A Presidential Candidate's Self-Interview on Job Shortages - Part II

By Carl E. Person, Self-Appointed Economic Advisor to H. Ross Perot, Bill Clinton, Paul Tsongas and George Bush

Copyright © 1994 by Carl E. Person. Permission is given for non-commercial users to send a copy of the data processing file for this work by electronic means to a specific individual for his or her own use, and then only if the entire file is sent, including this copyright notice, but no permission is given for anyone to copy or transmit this file for or to any person for public viewing or downloading. It is intended by the author of this work that the work shall be made available in electronic fo rm only through LawMall.

Part I. Headings:

19. Welfare Reform - "for Profit" - Yours and Mine

Q. You have touched upon welfare matters. Do you have any micro-economic analysis relating to welfare which would help to explain our job shortage?

A. That is a pretty tough question. I do have some good insights into the problem of welfare, and I'm sure that our policies toward welfare impact adversely on employment and contribute to the overall job shortage. Let me put on my thinking cap for a fe w seconds.

Q. Perhaps it would be easier for you to just talk about the overall welfare problem. Perhaps along the way you'll be able to relate welfare to job shortages, if that is possible at all. Because it would seem, to a bystander in any event, that having pe ople on welfare creates jobs for those who work in welfare matters and takes the welfare persons off of the job market, which would tend to result in more jobs available for non-welfare persons than would otherwise be available to them. How am I doing wi th your "micro-economic" analysis?

A. Not bad! It sounds similar to what I would say if I were in your shoes. My first observation about welfare, to answer your question most directly, is that the overall wealth of our economy in the United States is not maximized when we have undeservin g people on welfare, and this causes a deployment of our assets (both human and capital) in a way which lowers the overall number of jobs while robbing our economy and society of its valuable assets. Thus, the answer, upon this quick analysis, is that we lfare causes a job shortage in the long run, which is where we are not, after a long run with a welfare program which is not working.

Q. What micro-economic restraints do you see which you would change?

A. I have a way of getting people off of welfare, and I have proposed this every few years or so for the past 20 years. In fact, during one of my written proposals, which I sent to every Governor in the United States, I had a response from alawmallost ev ery one of the 50 Governors or their representatives in a most surprising interest in what I had to say. Two of the states were even interested in going forward with me and my plan, but the micro-economics of the situation (which in this case was specifi c federal statutory requirements which made it difficult to start a pilot project, and made it illegal to do what I was suggesting if it was not a pilot project) seems to have stopped the idea from ever being tried out.

Q. It sounds somewhat interesting, the way you put it. What specifically did you propose as your cure for this welfare mess?

A. I asked to be able to take persons off of welfare at my own expense, without any money being paid to me by government or anyone else for that matter, but after I had taken one or more persons off of welfare in this way, I wanted a lump sum payment to m e, by government, in an amount which I would negotiate with the government before starting out on my plan. In fact, as I indicated to the governments, I was interested in obtaining a lump sum payment of about 25% or so of the amount I saved the governmen t(s) over a period of years to be negotiated, perhaps 2-4 years. All of my proposal as to my payments was negotiable, so that I would not position myself and lose any interest by the governments.

Q. But what about the substance of your plan? I didn't hear you say anything about what you planned to do, or what you planned to teach. Didn't you have any specific plan?

A. Yes, I did. But I insisted from the outset that because the whole program was new and had to be worked out, I would not accept any regulations whatsoever. I wanted no rules, no regulations, no bureaucracy, no reports, no filing cabinets, no approved classroom, materials or books, no looking over my shoulder and no suggestions, advice or interference in any way with what I was going to do. In fact the first time I made my proposal, I made it to a lawyer working for the Human Resources Agency of New Y ork City, Addictive Services Bureau (which dealt with the retraining of drug addicts or former drug addicts). He was so thrilled with my program, which I did spell out to him in writing, that he said to me that he, the person I was dealing with on behalf of New York City, and a lawyer at that, wanted to be my first student in the program.

Q. So what happened? Also, just in case you might think that you've slipped something by me, I am still very much interested in what the program was, and I am putting this question down on my pad to remind me to make sure you tell me what the program was . Now, what happened?

A. Nothing, as you would expect.

Q. What do you mean that nothing happened? With such a build up, I can't imagine anything except fantastic results. What happened?

A. New York City never got back to me.

Q. Didn't you inquire?

A. Yes, I inquired several times, but still got no answer.

Q. Do you know now, 18 years later?

A. Yes. I found out quite by accident. The same lawyer came to me looking for a job, either because I was practicing law or because I was running a paralegal school and was always hiring lawyers to teach in the school. When he reminded me that we had m et many years ago, I was as anxious as you to find out what happened, so I asked him what had happened.

Q. So what did he say? Go on. I can't stand the suspense!

A. He said that when he talked with his superiors he found out that New York City was not paying but a small percentage (I think it was 5%) of the total welfare cost, and that New York State was paying I think 10%, and the rest, about 85%, was coming from the federal government. Therefore, there was no room for me to obtain the payment I was seeking, because the vast amount of the welfare savings would be realized by the federal government. And in any event, federal rules and regulations did not permit the City or State to make payments out of federal moneys earmarked for welfare to be able to reduce welfare. This would create unheard of bureaucratic problems and possible chargebacks and charges of unlawful diversion of funds if New York City tried to use welfare funds to cure the welfare problem.

Q. Were you surprised?

A. No. I was merely pleased to find out what happened.

Q. Is there more to your story? What about the Governors?

A. The problem with the Governors was the same. Federal law did not permit the states to make payments of the type which I was proposing, to give me a percentage of the welfare savings which resulted from my program, and a new statute or rule which permi tted some experimentation by the states (or cities, I suppose) apparently was not liberal enough to warrant attempting to try out my program. I am pretty sure that I was the first.

Q. Has anyone ever done this?

A. Yes, I read just about one week ago about a group in New York which was taking persons off of welfare and charging only 5 months worth of savings (which would have been 20 months under my plan because I wanted only 25% of the savings). I feel that my formula was applied and that my idea has worked out. Of course, I received no credit and it's quite possible that the idea developed independently.

Q. Are you really sure of this?

A. No. I had gone on television several times to explain what I wanted to do, and anyone could have heard about my program. In fact, every state was aware of what I wanted to do. But this is what I wanted. I wanted to find a way of taking persons off of welfare and broadcast the plan to the world, in the hope that somebody would hear me. I hope somebody did, and that he or she acted upon it.

20. The Personal Assistant - a New Career Field

Q. OK, tell me what you planned to teach the welfare recipient which would take him off of welfare.

A. Here is a copy of the program (see Appendix 6). I was going to motivate the person by exposing the person to cars, restaurants, and other things which might interest the person to want a job. I was going to motivate him by paying him or her some of t he bonus I would receive in taking the person off of welfare. I was going to take care of whatever problems might arise during the training period, such as bailing him/her or a family member out of jail, if necessary, and do whatever it took to take the person under my wing and turn that person into a useful member of our economic society. The training program itself would provide the person with multiple skills to enable them to fit into many different jobs. See Appendix 7, which is a list of the typ es of jobs which a Personal Assistant could expect to qualify for. My welfare training program was the precursor or father of the Personal Assistant Training Program.

Q. Is there any further dimension to your program?

A. Yes. I want every person in America to have the same opportunity, for the same contingent fee, to take persons off of welfare. I have already done this (without payment) several times. It includes on occasion taking a person into your house and prov iding food and shelter. An example would be how a taxicab driver could take another person into his house, if necessary, and show him the ropes on how to drive a car, how to obtain a taxi license, how to know the streets and places in the city, how to fi nd passengers during off hours, and various other things which a good cabbie learns over the years. The trainee in due course would be able to become a working cab driver, and the driver who trained him would be entitled to a contingent fee payment from the government of perhaps $10,000 to $20,000, of which he may wish to pay perhaps $5,000 or so to the trainee in completion of the overall arrangement.

Q. Do you think this would work on a non-bureaucratic grand scale?

A. I do. Especially since there would be no bureaucracy. We would have millions of persons seeking to do what they could to take people under their wing and show them the ropes, in what might be called an apprenticeship system, but not the type which is being advocated by politicians during the 1992 presidential campaign. I view my apprenticeship program as one which deals quite efficiently with welfare problem, and doesn't cost the government any money at all. The only money comes into the picture af ter the benefits of lower welfare costs are being received by the government. Of course, there would have to be some governmental employees to verify that the government is spending less money on welfare.

Q. Do you have anything more to add about welfare?

A. Yes. Many people would like to get off welfare but perceive that the cards (or micro-economic rules and regulations) are stacked against them. If capital were made more available for small business, small-business institutions would develop which wou ld assist many people, including persons on welfare, to obtain capital, thereby facilitating the removal of many persons from the welfare rolls merely by creating more opportunity, and having knowledgeable persons show them how to use such opportunity.

Q. Why doesn't the federal government do something along the lines you suggest? Have you ever told the federal government about your proposal?

A. Of course. At various times. But that doesn't mean anything to these politicians. In fact, I am a friend of one of the Senators on the Senate Education Committee, and I spoke first of all with his legislative assistant and told her about my plan. H er immediate reaction was quite positive, saying that my welfare proposal met all the criteria she had (or could then think of) for a workable plan and was very impressed. I sent her a copy of the plan, and (as I expected) never heard from her again. My letter to her (i.e., Senator James Jeffords) can be found as Appendix 8.

21. The Judicial Monopoly - Destructive Effects

Q. From what I have been hearing from you, it appears that you see antitrust monopolies in government, and that you would like to break up those monopolies. Is this correct?

