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the federal government it’s kind of like a cancer in the free market system in the United States it it just keeps growing and growing and metastasizing and slowing things down it’s really it’s just a monster I’m pretty skeptical about the mosque ramaswami Department of government efficiency I I think the name is kind of absurd governments aren’t efficient and the reason they aren’t efficient is that the inan IES in the government are different than the private sector the private sector businesses operate in what in a profit and law system if you make a mess of things you pay the piper and the government that’s not the case as a result they aren’t efficient they they don’t make good decisions that’s the reality of what’s going to hit Elon Musk and ramaswami in the face when they start doing this they’re they’re not running Tesla to do this kind of stuff you you need to have hitters that are experts in know what they’re doing and even then Elon Musk and Vivic ramaswami have been selected to head the new Department of government efficiency also known as the Doge they are looking to trim government programs and Target cuts to government spending though doge is yet another government Department it’s been said that the Doge would dissolve in 2026 after accomplishing its goals based on the social media videos circulating on musk and ramaswami this program geared to cut government wasteful spending sounds both disruptive and expeditious should Doge dissolve in 2026 this would be the 250th year of America’s Declaration of Independence how ironic is that so one may ask can musk and ramaswami two billionaires set back the powers of the US government reducing wasteful spending and increasing efficiency I’m sure they’ll be faced with opposition so how can Doge accomplish their goals will they privatize the workload being performed by government employees how many will lose their jobs to discuss this I have the man who served as President Ronald Reagan’s privatization Guru a professor of Applied economics at Johns Hopkins University Mr Steve [Music] hanky Professor hanky welcome back to the show sir great to be with you Todd I’d like to start off by asking you if you were at all surprised that President Trump won the election no if you if you were watching the betting markets like I was watching it it was clear that he Not only was leading Harris by a a country mile even in even in all of Swing States but also kind of the last month before the election uh Trump had really come from behind to get a get a pretty good lead so he had the momentum and as I say the absolute level looked like there was a gap with him being quite a quite a bit ahead of Harris well you know many believe that that uh government in the United States has gotten out of control for overreaching wasting a lot of tax revenue that they collect from hardworking Americans uh I want to kind of dive into that today what’s your what’s your opinion of that the the government uh not only at the state and local level but the federal government the United States is much too large uh I I think it could be shrunk by at least a third less than it is now and we we wouldn’t even know the difference there’s a lot a a lot of shrinkage could take place yeah so I mean do you think it’s time for that do you think we’re we’re ready for somebody like President Trump to step in and and actually do that shrink the government well I I thought that when I was President Reagan’s advisor in the in the early 1980s but you know re Reagan by the time the second term ended it kind kind of got things under under control but uh it it’s a tough slog there there really is no president that’s that’s rolled back the the federal government it’s really it’s just a monster and in a way just to use an analogy it it’s kind of like a cancer in the free market system in the United States it just keeps growing and growing and metastasizing and and and slowing things down well president Trump’s announced uh a new Department of government efficiency uh he selected two billionaires Elon Musk and Vivic ramaswami who have both volunteered to spearhead the Department’s initiative to cut government waste what’s the possibility that this will actually happen well let let me first start by just the name of is is kind of a contradiction in terms Department of government efficiency well governments aren’t efficient so I think the N the name is kind of absurd uh and and and the reason that they aren’t efficient is that the incentives in the government are different than the private sector the private sector businesses operate in what in a profit and loss system that’s based based on private property and and what are the incentives well you know if Todd saac reality uh is isn’t satisfying clients and doing so efficiently you’re you’re going to end up with negative cash flows and you’ll probably end up going bankrupt so so that’s the profit and loss system if you make a mess of things you you pay you pay the piper and and you pay the cost now the government that’s not the case if a civil servant or a politician makes a mess of things there’s there’s no Reckoning with a balance sheet or an income statement at the end of the year and nothing happens so so you have all these decisions being made in the public sector where no one gets whacked if they make a bad decision and so as a result they aren’t efficient they they don’t make good decisions because of the incentive structure it would be the the stupidest thing in a in a private company to give management free reign and say do whatever you want to do and it’s not going to make any difference in your salary or your pension or anything else uh just have have fun with the stockholders capital and and and no and no one there’s there’s never going to be an expost facto evaluation and audit of what you’ve done at the end of the year to see whether you’ve had benefits exceeding cost so so that’s that that’s the kind of system that the government operates in so it’s a very different world the government than a private business so that that’s the main thing and that’s why private businesses end up being productive a lot of them do go bankrupt by the way Mo most new startups for example they actually fail and and never get off the ground but that that’s the system and and it’s efficient because it’s it’s kind of darwinian survival of the fittest basically and and so that’s not in in the public