Friday, September 4, 2009

A Losing Bet

Let's see if we can find some consensus on the following: Each of us has limitations. Things that we cannot do. No matter how hard we try, we suck at it. For me the list includes math, carpentry, playing any musical instrument and having sympathy for liberals. (My list runs much longer, but I think you get the point.)

Governments have limitations on what it can do as well. Governments can build nuclear weapons, interstate highways and prisons.

But government cannot run a profitable business. How do we know?

Governor Patterson just signed the bankruptcy papers for OTB this week. You read that correctly. OTB became the first bookie in the history of civilization to not turn a profit on horse racing. Worse than not turning a profit, it can't meet its debts. Patterson may be blind, but he is not short-sighted, so he sought the protection of bankruptcy laws to allow OTB to reorganize and try again. Who thinks it will work next time?

A little history:

OTB used to be run by the city. It was hemorrhaging cash for years, and Mayor Bloomberg got the state to take it over. Think about that: Michael Bloomberg is a business genius. He is without question in the top 1% of business innovators in American history. And even the great Bloomberg, within the confines of government, could not find a way to turn a profit from OTB. So he kicked it to the state, and we are where we are.

Why can't government run this cash cow business properly? The answer is simple: Government does not value the dollar the way a businessman or individual values the dollar. Spend three minutes in watching the great Economist Milton Friedman explain it wonderfully here:

Because OTB it is a government agency, it shares the same characteristics as John Belushi and Chris Farley had in their last days: bloated and out of control.

Under the government, OTB stands for "Only The Bureaucrats." The levels of bureaucracy in OTB is astonishing. The have like 250 of these people in a Times Square Office. And they get cars too! OTB for some senseless reason, spends more money on cars than NASCAR. Plus you have unions jacking up costs left and right. City and State government never fight to keep costs down. Why should they? It's not their personal cash that they are spending.

What a shame. There is something like 65 OTB parlors. With technology, people can bet from home, so you have millions of mini OTB's in each home. And the government still can't right the ship.

Which brings us to the federal level, with the federal government owning car companies and banks. The banking and automobile industries are infinitely more complex than booking horse racing bets. And the feds bring another layer of bureaucracy. Does anyone think for a second these businesses will be profitable under federal control?

There is ample evidence that Obama and the Socialist majority in the Congress don't even want to pretend that these businesses will be run traditionally-meaning for profit.

As George Will recently wrote:

The Auto Stock for Every Taxpayer Act drafted by Sen. Lamar Alexander, a Tennessee Republican, would have required the Treasury Department to distribute to individual taxpayers — evenly, to the approximately 120 million who filed 2008 returns — all the stock the government holds in General Motors (61 percent) and Chrysler (8 percent). The legislation also would have prohibited using any more Troubled Assets Relief Program funds for GM or Chrysler. And the legislation would have prevented government from influencing corporate decisions for social, energy or environmental policy purposes.
Last month the Senate rejected this legislation 59 to 38. Only one Democrat voted for it.

If Obama's crew were running OTB, each parlor would be "green friendly" and be equipped with windmills that cost $100 million a pop.

Oh, memo to Governor Patterson, if you want to turn a profit from horse racing, here is what you do: close all the parlors, and turn the Internet betting over to a bookie. Tell the bookie that every Thursday, you will send your top aid to a bar in Brooklyn to pick up $1 million in cash.

Its a win-win.

Finally, please watch Milton Friedman's brilliance silence even a loud mouth like Phil Donahue here:

No comments: