% of Baby Boomers.

Another figure stands out, too:  Only around 37% of the respondents express “a lot” or “some” trust and confidence in the government’s ability to fix the country’s problems.  This finding appears to support the notion that the government is not a panacea for the nation’s problems.

Michael Barone, political analyst and observer
Political analyst Michael Barone first espoused the idea of the “50/50 nation” following the 2000 U.S. presidential election.

But the survey results also underscore the theory espoused by Michael Barone, Mickey Kaus and other observers of the American electorate that America remains a “50/50” nation when it comes to the political parties and their philosophical underpinnings.

… And that puts us right back where we we’ve been for the past decade and a half … despite the posturing of our political leaders.

For additional findings from the 2013 Public Affairs Pulse survey, click here.

Amtrak and the $16 Hamburger

Amtrak logo
Amtrak changed its logo in 2000 from the “pointless arrow” to the “fancifal splotch.”

What are we going to do with Amtrak? Over the past three decades since the rail line was formed as the “for-profit,” government-owned National Railroad Passennger Corporation, it has lost money year after year – all the while taking in more than $25 billion in government subsidies.

I’d be the first to admit that along Amtrak’s passenger routes are some of the most beautiful scenery one could ever hope to see. I’ll never forget a train trip my wife and I once took from Minneapolis-St. Paul to Seattle and back. The Empire Builder route travels across the plains of North Dakota where the cloud-to-ground lightning at night was a sight to see. And the trek through Glacier National Park and the Cascade Mountains of Washington State was equally memorable.

Of course, the price of our train tickets didn’t begin to cover what it actually cost to have us travel on the Amtrak train.

At the other end of the country, I enjoy taking jaunts to New York City from Wilmington, DE. It’s reasonably quick, it means I don’t have to face traffic jams on the New Jersey Turnpike, and it gets me into the middle of Manhattan without having to worry about parking (or the Holland Tunnel for that matter).

[I will say that seeing the “wonders” of post-industrial North Philadelphia and Chester along the train route to NYC is distinctly different than taking in the vistas of the Rocky Mountains!]

But the same question arises here as well: How much is the government kicking in for each ticket that I buy? We may not know that answer, but we do know how much Amtrak is losing on every hamburger they serve on the train.

It costs AMTRAK ~$16 to make a hamburger which is sold on the train for $9.50 … and the taxpayers cover the difference.

It’s one thing to lose money on the transportation service. But to lose money on the foodservice as well is … hard to swallow. Hungry customers trapped on a train with nowhere else to purchase food – how difficult can this be?

In the tortured reasoning of Amtrak, if the train doesn’t serve food, fewer people will ride, thus causing a further reduction in operating revenue.

But here’s the rub: Amtrak ridership in 2011 increased ~5% over the previous year. But operating losses went up four times as fast (~20% over the same period) to more than $900 million.

So isn’t this rich: Amtrak has a business plan that doesn’t work whether ridership goes up or down. 

And another thing:  I wonder if contracting out foodservice to a private entity has even been considered?

In the great tradition of the government jumping into commercial ventures — and then messing it up big-time when it comes to efficiency, the intent was to structure Amtrak so it would deliver a service that would be profitable while also serving the public interest.

And the U.S. Congress has gone back to the well numerous times to “tweak” and “adjust” the program so that it does just that.  For example, the Amtrak Improvement Act of 1981 prohibits the government-owned company from selling food products at a loss.  (Not that this has had any noticeable impact.)

Additional legislation passed in 1997 “mandated” a path to profitability for Amtrak – but with no specific changes to train routes, ticket pricing, employee head-count or wages outlined.

The way I see it, the abysmal performance of government-owned Amtrak is a direct consequence of several factors:

  • High overhead costs
  • Federal bureaucracy
  • Lack of agility and nimbleness
  • Lack of market incentives

It becomes all too tempting to overlay the Amtrak experience onto what will likely happen in other areas where the government has stepped in to regulate activities – like in health insurance exchanges, health care costs and quality of care.

But, you know, if there are problems that arise with healthcare, we can always pass supplemental legislation to “fix it” – just like we did with Amtrak in 1980 and 1997.

And that will solve everything.

Fraud and Abuse in Government Programs: It’s Really Not About Politics

Medicare and Medicaid Fraud and Abuse ... It's PervasiveMalcolm Sparrow, esteemed author and professor at Harvard University’s Kennedy School of Government, has been alerting us recently about the problems with various government programs like Medicare and Medicaid.

He’s painting a pretty bleak picture, actually. And the issues have little or nothing to do with ideology, but of competence.

Dr. Sparrow’s main argument is that the seemingly endless stream of horror stories about Medicare and Medicaid scams proves that many people are using these programs as “personal tills.” The number of cases that have come to light in recent years runs into the hundreds and involve millions of dollars – and there are likely many more incidences that have not ever been uncovered.