A. Yes. Monopolies are unhealthy for the economy in most instances, whether they are private monopolies or governmental monopolies.

Q. Give me an example of a governmental monopoly which is unhealthy?

A. My answer will probably surprise you, but I'll give it to you in any event. The answer is the court system.

Q. How can you say that? Don't we need a court system, and isn't a court system by definition a government function and therefore a governmental monopoly?

A. Although we tend to think of courts as government operations, they don't have to be. There are various exceptions, such as the Jewish Beth Din, which is a religious court which gives decisions which are just as binding as the regular courts, and even in the United States will be upheld by the regular courts. Also, binding arbitration is privately done, often through the American Arbitration Association, and these decisions will be upheld in the courts. In the long run, the decisions of the courts ha ve to be upheld by the guns of the military, and there is a limit on the power which a private court can have. All courts, public or private, depend upon the military might of the government to enforce the court decisions.

Q. What do you think of private courts?

A. I think so much of them that I founded the National Private Court, a for-profit court system back in 1975, and retained a panel of about 30 lawyers and judges to act as private judges. Because I was unable to obtain any funding for the private court s ystem, I was unable to start the business. Meanwhile, after contacting me for some advice, a private for-profit organization has done what I have urged, and it is functioning now as a private court system under the name Judicate, Inc., based in Philadelp hia.

Q. What was so special about your private court system to make it a model for others? Was there anything unique about it, or was it just another arbitration program?

A. My idea was so unique, that the Chief Justice of New Jersey sent a copy of an article about my court system to each of the judges in New Jersey to let them see what could be done in the private sector. The Chief Judge of New York actually warned the j udiciary in New York that it had better watch out or the private sector might make inroads which could hurt the governmental court system.

Q. I'm sorry for repeating myself, but what was it about your court system which was so unique?

A. I modeled my arbitration system after the court system, instead of after existing arbitration systems.

Q. What does that mean?

A. It means that rather than having the arbitrators' decision in my system be binding, with no appeal, I said that the arbitrator was to pretend that he was a judge and that he was bound by all the rules of law and procedure which were used in the governm ental court system. Thus, I was able to build in a check or balance to prevent the arbitrator from making a compromise or erroneous decision. In arbitration, there would be no appeal, which is why arbitration is fast and low cost, ordinarily. But in my private court system, I didn't want decisions to be rendered "arbitrarily" by the arbitrator. I wanted him to render a fast decision by the rules of law, with any party having the right to appeal the decision to a panel of 3 or 5 arbitrators, similar to a court of appeals, without the necessity of preparing a voluminous record, which is costly and time consuming for the lawyers involved. Thus, my private court system was envisioned as just another court, and I expected regular courts to refer parts or all of various cases to my court for decision, and then perhaps back to the regular court for jury trial.

Q. What did your court gain over the governmental court system?

A. Speed, less work and lower overall cost, and a faster disposition of the case for less money to the needy plaintiff, and a lower overall cost for the defendant. In other words, because of the congestion in the court system I was willing to have plaint iffs trade dollars in order to get a faster result. In due course, if the regular courts don't expand and give justice more quickly and more fairly, the private courts will take over much of their business.

Q. What is the cause of court congestion, in your opinion, and is this another micro-economic problem?

A. Court congestion, many people are led to believe by the press and politicians, is caused by too many cases, many of which are said to be "frivolous" or without merit. Their solution to this "congestion" is to fine the lawyers and the plaintiffs with i mposition of "sanctions" (requiring the plaintiff and/or his lawyer to pay the exorbitant legal fees of a Fortune 500 Company) and to dismiss the plaintiff's case without trial. If enough plaintiff's cases are dismissed and enough plaintiff's lawyers "sa nctioned", there will be a massive reduction in the amount of cases brought in the governmental courts, which will by itself reduce the congestion, and may even enable the governments to close some of their courts and dismiss some of the court personnel a s unnecessary.