sector now if you go back to Reagan who was really the only president who was serious about cutting waste Fraud and Abuse and cutting things back which is how we started in 1982 Reagan formed the grace commission Peter Grace uh was ahead of that and Grace in January of 1984 filed big massive report I contributed to the thing of course because I was on Reagan’s Council of economic advisors and and and in the grace commission we we had in there 2500 recommendations for to specific things to cut waste Fraud and Abuse and and I can report that those those were good recommendations but the result is very very little actually was implemented so it it was a great survey they had they had a huge number of First Rate people doing the study doing the evaluation coming up with all these 2500 ways to cut waste Fraud and Abuse but out of those uh it it was kind of like an AC we we would call it an academic exercise in a way so i500 I’m pretty skeptical about the musk ramaswami Department of government efficiency I I think I think the concept is good and cutting back the government is good and reducing waste Fraud and Abuse all all of those are admirable things but the question is well how how do you get the thing done and and they want to do it in the following way they have three things they wrote in a Wall Street Journal oped on Thursday yesterday uh November 21st 2024 where musk and ramas Swami laid things out pretty clearly first they want to do a lot of deregulation get get rid of regulations we don’t need that that just put red tape around economic actors private business businesses private entrepreneurs and slow everything down and and basically make a mess out of everything and and increase the cost of doing business make businesses less competitive than they would be so deregulation great that that was one of the main things by the way Reagan got elected on that’s what we were doing at the Council of economic advisors when M Murray Weeden Bomb by the way was a chairman of the Council of economic advisors for Reagan I that’s was he was a he was my boss basically I guess Reagan was really my boss but but Murray was a chairman of the council and Murray Weeden bom happened to be one of the the great experts at the time in the United States on business regulation he’d written many books on it and so forth so who who did Reagan make the chairman of the Council of economic advisers of the president marray Weeden bomb who who was probably the number one person the United States on deregulation at the time so de deregulation is a good thing they want to do it the second thing is to reduce the size of the federal Workforce and and of course that means you know a lot of savings and salaries and pensions and the third thing is just a general cost reduction look looking over the these bureaus and agencies to see if there are ways that they can uh you know procure supplies more cheaply and things remember the $600 toilet seat at the department of they they want to eliminate stuff like that yeah $600 uh toilet seats at the Department of Defense now the Department of Defense by the way they they have they’ve never been audited they can’t do an audit there because the place is so out of control the waste Fraud and Abuse and the $600 toilet seats are so pervasive at the Department of Defense that they the the you even the US government can’t do their own audit of the thing so so that’s where they want to go now fundamentally we’re talking about they’re looking at government spending is 6.75 trillion a year that’s how much a government spending 6.75 trillion and and they want to cut two trillion my first reaction when I see that kind of thing I is lots of luck fellas but if you look at it the the fundamental problem that musk and ramaswami the thing they don’t realize or maybe they realize it but they don’t have it in this article they’re always they’re all looking at like an income statement in a business and they want to cut cost cut cut the number of employees and they’re looking at this income statement which is a flow and and happens annually or in real time it’s it’s moving all the time uh the problem with that is that it doesn’t look at the most important part of the whole thing and the most important part in accounting is is not the income statement it’s a balance sheet so the question is well what about the federal government’s balance sheet we we know one thing the federal debt is $36 trillion and and rising and if what’s on the asset side well it happens that the United States owns a tremendous amount of land and oil and gas and mineral resources and and and to give some perspective about 25% of the US surface area is owned by the federal government so it’s a huge amount of real estate and if you add the the state and local ownership of land that even balloons the thing up further I I know when I looked at this uh because I I really was Reagan’s privatization Guru because he want he went after the balance sheet and and and he said you know H how do we restructure the balance sheet to make sense that is sell privatize a lot of assets that we own that are Surplus so-called Surplus assets and use the revenues to reduce the federal debt and and so uh the actually the fiscal 1983 budget if you read the the re Reagan’s presidential message there I I wrote the paragraph on privatization in that fiscal 83 budget and it was to mandated to Surplus Federal assets these lands redundant army bases and Air Force bases Naval Naval bases that we don’t need things like that uh and and I can report unfortunately very very little actually happened yeah I definitely want to dive into that uh because I know uh you had some recommendations and there were some executive orders that were were made um kind of getting back to you know maybe I don’t want to call it pessimism that you have that they can’t accomplish what it is that they would like to do I mean reducing you know the uh expenses by $2 trillion a third almost uh does does seem a bit um you know far-reaching I mean that would be very disruptive uh number one a lot of people would lose their jobs I guess how could the president actually do this could he do that through executive orders or will he need congress’s approval uh for these types of actions well I it’s a combination of things but both the answer is both now let let me let me give you an exam just to keep it realistic so I remember one thing I went over to the defense department started a asking the top brass about you know Surplus assets we we did an inventory of things and and they they actually this is this is the early 1980s Reagan’s first term and and they actually had warehouses filled with vacuum tubes from radios you know from World War II probably World War I too and and they dug in they they said hanky we we we don’t want to get rid of this stuff you never know when we might need it and and and why because they don’t pay the Department of Defense doesn’t doesn’t include in their budget any Capital carrying charges for those things those huge excess inventories they just keep them forever they’re never charged anything for them they just keep them in a warehouse someplace and and that’s it so that that’s kind of the the Absurd thing I originally ran into but then there were Surplus Army bases and and think about this the the President says he wants to get rid of some of those but that those all reside in a state and each state has two senators and and at least one Congressman in the congressional district where the base is and and they dig in their heels they they don’t want to they don’t want to close the bases I mean forget the vacuum tubes that that thing was so absurd I they probably end ended up getting rid of the darn things but I I don’t know but originally they resisted but the army bases and surplus bases that that’s another kettle of fish and and and I can tell you that the president even with an executive order is running into a buzz saw in Capitol Hill when you want to shut one of those things down so that that’s that’s what you’re dealing with the that that’s the reality of what’s going to hit Elon Musk and ramaswami in the face when they start doing this they’re they’re not running test Tesla or SpaceX where they or or X where where they can just go in and and can a bunch of people it doesn’t work that way I’m not pessimistic I I I’m I’m just skeptical I I I’m a I’m a realist I I wish them all the best I hope they can do this I hope they can even do a little of this in Hank’s Book of Rules when when these reforms come the the first thing I I have 10 items in my book of rules but the first one is for Quality policies you need quality people so when you look at what’s going on with these appointments and so forth with the new Administration as well as Biden by the way would I grade any of any almost all the appointments would I would I rate them very highly on a quality scale the answer no and and and and we see the same thing happening with Trump with the with these appointments he he wants a bunch of loyalist a bunch of you you know what kissers and that’s not quality to to do to execute you you need quality people just in a private business think of a private business why they do these World surveys Todd every year about the best CEOs in the world and and I can tell you they they’re almost always French now now why is that it it it’s because all all of the top Executives in France they have a very Merit meritocracy rules rules the roost in France all the CEOs are number one they’re all Engineers they’ve all gone to the Grand they call the big the big high schools the the the the big high high priests are all coming from there and and they know how to do what Engineers know how to execute so it it business is all about execution you can have great ideas and if you can’t execute forget it it’s not going to happen yeah that’s right I you can have analysis paralysis so you you know but if you can’t get it done right if you don’t have the ability to do that I mean do you think that um musk and ramaswami don’t have the ability to get it done I mean they they seem like they’re pretty break yeah it it isn’t them that that that’s the that that but they’re they’re not going to be H they’re not going to be running day-to-day operations and and and and by the way we’re talking about a monster that that is so much bigger than Tesla or any of these private companies that would make your head swim and you’ll be asking the people to cut the costs and it’s their own uh it’s their own system that they would be cutting I mean it’s a direct conflict of interest and I mean what happens I mean I can only imagine the labor oppositions that uh you know uh that that you’re going to run into the unions uh you know are going to be fighting them tooth and nail and the Congress and by the way th this is a bipartisan thing the Republicans will be digging in just as much as the Democrats if you if you start touching on something that’s affecting some some US senator who happens to be a republic Republican believe me he’s going to push back or she is so so it it’s a different world we’re not operating with the government in a profit and loss system that that’s my point I was trying to make originally it it’s a different set of incentives and and what’s economics all about Todd it’s about incentives and incentive structures and and if you have the wrong incentives you’re you’re you’re going no place what is their incentive because it certainly isn’t cost cutting I me what what is their incentive no they their incentive the incentive of a bureaucracy is to maximize their budget to spend as much as they can yeah well you’re right to get as many Appropriations as they can lard the staff gold plate the operation etc etc etc that that is the main objective function of the Civil Service and by the way do all kinds of things that L lard the pensions as much as you possibly can I mean the the the the front end bottom line pay is one thing but pensions are are are in fact some something else so where did we start going wrong I mean I you know I’d like to talk about you know some of the the um some of your work with uh you know President Reagan first of all how in the world did you become you know part of the Council of economics advisors how did you get that well uh I first met Reagan actually when I I I was teaching for a year at on the faculty at the University of California at Berkeley and at that time Reagan was a governor and and there were people that I I was close to on the faculty at the University of California at Berkeley who were close to Reagan and working with Reagan so I I started that that relationship with Reagan when he when he actually was governor and and then he became president and I was invited to join the staff at the Council of president’s Council of economic advisor so so that’s that’s how things got going and it turned out that this this idea of P do doing something