Seeking to find common threads between the many cases of fraud and abuse, Dr. Sparrow has concluded that the system’s vulnerability comes not from how it is designed, but because of the payment mechanisms the federal government has chosen to utilize.

It turns out that most Medicare and Medicaid funds are paid out automatically in response to electronic claims received from a slew of healthcare providers. Most of these claims are processed using rules-based systems – with no human interaction at all.

What this means is that fraudsters need only learn the rules, and then proceed to submit hundreds or thousands of bogus claims electronically – with little risk of detection.

And here’s a real kicker: If someone makes a mistake in their submission, the government returns a computer-generated message explaining the error(s) – thereby enabling the fraudulent activity to continue!

In short, those who are gaming the system find it nearly effortless to receive payments for fabricated claims … all because the systems check for billing “correctness” but not for “truthfulness.”

Dr. Sparrow’s conclusion: “The simple rule for getting rich quick through health care fraud is [to] bill your lies correctly.”

The thing that makes this state of affairs doubly distressing is that the government has been aware of the propensity for abuse for years now.

Dr. Sparrow quotes one Medicaid fraud investigator back in 1995 warning about the fraud risk of electronic claims processing: “Thieves get to steal megabucks at the speed of light, and we get to chase after them in a horse and buggy. No rational businessman would ever invent a system like this.”

But did this realization make a difference in “business as usual”? Nope.

Why? Dr. Sparrow believes it’s because the processing efficiencies of such payment systems are so obvious and tangible. But the problem with such an approach is that it becomes a sitting duck for fraud. Dr. Sparrow sets up the scenario like this:

“The recipe for disaster is now clear. Whatever the nature of the payments … pay them electronically. Set up the system with honest claimants in mind. Allow claims to be submitted electronically. Set the administrative budget low enough that the bulk of the claims have to be paid without verification.”

He then proceeds to conjecture how these programs make it so far down the road with so little in the way of critical evaluation:

“To make things really dangerous, add a degree of urgency to the public purpose … Urgency tends to trump caution and raises policymakers’ perception of the ‘business-acceptable risk.’ And if it’s a really ‘valuable’ program, supporters and officials will be loath to hear any criticism of it, and to discount reports of fraud.”

After painting such a bleak picture, Dr. Sparrow does not leave us without a path forward to a possible solution. He notes that fixing vulnerabilities in Medicare, Medicaid and other federal programs would offer good promise for long-term deficit reduction – an action that both political parties could support. But there needs to be the political will to make major structural and procedural reforms to the programs in order to meet the objective.

Call me a curmudgeon, but I’m a bit less optimistic than Dr. Sparrow; much as I’d love to believe that these changes could happen with everyone on board with the program, I’m not holding my breath waiting for them to happen anytime soon.

For U.S. Households, the $534,000 Elephant in the Room

It doesn’t matter where you may be on the political spectrum, the most recent financial figures about the U.S. economy and our financial obligations have to be stunning in their import.

It turns out that the federal government’s financial condition has deteriorated much more rapidly and significantly than is commonly understood – far more than the ~1.5 trillion in new debt that was incurred to finance the budget deficit.

Instead, USA Today is reporting that the government took on some $5.3 trillion in new financial obligations during 2010. Not surprisingly, a big chunk of these unmet obligations fell under Medicare and Social Security.

Adding these new obligations to the existing ones translates into a record of nearly $62 trillion in financial promises not paid for.

And if that particular number isn’t striking enough, perhaps putting it this way will get your attention: It translates into ~$534,000 in unfunded obligations for each individual household in the United States.

In addition to $534,000 being a breathtaking number in and of itself, it represents more than five times what Americans have borrowed for everything else (mortgages, car loans, college loans, etc.).

Now there’s certainly a big difference between the government and the private sector, of course. Corporations would be required to account for these new liabilities when they are taken on – and thereby report big losses to their shareholders. But unlike businesses, Congress can conveniently stave off recording these commitments until it’s ready to write the check. “See no evil … hear no evil …”

And here’s another big difference between the federal government and everyone else: the ability to “manufacture” greenbacks to pay for debt obligations. Whether we call it euphemistically “quantitative easing” or more bluntly “printing money,” that’s a solution that comes dangerously close to the famous quip attributed to H. L. Mencken: “For every problem, there’s a solution that is simple, elegant, and wrong.”

Sheila Weinberg, founder of the Chicago-based Institute for Truth in Accounting advocacy organization, raises another key point: “The [federal] debt only tells us what the government owes to the public. It doesn’t take into account what’s owed to seniors, veterans and retired employees. Without accurate accounting, we can’t make good decisions.” She has a good point.