Q. Is there any merit to this argument?

A. None in the slightest. There is no need to fine lawyers and plaintiffs for b ringing actions. The court has the power to dismiss a case, and if it is "frivo lous", the defendant should call the court's attention to this, make a request t o dismiss the case, and prove that the case has no merit, if the defendant can. But this should be done at the outset of the case, to prevent the defendant's lawyer from building up fees over a two to five year period and at the end of the case try to ma ke the plaintiff or his lawyer pay such fees as a sanction. The real problem is that "frivolousness" is in the eyes of the beholder in most instances, and there are many cases in which few lawyers would agree with a judge's determination of frivolousness (except the defendant's lawyer in that case). Judges have so much power now that they can arbitrarily make one side or the other a winner without raising any suggestion of impropriety, but to give the same judge the power to levy a fine of $250,000 agai nst an individual practitioner or his impoverished client attempting to enforce his civil rights is an outrage and a massive micro-economic restraint. The rich are seldom sanctioned and can afford any sanction which a judge might hand out. But the poor and their lawyers cannot afford to pay these sanctions, and the willingness of a plaintiff or a lawyer to undertake a lawsuit is severely undermined or "chilled" from a First Amendment standpoint when the governmental courts threaten to wipe a lawyer out financially because a court determines than the wealthy defendant should win. Plaintiffs' lawyers throughout the country understand the chilling effect that the possible imposition of "sanctions" has on lawyers as a group. It makes them unwilling to tak e novel cases for fear of being hit with a judgment (without trial, by the way), as part of the final decision giving judgment to the defendant. The judge says, "By the way, I think that the plaintiff's lawyer and the plaintiff should pay General Motors $250,000 in legal fees for having dared to allege that .....". The effect, known to all, is that fewer cases are being brought, and lawyers are less willing to assert arguments on behalf of their plaintiff clients for fear of being hit with sanctions.

Q. Is this another reason to use the private courts?

A. Absolutely. Private courts do not impose sanctions, and at least the parties could agree at the outset, in their arbitration agreements, that no sanctions should ever be imposed, if arbitration panels did start awarding sanctions. Also, the request f or sanctions only increases the combat and hostility, and increases the cost of litigation. Sanctions are self-defeating, but they do have a broad group of advocates: the major law firms and the wealthy clients they represent. Thus, sanctions is no mor e than a political backlash against the Constitutional right of persons to petition the courts for a redress of their grievances. Sanctions are designed to eliminate or reduce the constitutional rights of most Americans. And nobody knows it!

22. Judicial Sanctions, Examples (Lotteries, Webb, Spy)

Q. You are arguing, I believe, that these so-called sanctions have an economic effect beyond the obvious effect is has on the parties to a given lawsuit, isn't that so?

A. Yes. An effect beyond the fact that sanctions imposed in one case are intended to and do discourage thousands of lawyers and their clients from attempting to use the courts to seek a change in law or a decision in matters which others would argue have already been decided against you. For example, any lawyer who knows about litigation and sanctions would have told the persons who decided to challenge Roe w. Wade that their actions in challenging that Supreme Court decision could result in sanctions b eing levied against them amounting to hundreds of thousands of dollars.

Q. But this didn't occur, did it?

A. No.

Q. Well, doesn't this mean that sanctions are only imposed when they should be imposed and not when they shouldn't be?

A. That's a pretty ridiculous question, I must say, but I will overlook it because I know you're trying to ask the "hard questions" which your readers would like to have answered. The truth about sanctions is that they are as Un-American, arbitrary, subj ective and anti-constitutional as anything I have ever seen in the Courts.

Q. That's a pretty broad indictment. I trust you can back that up.

A. I can. First of all, I have been on a crusade against sanctions starting in 1971, when I first learned about the use of them (or the threat to have them imposed) as a major-law firm litigation technique, where a major law firm representing one or more billion-dollar companies in the case asks the judge (also from a major law firm in recent years) to impose sanctions against the plaintiffs who are broke, have no money to prosecute the case, and are represented by attorneys who are in the same position but cannot as readily admit that fact.

Q. What does being wealth on one hand and broke on the other hand have to do with sanctions?

A. It's funny you asked, because sanctions are usually awarded (I would guess 49 times out of 50) against the poorer or broker party (usually the plaintiff) in favor of the multi-million or multi-billion dollar client (usually the defendant). The charge is that the plaintiff's case is without merit and the plaintiff and his lawyer should have known that and therefore should not have brought the case. Because of the Supreme Court's relatively recent decision in Roe v. Wade (upholding the right of women t o obtain an abortion), the law would permit (or require) a judge to impose sanctions on the plaintiff and her lawyer who seeks to have the decision overruled. After all, the law is the law, and what clearer statement is there on the law about the right t o an abortion than a recent Supreme Court case which upholds such right? W-R-O-N-G ! The decision was overruled in some respects, and thereby not affording a basis (looking back) for awarding sanctions against one side (or the other, I guess). But what does this all mean for any other litigant who wants to bring a suit and test the law? If he/she does, and is wrong, then he/she and the lawyer run the risk of having to turn over all the money they have saved (and a lot more) to the other side, merely b ecause they are trying to vindicate their asserted rights.

Q. Granted this sounds unfair, but what does it mean from a micro-economic standpoint?

A. It means that we have given judges (most of whom have been appointed by Presidents Reagan and Bush) an arbitrary power to penalize plaintiffs (or defendants, of course) and their lawyers who maintain positions in a lawsuit which the presiding judge doe sn't like, and to award the President or his economic think-alike allies with not only a favorable decision on the merits of the case but an additional bounty of taking away of the home and savings of the hapless losing party and his/her attorney. The wh ole thing is most obviously unfair, but nobody does anything about it. I have tried to do something, even to the extent of testifying at a state hearing on sanctions, and I prepared and disseminated a proposed law which I prepared which would have made s anctions a less devastating weapon. A copy of my proposal can be seen as Appendix 9.