with the public lands the these are a a huge asset of of the federal government and and run negative cash flows so so you own something that’s worth trillions of dollars and and and it’s actually Genera it’s a drain negative cash flows so we have all these Timberlands we’re we’re not talking about Parks and Recreation areas national monuments that kind of stuff we’re we’re talking about Graz grazing lands 150 160 million Acres of grazing lands maybe 80 million or more of Timberlands Prime Timberlands and and they produce negative cash flows actually so the question it came around to me because it it happened that I was was an expert on this and then I proposed look at the balance sheet we we sell some of these things we get cash on the on the asset we we turn the the physical asset the land or mineral rights or M or oil and gas rights we we turn those rights Into Cash on the asset side of the balance sheet and and we and we use that to do what reduce a liability the federal debt on the liability side so so we shrink the balance sheet that that’s that’s where I think musk and RIS Swami are kind of missing the boat they they don’t they’re looking at the income statement they’re trying to reduce the government outflow of expenditures that’s happening on the income statement every year strategically I think that that’s a good idea there there’s no problem with that but they’re missing the elephant in the room and that is you want to shrink the balance sheet of the federal government and you do it just as I explained So So Reagan said well okay fine hanky to develop some program to actually allow us to get rid of some of the this these assets so I did and I gave a uh I gave a speech a notable speech in Reno Nevada group of important Western ranchers that were meeting on and and the speech was eventually called privatize those lands it was it was actually published in reason magazine I think in 1982 I can’t remember for sure when it was but at any rate I I gave my speech that which I always do to Mrs hanky to to read before I gave it and she said oh you you’ve got a clunky language in here you’re you’re talking about getting rid of these government owned Surplus lands and everything she said she said you you want to privatize those lands I said oh that’s that’s a great idea so I I I amended the thing I gave the speech and then uh of course it it was very controversial at the time and one of the controversies turned out to be the word privati and and and the critics said well Hank using a word that’s not even in the in the English language it’s it’s not in the Webster’s dictionary which it wasn’t and it wasn’t we discovered because Mrs hanky who happens to be French gave me the word and it’s a French word the the French originated the word so as a result of all this uh among other things after I left the president’s Council of economic advisors Mrs hanky and I lobbied to get the word privatized in Webster’s dictionary which we did and 1983 is the first time in Webster’s Collegiate dictionary that word appears and uh and and that’s that’s the S the source of the word is Mrs hanky actually well sounds like uh she’s very smart and uh like you know all uh good women in our lives they help us to refine and and uh that’s that’s awesome another thing in Hank’s rule book if if you if you see a successful person most of the time there’s a mother behind that individual that’s right a good mother that’s right yeah I always say behind every good man is a better woman so yeah yeah I I I I think you’re right that one you you you and I you and I are on the same page on a lot of things Todd and and that happens to be one of them yes let let’s kind of talk about the land a little bit more because uh you know I have read a little bit of your work on that why is the government holding on to this land I mean wasn’t the purpose of the government owning so much of the land originally you know the forefathers that they would turn this land into money-making opportunities and that they would be able to sell the land and um and and use it like you had mentioned to you know turn them into valuable resources so much of it is just mismanaged is you know falling into uh wasteful expense why are they doing that I mean why isn’t and and no one by the way no one is talking about this I mean they want to talk about the interest on the debt they want to talk about the department of Def defense spending and a lot of these other um you know programs VA healthc care uh you know they but they no one’s talking about the amount of waste that is going into this land uh Bank what was the I mean what was the purpose of it originally and why aren’t they doing it originally what what the what the founders and and and early on in the United States the United States government originally of course it was very small but it was it was basic a huge real estate operation they they had all this l i mean you’re you’re in the real estate business I mean these guys were the real deal because we had all this land in the United States and they were in the business of selling the land and collecting Revenue to not only run the government but also paying off debts that the U the US had run up uh in the in the Revolutionary War so so that that was the the game plan it it was all very normal and and then uh eventually it came to to a grinding halt especially and and you look where where is all the federal land it’s the last land that was acquired by the United States it’s all in the western states it it it there there’s virtually no federal land in the in the East or or even the Midwest you you’ve you’ve got to go out as far as Nebraska before you start or even slightly west of Nebraska B basically ground a hall and and by the way if you look at it not only we we’re talking economics cash flows negative but if you look at Federal Timberland the the state of these Timberlands is terrible lot of blowdown dead trees disease trees uh and and by the way that’s one reason if you look at fires most of the most of the for these big forest fires we have in the United States and in Canada they they go on and on about climate change and and climate change this climate change that th those are on very low quality public lands that haven’t been maintained properly it it’s the the propensity of those things and frequency on public lands is those fires it’s way greater on public lands than on private lands and if you look at grazing lands and and look at a