The blind leading the deaf: It certainly doesn’t portend well for the future. But there’s always the hope that if we can somehow create robust future annual economic performance in the 4-5% range, we’ll grow our way out of the problem.

We’ll have to see about that.

Witnessing the Birth of a Nation

Sudan's political regions
Sudan's southern region (in blue) votes 98%+ for secession and is slated to become Africa's newest nation in July 2011.
Is Africa poised to be the home of a brand new country? It would seem so, as the results of a January referendum held in Sudan’s southern region were announced earlier this week.

And the results couldn’t be more definitive: More than 98% of the nearly 3.9 million ballots cast were in favor of separation.

While there were indications of voter irregularity – some provinces have fewer registered voters than votes cast – this is no sham election à la Iran or Cuba. International monitoring groups have determined that the overwhelming sentiment for separation and independence makes the pro-secession vote a valid result.

The final results will be certified in a few weeks, following which the wheels will start turning toward the formal creation of an independent state on a predetermined date of July 9, 2011. The new country will likely be called the Nile Republic or Azania.

If events continue as they are going, July 9 will be the culmination of a decades-long struggle that has produced more than its share of misery for the primarily Christian inhabitants of Sudan’s southern region. In this case, religious and tribal differences trumped the impractical and ultimately unworkable colonial-imposed boundaries set down by Britain in the late 1800s.

But despite the grim and grueling history of the conflict, the resolution of this struggle provides a happier ending compared to similar struggles on the continent – the secession attempt of Biafra from Nigeria being perhaps the best-known. That struggle had similar shades of tribal and religious differences, but the end result was reunification by force.

Contrast that with Sudan’s actions today. President Omar al-Bashir declared that the southern region had a right to choose whether to secede, and stated that his government would respect the outcome of the vote.

This is not to say that Sudan will not continue to keep a close eye on its southern border. “The stability of the south is very important because any instability in the south will have an impact on the north,” al-Bashir says. “The south suffers from many problems. It’s been at war since 1959.”

One can only imagine the Herculean challenges the new Nile Republic will face – ranging from citizenship qualification to finances, infrastructure and security issues.

But to have come so far while suffering so much in the process, those are issues most people are probably looking forward to facing and solving. And those of us lucky enough to have been born into societies where self-determination is already an accepted ideal wish them nothing but success.

Proposed USPS legislation is no panacea.

With all of the horrid financial news coming out of the United States Postal Service in recent months and years, we’ve been waiting to see what sort of congressional legislation would be proposed to alleviate its problems.

The wait is now over, with the announcement of a legislative proposal called the Postal Operations Sustainment & Transformation Act of 2010. (P.O.S.T. – get it?)

This legislation attempts to fix the USPS’s precarious financial condition with a bevy of provisions such as easing employee pension and retiree health costs, making it easier for the USPS to close redundant or underperforming branch offices and, most dramatically, eliminating Saturday mail delivery altogether.

It’s no wonder the proposed legislation seeks to cut back on operating costs, because the volume of mail the USPS processes has dropped by ~20% just since 2006. And the prediction is for a further decline of ~20 billion pieces of mail that will be handled in the coming decade.

Sen. Thomas Carper, who introduced the bill, had this to say about the proposed legislation: “… If we act quickly, we can turn things around by passing this necessary bill that would give the Postal Service the room it needs to manage itself …”

That sounds nice and tidy. But does it really solve the USPS’s financial and structural problems?

If enacted, the new provisions in this legislation are expected to save the Postal Service somewhere north of $3 billion per year. But only a couple days following news of the legislative bill comes word that the USPS lost $1.6 billion in the month of August alone.

In fact, for the first 11 months of its fiscal year, the Postal Service’s losses have totaled nearly $8 billion. USPS losses are significantly higher than last year at this time (~$6.3 billion by comparison) – and that’s even while experiencing an increase in mail volume of ~1.8% year over year.

In this context, it seems pretty evident that the pending legislation will not come close to remedying the USPS’s financial situation – even as it enables the most sweeping cuts in operating activities that have ever been seen. Unfortunately, a classic case of “too little, too late.”

The Postal Service’s own Office of Inspector General has released a report claiming that the USPS could be financially sustainable at the lower mail volume levels projected … if it could raise prices above the inflation rate. But such an action could tip the whole enterprise into a “death spiral” where the price hikes drive away customers. A reminder to everyone involved: Mailing service is no longer a monopoly in this country.

This problem is by no means solved.

USPS: Yes, it’s in the news again.

It seems the U.S. Postal Service is never out of the news – and the news is almost always depressing or infuriating.

And last week, the USPS made the headlines not once but three times. The first item was a financial report – numbingly repetitive by now – that the agency lost nearly $1.6 billion in the last quarter.