Q. What became of your proposal?

A. Nothing, as you would expect.

Q. I still would like you to explain how the threat of sanctions goes way beyond the parties in the one lawsuit.

A. First of all, it discourages untold numbers of persons in the United States from attempting to enforce their rights, which reduced the viability of the plaintiffs' bar (of lawyers) and reduces the amount of money which the discouraged persons would hav e obtained if they have been willing to pursue their rights. The effect of sanctions goes far beyond eliminating "frivolous" cases (whatever those cases are). As an aside, by a 5 to 4 decision of the Supreme Court, the Supreme Court held that a case was "frivolous", but four of the Justices did not agree. Thus, by judicial consensus, there was a decision reached in which 4 of the highest justices in the land thought a case was not frivolous, and were outvoted, with the result that the plaintiff and his /her lawyer lose their homes and savings for having brought a "frivolous" case. Not only do they lose the case, but they lose everything else as well.

Q. And what else do you want to say?

A. I think I can illustrate the micro-economic effect of sanctions by reference to my McDonald's Dick Tracy case. Several years ago, I commenced a lawsuit (pro se) as the parent of a child who became "addicted" to gambling, by reason of wanting to keep p urchasing McDonald's food to be able to obtain Dick Tracy lottery tickets, to see if he could win any prizes, especially the top prize of $1,000,000. Federal and state laws prohibit lotteries, including the movement of lottery tickets across state lines into states which prohibit lotteries (and they all do). The lawsuit was an attempt by a single citizen (namely myself) to enforce the nation's laws prohibiting lotteries, because I saw that the laws were not being enforced, and this failure of enforcemen t was creating a massive drag on the nation's economy my encouraging billions of dollars of expenditures by persons wanting to participate in the illegal lotteries, which diverts the money away from competitors who abide by the law, and raises prices for the bad guys while causing the good guys to go out of business. This is the economic justification for prohibiting lotteries and enforcing the laws which prohibit lotteries.

Q. What makes you think that McDonald's Dick Tracy contest was an unlawful lottery?

A. The law works in categories, to enable the laws to be general and to cover the conduct which is described. The definition of a "lottery" is known to all law students and lawyers (if they haven't forgotten what they learned in law school). The definit ion consists of having 3 elements: (i) consideration, (ii) chance and (iii) a prize. The "consideration" is the money which my son was paying for the food he purchased at McDonald's. The "chance" was the opportunity without any skill on my son's part t o become a winner, merely by scratching off a part of the card and seeing if the card was a winner. The "prize" was the one million dollar first prize if my son saw "Lips Manlis" on the card after scratching off the covering material, or some lesser priz e if someone else appeared, as set forth in the rules for the contest published by McDonald's.

Q. What is so wrong about having McDonald's give away free prizes to your son or someone else?

A. The problem is the micro-economic restraint involved in the federal and state laws which prohibit lotteries. I know how to run a lottery for profit. But I don't do it because the law says that I can't, and would go to jail if I tried. The numbers pe ople in Harlem, New York City are constantly hounded by New York City police who arrest them for violating the laws of New York which prohibit lotteries.

Q. What about states in which lotteries are legal?

A. You mean what about the states which set up lottery commissions and, on a monopolized, exclusive basis, offer their lottery products and services throughout the state via commission outlets?

Q. Yes.

A. The states have created some limited opportunities for lotteries to be conducted, with the proceeds after payment of prizes going to education, other state purposes, or to designated charities which are permitted to conduct the lotteries. Nowhere in t his do I find McDonald's.

Q. So what's wrong with McDonald's adding itself unofficially to the limited list?

A. Millions of persons in the United States would love to start a lottery, if it could be done legally. Since it can't be done legally, we obey the law and don't start a lottery. But McDonalds' conduct of a lottery in alleged violation of law is nothing to praise McDonald's about. They have found an area of commerce which is prohibited for all to enter, and have entered the prohibited area and have, not surprisingly, increased their sales by hundreds of millions or billions of dollars, with profits in the tens or hundreds of millions of dollars. This billion-dollar business is taken away from competitors who obeyed the law, and has caused them economic losses, perhaps causing some of them to go out of business. McDonald's, benefits, not only by the a dditional hundreds of millions of dollars it reaps from its exclusive commercial activities, but the damage it has done to the law-abiding competitors who did not turn their marketing program into an unlawful lottery. The lottery also takes money out of the hands of innocent children and their parents because of the purchases which are made to buy the lottery ticket and not to buy the food on a competitive basis in relation to others offering the same product.

