Minions Of A Lesser God

 

Haaaail to Thee, Our Market Free
Destroyer of De-Moc-Ra-Cy!!

Megan McArdle quotes:

“In one year,” wrote Warren Meyer in 2015, “I literally spent more personal time on compliance with a single regulatory issue -- implementing increasingly detailed and draconian procedures so I could prove to the State of California that my employees were not working over their 30-minute lunch breaks -- than I did thinking about expanding the business or getting new contracts.”

Meyer is the owner of a company that runs campgrounds and other recreational facilities on public lands under contract from the government. It doesn’t seem like regulatory compliance should be eating up so much of his time; he is not producing toxic chemicals, operating a nuclear facility, or engaged in risky financial transactions that might have the side effect of sending our economy into a tailspin. He’s just renting people places to pitch a tent or park an RV, or selling them sundries. Nonetheless, the government keeps piling on the micromanagement lest some employee, somewhere, miss a lunch break.

That poor man! He--let's call him "Pops" Campground for short- is just running his little bit of heaven on earth, a company that rents out space for tents and RVs and sells the families ice cream and fishing bait. But instead of calling his small business Bide-A-Wee or Camp Rollin' Thunder, Meyer calls it Recreation Resource Management.

Recreation Resource Management contracts Public-Private Partnerships for state and national parks; RRM takes over all park services and gives back a percentage to the government. It manages parks in at least a dozen states.

We manage many different types of recreation properties under many different arrangements with government bodies. However, the most common arrangement is for Recreation Resource Management to operate a revenue-producing property under a type of concession agreement or commercial lease.

In these contracts, Recreation Resource Management is responsible for all aspects of managing the property, generally putting in place on site employees and managers. RRM performs maintenance and cleaning work for the property, and is responsible for most normal operating expenses, from insurance to marketing to utilities to regular maintenance. In return, RRM collects all revenues from the property, paying the government an agreed-upon percentage of the revenues as a fee. Typically, these contracts will specify the scope and quality standards of the work to be performed, the operating hours and days, the maximum fee rates, and, of course, the agreed-upon revenue share to government.

The government privatized the running of some state and national Parks and awarded some contracts to Meyer's company, Recreation Resource Management, a very large company with very comprehensive services. "Pops" is not running a campground, he's running PPPs that hopes to operate parks everywhere.

This type of contract structure has a number of advantages over typical flat fee or cost plus outsourcing contracts:  

◾Government expenses are capped – since there are none!  

◾The private operator, such as RRM, can work to improve both expense levels and revenue generation at the property.  

◾Our incentives are well-aligned with the agency’s — to make money, we have to keep the public satisfied so they will come back in the future.  

◾The contracts are not subject to year-to-year appropriations processes. No money to pay facility expenses or the private contractor has to be budgeted each year  

The concession arrangement, however, is not always the most appropriate. For example  

◾Some parks, such as most city parks, simply cannot realistically charge a user fee. In this case, contracts tend to take the form of fixed cost or time and material contracts for park operations services  

◾As states close parks, they are increasingly turning to non-profits to take over parks. We are working on several different approaches to bringing our expertise and experience to these non-profits

Their efforts evidently were successful.

Recreation Resource Management: This is a Notice of Intent to make an award to the H.J. Heinz III Center for Science, Economics and the Environment. For the development of biologically meaningful performace measures for fish, wild and plant resources that can be applied across the landscape to ascertain the status and trend of fish, wildlife and plant resources within a state to ensure these resources are receiving adequate protection and fulfill the Bureau's mission to provide these resources for the use and enjoyment of present and future generations

and

Applicants Eligible for this Grant  

Nonprofits having a 501(c)(3) status with the IRS, other than institutions of higher education

In due time they undoubtedly will be successful in enclosing all city parks and charging a fee as well.

Perhaps one reason why "Pops" Campground is so successful is because he is not just the owner.

In addition to being president of Recreation Resource Management, Warren Meyer is also President of the National Forest Recreation Association and a board member of the California State Parks Hospitality Association, both trade groups of concessionaires. He is the author of the website ParkPPP.com and conducted the first national conference on using public-private recreation partnerships to keep public parks open.

He's also a lobbyist for the industry!

But wait! That's not all!

Warren Meyer is the author of the web-site climate-skeptic.com, a site he originally started to help report climate developments in layman’s terms, particularly the science of the skeptic’s position. Warren has a degree in mechanical and aerospace engineering from Princeton University, where his studies focused on the control and stability of dynamic systems, issues at the very heart of the climate debate. He also has extensive experience with forecasting of dynamic and complex systems, with an MBA from Harvard University and years of experience with planning and forecasting at several Fortune 50 companies.