Like a bad movie that never seems to end, the USPS is on track to lose as much or more money in FY 2010 than it dropped in 2009. Meanwhile, the Postal Service continues to seek ways to reduce expenses by cutting back on the services it provides. Look for Saturday mail delivery to be a thing of the past by 2013.

Then, later in the week came news that Robert Bernstock, the USPS’s former president of mailing and shipping services, was found to have improperly used his position to conduct outside business, including helping award six non-competitive contracts to several of his former business pals. The Office of Inspector General, which investigated his activities from July 2009 onward, also concluded that Bernstock “used his subordinate staff to conduct work that supported his outside business activities.”

Bernstock resigned his position on June 4.

Hard on the heels of the Bernstock revelations came the nice little news nuggett that the USPS has been overcharged in excess of $50 billion for payments to the Civil Service Retirement System (CSRS) – payments that were made over a 37-year period from 1972 to 2009. The Office of Personnel Management, which is responsible for calculating the CSRS pension liability, is now reconsidering its calculation of the USPS’s pension assets in light of the report.

While it’s nice to see that the CSRS error is being remedied, it’s pretty amazing that something so inaccurate as this could have gone undetected for the better part of 40 years!

And what’s the USPS doing for an encore this week? It’s filed for an exigent postal rate increases ranging from 5% on first class mail to a whopping 23% on parcels. Isn’t that wonderful: reward inefficiency by getting a price increase.

This quartet of USPS news items over the past week embodies everything that concerns those who are looking at the prospects of increased government involvement in health care with dread: operational inefficiency … financial mismanagement … corruption and backroom dealing at the highest levels.

It’s also a cautionary tale for those who blithely believe that if we could only move this or that business activity away from the “money-grubbing private sector” and give it to a government entity instead … all of our problems would be solved.


USPS: The Losses Keep Piling Up

The latest financial results for the U.S. Postal Service are in, and they’re a continuation of the same old story line: Tons of red ink and fingers pointing in every direction.

The USPS posted a net loss of $3.9 billion for FY 2009, “only” $1.1 billion worse than the previous year. And that’s even after receiving a $4 billion deferment on paying an annual $5.4 million obligation to pre-fund healthcare premiums for its retirees.

Not surprisingly, total postal revenues were down about 10% to ~$68 billion, not only because of the economic downturn but also because of the continuing shift to digital communications. Total physical mail volume declined ~13% to around 177 billion pieces.

Given the sorry financial stats, one would assume that the USPS would be moving forward in all haste with its plans to shutter as many as 10% of its post offices and branches around the country.

But if you thought that … you would be wrong. What started out as a potential closure listing of ~3,200 stations (the impressively named Station & Branch Optimization Initiative) quickly became ~700 stations and branches that were actually slated to close. Then that figure was trimmed to just over 400. And now we have word that the closure figure is down to ~370.

Given more time, the number of closures may well slip even further … and at some point the whole exercise becomes completely meaningless as cost-cutting endeavor.

And then there are the persistent rumors that mail delivery will be cut back to five days from six. But that never seems to be anything more than just an idle threat.

Welcome to the wonderful world of government agencies: Stultifying bureaucratic procedures that are near-Byzantine in their complexity, coupled with reacting to every conceivable interest group while being too timid to make any hard choices at all when it comes to managing their operations like any business in private industry must do.

Anyone for government-managed healthcare?

USPS: Why don’t we just throw another couple billion around?

Last week, the United States Postal Service reported its latest quarterly financials — a $2.4 billion loss. Compare that result against the same quarter last year (pre-stock market dive), when the USPS lost only a mere $1.1 billion …

But what the heck? Why doesn’t the government throw a few more billions of dollars around? That’s probably in the cards, because Postmaster General Jack Potter has let it be known that the USPS may be on track for losing as much as $7 billion for the year … and that’s even if the USPS follows through on its plans to shutter ~3,200 post office locations (nearly 10% of the total).

Of course, one of the reasons for the sorry financials is a decline of USPS operating revenue on the order of around 9%. The most recent postal rate hike couldn’t make up for the ~14% decrease in mail volume, which dipped not just because of the recession but also because of changing communications practices, online bill-paying and the never-ending growth of e-mail.

Still, those volume declines are not as steep or as challenging as many private-industry companies have faced in their industries. Could it be that the USPS, as a government entity with all of the bureaucracy and HR/personnel strictures that entails, simply cannot be as nimble and flexible as firms in private industry? And what does this portend for us in the realm of government-managed healthcare?

Maybe the words of singer-songwriter Bobby McFerrin are applicable here: “Don’t worry. Be happy.”

Besides, what’s the alternative — clinical depression?