big pasture and there’ll be there’ll be a fence and on one side it’s private on the other side is public and and you you know right away what’s going on the the public land will be in terrible shape so so it’s an ecological thing that you you’d think the environmentalist would want all these public lands going into private hands because the if somebody’s private they’re going to take care of the thing they’re not going to they’re not going to destroy it the US Forest Service they have no incentive to take care of things or the Bureau of Land Management which manages the private the public grazing land they have no particular incentive to take care of and maintain things why do you think they’re hoarding the land well the the big thing we ran into I’ll tell you the environmentalist ran straight into us in the early 1980s that was the thing and and they used arguments like oh Reagan’s gonna privatize these public lands and as as pave everything over with asphalt and they used all kinds of stupid arguments but they they won the day the in the court of public opinion the the public was was not in favor and that’s why we didn’t in the end privatize much of anything I mean do you think in some ways they’re um it’s they’re just trying to control the development I mean if you’re looking at real estate I mean it is a uh basically a finite product I mean do you think a lot of the the land hoarding has to do with you know controlling costs or being able to uh you know keep it’s a remember these are negative cash flows it’s not but it’s no implication they’re not they’re not holding these things because they make money right in aggregate I mean some things like o oil and gas and and some of the mineral rights that that’s that’s but even if you throw all of those together everything together but they would keep them anyway it loses it loses money and I mean wouldn’t they keep them anyway if they if they sold the land off they would still in a lot of ways keep the the gas and mineral rights right I mean well yeah they could do that they could sell the surface rights but keep the oil and gas and mineral rights but here here’s what I what I proposed uh it it gets kind of complicated but to to give a what we’re talking about I said that they should put a rule and the rule would be for all federal assets that they would have to meet a minimum real rate of return and if they didn’t meet that minimum and I had 10% if the asset wasn’t generating a 10% real rate of return every year it would automatically go on the auction block it wouldn’t it wouldn’t be worth the federal government keeping the thing so that that was hanky’s rule so if if you had that believe me all these things would would end up being privatized they’d be go off the federal balance sheet the federal balance sheet would shrink the the government in a what in the the government would shrink in that sense that that’s one way to shrink the get the federal government shrink shrink the things that they own that aren meeting a Target rate of return yeah I that sounds responsible to me I mean that’s accountability um it just it’s so amazing that no one’s talking about this you have such a a big liability what some would look at as an asset but a liability at that so how valuable is an asset that outweighs its you know ability to cash flow and on any like you said a business balance sheet that would be bankruptcy but there has been you know really nothing that has been you know applying pressure to like what you’re saying if you can’t if you can’t take this land and turn it into a money-making um you know proposition then you don’t deserve having it and you should it should be on The Auction Block I completely agree is there a downside to it though is there something that I’m not seeing to where you know there would be a downside the hypothetical downside that uh is not true the the lie that the public was fed is that somehow how all these natural resources these grazing lands and Timber by the way we the only thing Reagan ever in my program ever proposed privatizing were commercial grazing lands that are that are being grazed on right now and and the public owns and they’re leased out to ranchers or commercial Timberlands it was all commercial property all commercial we weren’t talking about any parks National Monument all of that stuff forget it it was it was not in the picture but the environmentalist at the time made the argument that if this these lands went into private hands it would be an environmental catastrophe with without any evidence whatsoever that would reveal that the public lands from an environmental point of view as I mentioned earlier are in a lot worse shape the the quality of Timber lands is way worse on public in US Forest Service lands than at warehous or any the any private lands that have forestry and the same with grazing lands it it’s blatant you can just you can see it in photographs you don’t you don’t have to have some scientific study you can see it with a naked eye but they got by with a lie they get by with a lot of they they get by with a lot of lies I mean we we’re told now every summer when we have forest fires that this is all due to climate change climate change climate change this is this is BS of the highest order it’s due to very low quality timber that’s diseased got a lot of blowdown has has never been clearcut has never been harvested it’s a complete mess and and basically a fire trap just waiting to blow up which which of course it does all the time relative to what goes on on private lands private for Forest lands you do not see the frequency of fires you know I I I I understand but I’m still having trouble with it because you know when when you look at the argument and you know because the government has such power that by selling the land it would be a destruction to a environment when they regulate us land owners anyway so you know they still have all of these you know rules and policies in place that prevent you from actually doing what you want with your land um but I guess what you’re saying is it’s much easier for them to um get money for their programs whatever they are um when you’re doing it in the good faith or good you know um favor of saving the planet I mean it’s you know it’s no one wants to stand up against that you know when they say Todd you’re you’re having problems with this because you’re being logical and factual and and a realist so so you’re you’re going to have problems