Q. I see what you're saying. You are saying that since the government isn't enforcing the anti-lottery laws against McDonald's, that your case was an effort by a citizen to privately enforce the laws prohibiting lotteries.

A. Right.

Q. Just a matter of personal interest, how many millions of dollars were you suing for?

A. Thirty-five dollars.

Q. Thirty-Five Million dollars?

A. No, just $35, the amount of money my son spent in food at McDonald's during this Dick Tracy contest.

Q. I see that you weren't trying to get rich on the case.

A. No, I was trying to rechannel billions of dollars away from illegal lotteries back into something more useful for the U.S. economy.

Q. What happened with sanctions?

A. Predictably, the attorneys for McDonald's and Walt Disney threatened that unless I withdrew the case, the attorneys and their clients would request that the Court impose sanctions on me. A copy of the letter threatening sanctions can be seen as Append ix 10.

Q. What did you do?

A. Let me spell out the picture once again. I am the lawyer and the client. (My 5-year old son was not a party to the suit for various reasons, some personal and some technical.) I do not have the resources to pay a sanction of $50,000 or more (or less , for that matter), and all I was suiting for was $35 and trying to establish a principle which would help this country's economy. What would you do.

Q. The same as you apparently did, which is.....

A. I dismissed the suit.

Q. Didn't you feel that you could win?

A. Have you ever made a $100 bet with a beggar? If you lose, he gets the $100, but if he loses, you get to keep your $100. There is no percentage in fighting a case where I have nothing to gain. The threat of sanctions of such a majestic amount (everyt hing I own) is enough to deter me from doing what I thought was right. In this way the country was deprived of a ruling which could have ended a billion-dollar drain on our economy. How many other instances are there where the threat of sanctions costs the economy a similar decison?

Q. Do you have any other examples of sanctions or the threat of sanctions?

A. Yes. Several years ago I was representing an inventor at a trial against Kenner Toys claiming that Kenner Toys unlawfully misappropriated an idea for a dentist toy or game which my client (Irene Webb) had submitted to Kenner. Kenner, several years la ter had come out with a toy called Dr. Drill-N-Fill, which we claimed had many of the elements of my client's earlier submission.

Q. How did the question of sanctions arise?

A. During the second day of trial, the federal judge said that he didn't think my client had much of a case, and that if she continued with the trial he would think seriously about imposing "sanctions" against the client and me.

Q. What went through your mind at the time?

A. I knew the client and I could not afford to pay sanctions which could have amounted to about $25,000 to $50,000, based on the amount of time which the defendants had spent in defending the case. The real problem was that we already had in evidence the amount of royalties which had been paid to the other inventor, amounting to more than $1,000,000, which was the amount of our damages, plus future royalties, meaning perhaps $2,000,000 in damages (including interest). We settled the same day for $25,000 rather than to risk the threat of sanctions which the judge had unilaterally threatened to impose.

Q. What happened then?

A. The judge started another trial. The second inventor kept the $2,000,000; and my client and I split the $25,000. My client's effort at inventing did not pay off as well as she might have been entitled to, because we were not allowed to have our day i n court. The day in court was terminated by threat of sanctions. Let's look at sanctions from the perspective of Kenner. Assuming Kenner was maintaining a "frivolous" defense, do you think that the threat of a sanction of $25,000 or $50,000 would stop Kenner from defending against the possibility of a $2,000,000 judgment again it? Of course not, which makes the whole matter of sanctions a weapon against the poor which is used by the rich to win cases they are not supposed to win, and by the courts to be able to reduce "court congestion" no matter who is hurt.

Q. How about one more horror story?

A. My best one revolves around the idea that if you are suing a person who turns out to be a rapist and child molester, you can't lose the case, at least this is what most people would think. Therefore, when I found out that the defendant I was suing had pleaded guilty in federal court to spying against the U.S. in favor of Russia (about 7 years ago), I thought I couldn't lose. But I did, and the federal court assessed sanctions against me (and my partner) in the amount of $20,000, which we paid ($10,00 0 by me, and $10,000 by him). (A copy of the $20,000 sanctions judgment against me in the Teltronics lawsuit is attached as Appendix 11.) On all major points of law which we raised in the case, we were either correct then, or cases have subsequently bee n decided which upheld our point of view. But we've received no refund, and of course don't expect any. The case was a complicated bankruptcy, antitrust, breach of contract, fraud case in which the bankruptcy trustee of the estate of my client (Teltroni cs, Inc., the 37th fastest growing public company in America before it was attacked by L.M. Ericsson) agreed that the convicted spy (L. M. Ericcson, Inc., a major Swedish corporation) had unlawfully injured my client in various ways. But that's what sanc tions are all about. Might makes right.