Currently Warren runs a company called Recreation Resource Management, based in Phoenix, whose business is the private management of public parks and recreation. His company has been in the news of late for offering to reopen at least 6 closed Arizona State Parks under private management and remove the need for public subsidies of these parks.

"Pops" Campground is a Princeton aerospace engineer with a Haaavard MBA. And the man who depends on gasoline automobiles for his livelihood is a climate change skeptic, who would have thought? But "Pops" thought the whole thing out very carefully and Forbes was happy to print his argument against it. You will be relieved to see that warming not only is not happening, but the opposite might actually be occurring!

You might think that all of these little personality quirks would put him in simpatico with libertarians and you'd be right. From the RRM site:

Heh, and we haven't even gotten to the post yet.

Megan McArdle:

I know what you’re going to say: Employees should have lunch breaks! My answer is “Yes, but.…” Yes, but putting the government in charge of ensuring that they get them, and forcing companies to document their compliance, has real costs. They add up.

You should be able to eat lunch but let's not go crazy here. If God intended for your owner to fill out paperwork He wouldn't have invented sandwiches, nay, nor the pocket to put them in.  It might inconvenience your boss to fill out paperwork so just dunk under the counter and eat your bread and cheese when the ticket line is short.

We can plainly see McArdle doesn't believe the government has the right to regulate businesses. How dare they take charge of ensuring businesses give lunch breaks to their employees? That right should only belong to the man who promised to "improve... expense levels." Employees are one of, if not the, largest expenses of a company and we are well accustomed to seeing minimum wage employees forced to work at will and whim, work overtime without additional pay, and work at lunch time and break time. Like Ross Douthat, if something doesn't fit McArdle's worldview she ignores it.

An economy with but one regulation -- employees must be allowed a 30-minute lunch break, and each company has to document that it has been taken -- would probably not find this much of a drag on growth. But multiply those regulations by thousands, by millions, and you start to have a problem.

 Millions of regulations! Billions! How do so many companies manage to make millions and billions of dollars? It's a terrible puzzle, for we know that businesses are so delicate that if any were to raise wages they would immediately fail.

A new working paper from the Mercatus Center attempts to document the cumulative cost of all these regulations. It finds that the growth of regulation between 1977 and 2012 has shaved about 0.8 percent off the rate of growth, costing the nation a total of $4 trillion worth of GDP.

Of course they did. The Mercatus Center, ladies and gentlemen:

The Mercatus Center, part of George Mason University, is one of the best-funded think tanks in the United States. It is listed as "sister organization" to the Institute for Humane Studies. Mercatus describes its mission as "to generate knowledge and understanding of the institutions that affect the freedom to prosper, and to find sustainable solutions that overcome the barriers preventing individuals from living free, prosperous, and peaceful lives."

The Mercatus Center was founded and is funded by the Koch Family Foundations. According to financial records, the Koch family has contributed more than thirty million dollars to George Mason, much of which has gone to the Mercatus Center, a nonprofit organization. Democratic strategist Rob Stein described the Mercatus Center as "ground zero for deregulation policy in Washington.”

The Mercatus Center has engaged in campaigns involving deregulation, especially environmental deregulation. According to The Guardian in 2010, it "now fills the role once played by the economics department at Chicago University as the originator of extreme neoliberal ideas."[2] During the George W. Bush administration's campaign to reduce government regulation, the Wall Street Journal reported, "14 of the 23 rules the White House chose for its "hit list" to eliminate or modify were Mercatus entries -- a record that flabbergasted Washington lobbying heavyweights."

The Wall Street Journal has called the Mercatus Center “the most important think tank you’ve never heard of."

McArdle does not make a disclaimer because at this point, nobody cares. She couldn't sand-blast her reputation clean.

Stories like Meyer’s are the tangible face of the economic theory. As is the fact that in the annual small business survey by the National Federation of Independent Business, taxes and government red tape are far and away the biggest issues that business owners cite as their most important problems. Forty-three percent of those surveyed cited one of the two as their top issue.

That matters, and not just because of business owners’ headaches. The burden of regulation is not distributed symmetrically. It falls heaviest on firms that deal with dangerous substances, yes. But it also falls most heavily on smaller businesses, which cannot afford staffs of pricey compliance specialists to make sure that their desk chairs meet the new California workplace seating requirements. This may help explain why the number of firms is falling, and markets are consolidating.