with this that that’s why musk and RIS Swami are GNA have a a lot of problems getting their head around what’s going on let me give you an example let let’s get very concrete so after I left the president’s Council of economic advisors and Reagan administration it it was known that I I was an exp expert on this topic and and more or less a guru on privatization and and it turns out that there’s an Indian tribe in Oregon the selet Indian tribe that had a most of the reservation is actually Timber Timberland and and they it’s a tribe so the tribal rules are that the Bureau of Indian Affairs essentially ma manages the reservation and and they require the timber lands to be hared harvested as does the US Forest Service that that means you you can’t clearcut the Timber and replant it you got it you know one one one tree at a time kind of a completely nonsensical harvesting rule that the forest services so so the tribe contacted me and I acted as a consultant for them because they wanted to privatize the whole reservation this is an Indian Reservation that that most of the land was old growth forest and they wanted to privatize it why because they wanted to cut the trees clear cut the trees in a systematic way and replant them and and be harvesting these things just like a farm would you plant the corn every year you harvest the corn you plant next year that’s that’s the timber the duration of planning of course you don’t you don’t cut a tree every year and replant every year you have to let let them grow to maturity so so so I I I did the study and and and of course the the value of this reservation skyrocketed if it would have been privatized rather than being reservation so they wanted to go with it so we we we we went in down to Washington DC did did all the lobbying and everything HW Bush a republican was President then this thing hit a stone wall and and why did it hit a stone wall you’d think Bush a republican would have been all in favor of this the Indians are coming in they say we want to privatize this thing and the Bureau of Indian Affairs and the department of interior and US Forest Service put up a stone wall now why because they didn’t want to set a precedent because they said oh the the these big the cetes is a small tribe small reservation they said if they do it that that might get into other Indian tribes heads and they’ll start wanting to privatize their their reservations and that was the end of it and right and and you had some of the big tribes by the way and Arizona lobbying against it they they didn’t want it we might actually have free market in uh timbering we may reduce building costs and we’d also have private property because if an Indian if an Indian tribe privatized the commercial lands that the tribe owned the tribe would still own the lands we the the thing is they would would own it and they would be able they would then be in the profit and loss system and and they would make the right decisions about harvesting and replanting and and and all these things they they’d be operating like Warehouse or somebody like that and and wouldn’t it also be true I mean I know um the productivity of grazing lands I mean we could actually encourage people to do more farming oh there’s no question about prod ity would shoot shoot way up it just seems like I mean there is obviously um you know there’s a a control Factor here um and like you said I mean the need to deregulate cut red tape um so you’re thinking that once Trump takes office regains office um you’re thinking that he’s going to come into massive opposition on the ability to deregulate cut red tape reduce government uh you think it’s you do you think it will happen do you think it won’t happen at all I mean I I I I as I say I think it’s I I think in in principle it’s a good idea but in practice it’s it’s a tough knot to crack and and I know this because I I was in the middle of in the Reagan Administration and with a Grace commit Mission and so forth so I I have a pretty good idea of what I’m talking about I’m not I’m not theorizing at at John’s Hopkins University and a classroom I I’m talking about the real world here the real world this is the way it operates and and these examples that I’ve just given you that are very concrete the select tribe that wanted to privatize that’s very easy to understand and and to and to get your head around the fact that politics is involved in the thing is it a bigger agenda I mean is it is it just politics is it you know uh yeah it it it it is politics and and and and I I gave you a little case study case study one selects Indians trying to privatize their reservation they they wanted to privatize the the tribal council which I met with many times voted to do it and and who stopped it the HW Bush Republican Administration stopped it it it wasn’t some left-wing Democrat who stopped it it was HW Bush who stopped it and I gave you the reason why because because the big tribes heard about this and the big tribes came in and said no way we we we we we don’t want to do this interesting so how would you advise president Trump well I I would advise that uh he he’s rule number one which I’m reading again quality policies for Quality policies you need quality individuals quality people so that’s that’s the in other words if they set up this department and they’re just a bunch of political flunkies that come in there and Hangers On nothing nothing much is going to get done really you to do this kind of stuff you you need Heavy Hitters that that that are experts and know what they’re doing and and even then even then you they’re they’re not only have to be experts in in in in things like privatization and and government cost control but also the political aspect is something that most people don’t realize it it’s you you can have very smart person very successful in business and so forth a after all Peter Grace was very successful a very very smart businessman who came up with a very good report and 2500 recommendations and and what happened well I think if you went through the 2500 you’d find very few that were implemented or anything that made much of an impact so do you have any so what you’re saying uh with President Trump is that he needs to select the right people in order to accomplish this cost cutting or you know getting rid of the the waste Fraud and Abuse in the government but you’re not thinking that because they’re business people that musk or ramaswami are the ones