Q. What might did L. M. Ericsson, the convicted spy have?

A. I found out. L. M. Ericcson was represented by Henry Kissinger & Associates, and when I found this out I issued a press release to every member of Congress explaining what had happened and that this spy was being represented by Henry Kissinger. A cop y of this press release can be seen as Appendix 12. Two weeks later, Kissinger responded to each of my charges in a front-page leading article published by the Wall Street Journal, explaining why he went to bat for the spy. A copy of this article publis hed 1/14/8x in The Wall Street Journal can be found as Appendix 13.

Q. And what is the micro-economic effect of this instance of sanctions?

A. The bad guys won, and thousands of public shareholders lost 100% of their investment in the 37th fastest growing public company in America, one of the first telephone interconnect companies, founded by Edward M. Beagan. As a result, Beagan was deprive d of the business he founded and the wealth which he had in his hand. I lost untold millions of dollars in legal fees and time which could have been put to use by me, and consumers obtain higher costs for their telephone products and services.

23. Other Governmental Micro-Economic Restraints

Q. What other government monopolies involve micro-economic restraints?

A. Most activities, unfortunately.

Q. Give me some examples. Well, every time the government gets into any kind of business or activity, you find that the government likes to ensure that it has no competition, which permits the government to waste money on excessive salaries and little-wo rk positions, as political payoffs to the persons who support the ruling politicians. Examples of these monopolies are: sanitation department or garbage collection; off track betting parlors; hospitals; schools; busses; subways; fire departments; motor v ehicle bureaus; parking enforcement agents; police department. There are many functions of government which could use competition. The police departments have become ticketing agencies to raise revenue for the municipality, and this could be done less e xpensively by private enterprise. Garbage collection could be done less expensively by private enterprise. Judicial determinations could be done more quickly and at less expense by private enterprise. Off track betting parlors could become more profita ble through private enterprise, with the city taking more from taxes than it is able to earn through ownership, at least in New York City in 1992. Busses are under heavy attack in New York, an another assault in the works on government excesses.

Q. This sounds interesting. Could you please elaborate.

A. Busses in New York City are maintained at New York City repair depots by unionized New York City workers, and the busses are driven or operated by unionized New York City workers. The salaries are high, and the productivity (at least of the repair per sonnel) is low, resulting in a high cost ride if the prospective rider wants to wait for a bus. In comes the van, unlicensed (or even licensed) taxi or "jitney", making runs parallel to the bus runs, but offering a less expense ride, more often, and fast er than the bus. Millions of dollars are being diverted from the bus systems in New York City, causing a threatened loss of municipal union jobs.

Q. What is the answer here?

A. I suppose the answer is that privatization of the city transportation system has started, and lower-cost, faster rides should be encouraged. Bus systems may not be flexible enough to survive, and bus drivers should be encouraged to purchase and operat e their own jitneys, which would make them more polite, faster, and more conscious of serving the rider and not abusing the vehicle. The overall result for New York City would be faster, better transportation, at a lower cost, which would tend to reduce the cost of goods and services made in New York City, and allow New York City to be more competitive in the world. There would be a reduction in the political base which ordinarily supports and votes in whomever becomes Mayor of New York City. Also, the re would be a substantial increase in the overall number of jobs, but competition would put a ceiling on the amount that an owner/operator would earn, to something less than bus drivers now earn, presumably.

Q. Is there any place where this type of transportation has worked out?

A. I can think of two places right off hand. The first one I saw and used was in the Philippines, during 1955. After the Second World War, many jeeps were left in the Philippines by American forces, and these jeeps were modified to put a ladder at the r ear of the jeep, and thousands of these jeeps travelled regular routes moving persons (including myself as a two-time visiting G.I.) around Manila and between Clark Air Field and Manila and other places. The jitneys were inexpensive, fast and efficient. The other place I see them working is in Atlantic City, zipping along the main roadway serving most of the casinos. At the end of the road, there is a "station" of sorts which has a sign saying that this is for the "Association of Jitney Drivers", indic ating to me that the jitneys are privately owned and that there has been a privatization of public transportation in Atlantic City. It seems to work well.

Q. Is there any general observation on these government monopolies?

A. Yes. I find that they are able to perpetuate themselves against the public interest through their close association with politics, enabling them to advocate and obtain statutes, rules and regulations which prohibit any competition from private enterpr ise. This is one of the main areas of my concern, and the concern spreads across the economy and adversely affects it in many areas, including proprietary education, higher education, welfare training, surface transportation, other municipal services, an d governmental licensing. The one sure thing you can count upon concerning a governmental agency at the state or federal level is that it spends too much money, is replete with waste, is doing a job which doesn't need to be done as a main part of its bus iness, and should be pruned down or eliminated before the government goes into bankruptcy or insolvency. I have proposed a Federal Deregulation Agency to take care of this problem, since I see little hope that state or local politics would be able to do the job. Nobody wants to be the person responsible for termination of 50% of the jobs in the various bureaucracies (a number I picked out of the air) and trying to retrain these persons into something meaningful and obtain employment for them in a new po sition. This is a massive restructuring which is needed to make the U.S. economy more competitive. The wasted jobs of the federal, state and local bureaucracies need to be eliminated so the persons can perform meaningful work for the economy and stop be ing a drag on the economy.