You know what's next! Let's take a little look at that National Federation of Independent Business.
From CNN:

The National Federation of Independent Business is one of the most influential small-business advocacy groups in the country. They battle against government regulation, higher taxes and, perhaps most famously, Obamacare. And they do it all as the self-described "voice of small business."

But it turns out that the champions of Main Street America got more money last year from a group backed by billionaire industrialists Charles and David Koch than any other single source.

NFIB and its affiliated groups received $2.5 million from Freedom Partners Chamber of Commerce, a conservative advocacy group with deep ties to the Koch empire. Of the five men that sit on the group's board, four are current or former employees of Koch companies and one is a friend of Charles Koch's.

Freedom Partners gave the NFIB $1.5 million last year, the biggest single contribution the federation received, according to tax records. The Koch-backed group gave three other NFIB-affiliated group another $1 million, making Freedom Partners among the top two biggest contributors to those groups, records show.

The big-money donations are raising questions about whose agenda NFIB is serving, that of mom-and-pop businesses or the captains of big industry.

Lisa Gilbert of the government watchdog group Public Citizen said the NFIB is "taking the name of small business in vain."

"The idea that Koch brothers money in some way is going to help small businesses is laughable," Gilbert said. "What they're buying is the ability to help set the agenda."

And that agenda has included taking the lead on the lawsuit challenging Obamacare (NFIB v. Sebelius) that went to the U.S. Supreme Court. They also opposed increasing income tax rates on people making $250,000 or more, even though the vast majority of small businesses aren't affected by the rate hike.

NFIB spokeswoman Jean Card said the organization brings in the bulk of its revenue, about $86 million, from dues its 350,000 members pay. Members, she said, set the group's agenda.

Any suggestion to the contrary, is "simply not true."

"We do what our members tell us to do. We've been doing it since 1943," she said.

...

This isn't the first time NFIB has taken money from big corporate interests. In 2011, NFIB took $850,000 from the nation's top insurance industry trade group as part of a campaign to repeal a key Obamacare tax. The back-channel transfer by America's Health Insurance Plans to the NFIB allowed insurers to fund a much more politically popular ally in the fight against a tax on health care premiums.

Also, too:

The National Federation of Independent Business (NFIB) is a powerhouse lobbying group (reporting $100 million in revenue in 2013)[1] that purports to represent small businesses, emphasizing the claim that they are "NOT a voice for big business."[2] However, the group has been shown to lobby on issues that favor large corporate interests and run counter to the interests of small businesses.[3][4] News reports have also found that NFIB, which tells the IRS it is a "non-partisan" service organization, engages in partisan politics, and receives millions in hidden contributions.

Small business owners run the gamut politically. For instance, 33 percent identify as Republicans, 32 percent as Democrats, and 29 percent as Independent.[5] However, NFIB accepted a $3.7 million gift in 2010, and a further $1.4 million in 2012, from Crossroads GPS, a group affiliated with Republican political operative Karl Rove that overwhelmingly endorses and financially supports Republican candidates.[6][7] NFIB also received $1.5 million in 2012 from Freedom Partners, a behind-the-scenes organization that has been described as the "Koch brothers' secret bank," according to tax documents.[8]

Other notable contributions publicly disclosed by the donor include $135,783 in 2012 from the Center to Protect Patients Rights, a secretive organization now known as American Encore with intimate ties to the Koch brothers.[9] The Lynde and Harry Bradley Foundation, which has given to a wide range of conservative groups including the American Legislative Exchange Council (ALEC), has also provided financial support to NFIB.[10][11][12][13]

Again, no disclaimer. The other link leads to a Marginal Revolution post and the study which do not say that regulation is causing the fall, but instead say changing laws and mergers and acquisitions probably are; profits are up.

So far (in one post!) we have heard from a climate skeptic (not Koch as far as we know!), some Koch guys, some more Koch guys, and a Koch guy. By "Koch guy" I mean a person whose career has benefitted substantially from being one of the little Minions that get trickle-down paychecks from the Despicable Koches.

Even within those businesses, the burden will tend to be disproportionately concentrated. Employment conditions are heavily regulated, so firms that employ a lot of workers to get a given level of output will have more regulatory overhead. And firms that employ a lot of low-wage labor get hit from every direction: Businesses like fast food and retail tend to have thin profit margins, so they don’t have a lot of room to absorb the extra cost, and they also can’t really cut wages to reflect the higher cost of labor, because they’re already operating at or close to the statutory minimums. A consulting firm that has five employees, on the other hand, will probably have a higher compliance cost per employee, but also much more room in pricing and profit margins to absorb that cost.

How much does this matter? Well, if you want to camp at Meyer’s rec sites, but can’t afford to pay Hilton prices to do so, it probably matters to you a lot.

This is just one of many dishonesties. If you don't eliminate regulations, you'll be charged Hilton prices for a campsite. McArdle does not tell us how Hilton can afford to have nice rooms and lots of employees when "Pops" Campground cannot, but that's just one of those mysteries of the universe.

But it also matters to the rest of us, because when you add that burden up, it potentially has big effects:

1.Regulations can knock the lowest-skilled workers out of the labor force, at which point they’ll struggle to get a better job. It’s fashionable to say that these are terrible jobs anyway: hard labor and they don’t pay enough, so who cares? But those jobs are where people learn the basics of work: showing up on time, being nice to the customer, attending to every detail, and so forth. The regulatory burden is effectively a cost wedge between the amount you pay your worker, and the amount it costs you to employ them; the bigger that wedge, the more likely it is that some people simply won’t be able to find employment. The result is a great human capital loss to the economy, and the devastation of unemployment.

Here McArdle pretends that low wage jobs are only taken temporarily by teenagers and "urban" people who need to learn how to act properly among "not-urban" people and adults.

2.Small businesses are vital to the economy.2 They’re sort of like the engine oil that lubricates the economy, because a lot of things aren’t profitable at a larger scale. For example, a few years back, I interviewed the owner of a wire basket maker in Baltimore, who was making racks for a car manufacturer to store their parts in on the assembly line. These were a cog in a great industrial enterprise, but he was turning them out in tiny batches -- six at a time, or a dozen. That sort of job simply wouldn’t be profitable for a major manufacturer, because the cost of retooling a big assembly line, and the bureaucratic controls needed to run a large firm, would eat all the profit margin. An owner-operator of a smaller business has a lot more flexibility, and the cushion provided by that flexibility is absolutely necessary.

I know that the first thing I want to do when I am around dangerous machinery is eliminate regulation. Flexibility is so necessary, unless you are a worker whose back is crushed by a badly maintained workspace and sloppy adherence to safety rules.

3.Regulations can make it unprofitable for small businesses to grow. Let’s say your firm has room to scale, and might even become a big business someday. That’s great! But now we run into the problem of small business carveouts. A lot of laws, including Obamacare, have them, so that politicians can claim their policy won’t affect small firms. The problem is that when you hit one of the thresholds, there is an absurdly high marginal cost to hiring the next employee, or taking in the next dollar of revenue. That can retard growth, which is not something the U.S. can currently spare.

This will indeed be a terrible burden. Perhaps they should wait until they have to hire twenty workers and can handle bigger orders and make lots more money.

All of these costs have to be carefully weighed against the benefits of regulations -- and not just on a regulation-by-regulation basis, as is currently done, if such cost-benefit analysis is done at all. Each hour of a firm’s time that is sucked up by compliance is an hour that is not spent growing the firm, improving the product, better serving the customer. And as the number of the hours so spent increases, and the number of precious hours spent on growth and operations shrinks, each added hour we take is more costly to both the business and to the rest of us. With labor markets lackluster and growth underwhelming, that’s a cost that none of us can well afford.

For the want of a timecard the hour was lost, for the want of the hour the firm was lost, for the want of the firm the economy was lost, for want of the economy the nation was lost, and all for the want of the manila punch card. Sob!

And now our sad tale of Koch Minion woe comes to an end, except for two notes from McArdle:

1.My grandfather, who owned a gas station, saw his regulatory burden mount steadily between the time he bought it in 1940, and the time he died in 2004, to the point where it consumed an outsize share of both his time and his emotional energy -- and occasionally dropped surprise six-figure bills on him for newly imposed compliance rules, which is not a sum that most small business owners tend to have lying around in their underground vault.

One of those burdens was removing lead from gasoline. We know what McArdle would choose if it came down to making more money or spewing lead poison all over America.

2.There’s a lot of talk about how many jobs are provided by small businesses. This is somewhat exaggerated. Small businesses have a lot of churn, for various reasons. Most net new jobs are provided by a small number of high-growth companies, a fact which I’ve heard interpreted as saying that we don’t really need to worry about small businesses, only high-growth startups. Except that small businesses are a vital part of the economy for reasons beyond quantity of jobs added.

Why would a job that saw you as nothing but lost revenue have churn??