to do it who would you recommend I mean who who would he get to do it yeah now now we’re really getting out in the weeds I I don’t have any particular recommendations but I the the kind of people who can do this are not necessarily business people by the way all businessmen think they can go in and clean something up right away in Washington this is this is just a joke Mo most businessmen are clueless about how political economy actually runs and how how government governments operate it’s just not like running a business that that’s all I can say is it dangerous for these individuals to do something like this well I don’t know if it’s dangerous I I I don’t know that there’re be assassination squads or anything like that but it it it it it might be very frustrating you got to know how to play the game and and and and the game I’m I’m saying and the incentives are in institutions are very much different in the public sector than than they are in the private sector now it’s it’s a good idea that there’ll be somebody in the White House who’s who’s blessed this idea of cutting waste Fraud and Abuse that’s good I mean re Reagan did that Reagan understood it very well but I I can tell you you’re referring to Trump being in the White House being yeah he’s he’s already he’s already sprinkled holy water on this whole thing and and and he’s also with you know it’s a a mutual admiration Society with with Trump and musk and ramaswami you know that so that that’s all fine and and what they’ve laid out even even looking at their three-part plan focusing on kind of the income statement as I say right away I I’m telling them no you you’re missing really the elephant in the room is a balance sheet you you got to worry about H how do we shrink the balance sheet not not just the income statement but how do we shrink the balance sheet of the federal government so so that they they’ve just started so give them give them time maybe they’ll think about the balance sheet but then it it to to do all this you it has to have people and they have to have the authority by the way that’s another thing they have to have the authority to do it and you you’ve got to deal with all the other branches of government so it’s I’m just saying it’s a it’s not as simple as people think so I guess you know in sort of closing I I I want to talk about Congress and the their role their approvals of you know a lot of this uh spending uh this you know what what you’re considering fraud waste and abuse I mean obviously a lot of these I mean this has to be approved um the the spending of taxpayer money um can you think of one or two things that are the biggest waste of government spending of or taxpayers money I mean can other than the land that do you still think that’s a problem and do you what other types of things do you feel um has you know been misappropriated through the years well it’s a it’s a huge laundry list I mean you I I can’t imagine any agency where you don’t have a huge amount of waste Fraud and Abuse it’s just the nature of the beast but uh you know f f focusing on these assets is I think a very important thing to to do and and get in a you know big privatization program get get rid of as as many of these commercial assets the government owns as as possible and by the way since you’re in the real estate business this we’re talking about real estate this is a real estate business get get back to what the founders of the United States were doing with all the excess land and real estate that they own they they they had probably one of the biggest real estate operations in in history so get back in that model and then you know take a take a knife to all these bureaus and agencies but but again uh there there’s there’s a lot of I let’s put it this way there’s much lwh hanging fruit that that is pretty easy to spot it the problem is cutting the fruit from the vine that that’s the problem and and I’m saying it’s it’s just not as obvious as if you’re running a private business if if you spot that and you’re the CEO you you just do it yeah well I’ve seen quite a bit of waste myself I mean being in the real estate industry and and uh in the building industry I mean I can tell you how frustrating it has been uh you know dealing with Department of zoning and permitting and uh you know getting things approved and variances and you know special exceptions and uh they make it such a grueling process and I always said uh you know I can remember being in Baltimore City one time and um a situation where I had a um an inspection that uh was had failed and in Baltimore City you have to actually go downtown again to reapply for a new inspection you you didn’t just call them up you know you had to actually go into the permitting office and I can remember one time I spent over 4 hours um in this department and um I mean it was it was it was absolutely crazy and U you know I could bore people with the entire story but I thought to myself man if they would privatize this workload that the government is doing that is so disincentivized actually help people and be expedient and efficient and um help somebody that’s trying to uh you know um provide decent housing for people at affordable costs it’s just it it’s very frustrating and um I I’m hopeful I think um you know I’m very excited with the fact that I hope that these billionaires are able to get something done and can disrupt the system and I think though people don’t understand that it’s for the overall good it is a bipartisan issue I hope that we can come together uh with this uh just terrible divide that we have gotten ourselves into it seems like since the Obama Administration it seems at least for me the the the most obvious that we have become such a nation of divide and I’m hoping that we can get back that people will understand understand that it really isn’t a matter of a left or right situation it’s what’s good for everyone and uh you know that we can get some incentive back in America again so you see the these regulations by the way you pointed out the the building inspector so that let me let me give you the i’ like to keep things concrete so this is a good example right here in Baltimore because I’m in Baltimore too right down the road from you and so the the at Johns Hopkins University they they were refurbishing one of the departmental offices in in the building I happen to be in and so this thing dragg on for months and months and you know it was a relatively small job so I I finally asked one of the staff I said what what in the world’s going on when when is this going to be finished and they said I said why why is it taking so long and they they said it’s the city building inspectors it has to be inspected and we and we just keep waiting for them so the thing took months extra months why because the building inspectors never would come out to the university and inspect the thing and sign off on it so it wasted all kinds of money all kinds of time the this the staff I felt sorry for it’s the the department I’m in they they were basically shoved off to the sideline operating the whole department apartment not in normal offices but you know kind of in a closet more or less for months th this week they finally moved in but I I thought it’s months and months overdue and it’s simply building inspectors from the city of Baltimore let me tell you what happened to me on one project um I was doing a a renovation on a house and um you know we completely tore out the uh you know the walls uh refloor planed everything was permitted the building inspector actually gave me a closeup uh you know uh inspection to looked at the framing that I could close up so then we called for uh the insulation inspection and the uh inspector actually um came out again and approved the the drywall phase so for some odd reason they never you know this inspector never updated the uh computer that the uh installation had passed and that we could close it up and this inspector actually moved to a different department so we had a problem getting our final and they said well you didn’t insulate you didn’t call for your insulation inspection and we said well we did call for the inspection but he said that the inspector had put down that it failed and you know it took week to get this uh worked out in fact um I I mean it was just it was just awful process and we thought we were going to have to tear all the drywall out um in order to get it done so I mean the mistakes that they make everybody makes mistakes but the there there really is no way of efficiency in any of the Departments that I’ve experienced so um you know I I would I think a welcome change is um you know is is needed oh I I I I I wish musk and ramaswami a lot of luck with this um I I think it’s a I think it’s a great idea that’s my one conclusion the other conclusion is that I’m skeptical that they’ll actually be able to accomplish anything close to what they are attempting to do well Professor let’s talk about your new book can you just tell us a little bit about that because um it’s pretty exciting I know the last time that we had uh podcasted you were in the middle of it and uh it’s actually come out now I I my co-author who unfortunately is no longer with us he would have been a hundred years of age this year Professor Leland joerger famous economist uh and I did this I he he met the Grim reap Reaper when he was 93 so it’s taken a while for me to finish the project and uh the book is called Capital interest and waiting and if you want to find out anything about interest rates how they work how it works in the system and so forth it’s it’s it’s all all in there the the big takeaway of the book is that we developed the idea which kind of a seed of it has been around for 150 years or so but the seed is waiting is a factor of production that’s an input into the production process and and the price of waiting is interest now what’s that mean that waiting is that you you decide not to consume today and wait to consume wait to get an income or revenue or return at some point later in time and if if you’re going to wait you got to get paid in interest to wait and and that’s an important factor of production just like land labor and capital remember when you took principles of economics all all the production models always have been we got three inputs land labor and capital you put those into the system and you get output in the economy and and joerger and I said no no no wait wait if you don’t have waiting as a factor production along with land labor and capital you’re you’re you’re not going to get much output from the system so that’s that’s the big you know 30,000 ft that’s kind of what the whole thing is about but it gets into applied things like why why is the yield curve on interest rate sha shaped the way it is why why are interest rates at the levels are at uh so it’s it’s it’s very much tangled up with your your business which is real estate if you if you didn’t have waiting you you wouldn’t have mortgages because there W be any supply of mortgage Capital so so think about think about that if if you wouldn’t have waiting of course even even if you didn’t have Finance markets just in a primitive Society if people consumed a 100% of what they earned and they never put anything back they they couldn’t they they couldn’t do what they couldn’t build a house even even if there wasn’t a mortgage market so so waiting is a very important factor of production of course the more waiting that can be justified the the the more productive and faster and economy will grow so it’s very very much part of the Dynamics of Economics interesting well I’m going to have to read it and then we’ll have to talk about it and have you back on we’ll yeah we we’ll have a full drill on the thing but sounds great in in the meantime you can probably post some uh information so that people viewing the podcast can know where to get it Paul great McMillan is a publisher there we’ll drop the links in the show notes absolutely below great thanks all right Professor hanky well thank you so much it’s always a pleasure sir and I look forward to uh talking with you again soon that’ be great Todd thank you thank you thanks so much for watching if you like the video you can hit that thumbs up it’ll let’s Stephen I know that you did and if you haven’t already subscribed to Sax’s YouTube channel come on what are you waiting for hit the alert Bell you’ll know every time we upload content just like this one of the best compliments you can do for me here at sax realy and your host of this podcast is to share our Channel and this video with your family and friends together we’ll build the most amazing online community keep those comments and questions coming drop them below we love reading them and we’ll see you next time SX Ry Maryland broker number 67720 office number 443 318451 4 Equal Housing Opportunity
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