Q. Before we started this interview, you mentioned something about the economy being better off if many of the government worked "stayed at home" and continued to draw their pay, rather than having them come to work. Can you explain what you meant by thi s?

A. What I meant is that some governmental (and even private-enterprise) jobs are so destructive to the economy that the economy would be much better off, as a p artial solution and political compromise, if we continued to pay these persons but merely ordered that they not show up to work. If we fired them, they would probably go on unemployment or welfare, which would reduce the economic impact of continuing the ir salaries for a while, but the main benefit would be that their destructive work would end, and the economy could be freed up from the restraint imposed by the daily work they did. An example of this would be the Taxi and Limousine Commission, which ha s an army of persons regulating the taxicabs in New York. There is no more need to regulate taxicabs in New York with an army of officers than there is to have an army to regulate movie houses. The economy can function well without armies of regulators in various industries, whose sole purpose is to push paper and push humans around without any apparent benefit, other than the jobs which are created and the revenue which is raised as a profit-making business of the city. The cost of a taxi-cab license per year has been raised by New York City to $1,050; and the fine for a dirty fender is now $60; and the cost of a faded paint job is now $100. The head of the TLC is a "Commissioner" paid $150,000 per year, and he has at his disposal a fleet of 500 vehi cles 200 officers and 300 judicial personnel to set the amount of the fines. His annual operating budget is $25,000,000, and he produces revenues for New York City of $25,000,000 over and above such amount. New York City gets $25,000,000, but the public pays the $50,000,000 plus the value of the time lost to the regulation. The city winds up with higher transportation costs, and loses convention business and other business. Higher taxi fares contribute to the overall high cost of doing business in New York City, and makes the city's products and services less competitive in the world marketplace, which results in a loss of jobs for New York City residents who see their taxi fares going up while their employment opportunities are going down.

Q. More and more I think I am catching on to your argument. What you are saying, I believe, is that the economy is made up of a lot of small economic aspects, and that any one of them (such as higher taxicab fares) is not enough to sink the city or its e conomy, but when the politicians time after time have created hundreds of micro-economic restraints, you have hundreds of different economic losses which collectively amount to one hell of a lot of money, more than the city can afford. Is that what you a re trying to say?

A. Very good. I was getting tired and I'm glad you made this excellent summary for me. Macro-economics attempts to have all the change result from one little act (increasing or decreasing interest rates or tax rates a little bit), but micro-economics is more precise and lets you know exactly where the leakage or loss is the greatest, and by pointing out the loss (i.e., the numerous micro-economic restraints) the method of cure becomes obvious, much more so than any macro-economic solution.

Q. I remember quite early in our interview that you said you would tell me when you feel I am ready to understand the overall problem. I think I understand what you have said, but have you said all that you want to say before giving me your promised anal ysis?

A. No. There's more to come. But if you understand what I've said already you'll have no trouble with the rest, except some philosophical difficulties perhaps. But all of this is part of the difficulty in trying to create the change which is needed to bring back the jobs.

Q. You still promise to tell me when you feel that I am ready to hear the punch line?

A. Yes.

24. The Two Most Important Parts of Our Economy

Q. OK, where do we go from here. I am not sure what direction you want this interview to go at this time.

A. Let me start by asking you what are the two most important aspects of our economy. I'm going to give you a list of ten items, and I want you to select the two most important aspects, in your opinion:

  1. 1. Taxes
  2. 2. Interest rates
  3. 3. Race
  4. 4. Abortions
  5. 5. Sex
  6. 6. Money
  7. 7. Immigration
  8. 8. Drugs
  9. 9. Japan
  10. 10. Education

Q. When you say important, what do you mean. Important in what way?

A. What I meant was which two of these ten if made most efficient under micro-economic principles could produce the greatest economic returns for our country.

Q. Well, I don't think it would be taxes, because from our own experience the macro-economic lever of taxes doesn't seem to have worked, except adversely. Interest rates has the same comment. Hasn't worked, except adversely. Race? Well I know there is a lot of public debate and various laws, but I would think that if persons of all races had equal opportunity to make money there would be a substantial lessening of the race problem. Abortions? Although the political agenda is set in 1992 on abortions , I don't see how this issue can be solved on a micro-economic basis, and I don't see any solution which is going to change our economy to any great extent. Sex? This seems to be getting warm. It seems to me that 50% of the country could be doing a lot more economically for the country, so I will hold "sex" aside until I look at the rest of the items on the list. Money. I think I've found one of the two. What you are saying is that if money (or capital) were available to all on a competitive basis w ithout all the government-imposed restraints, there would be millions of additional businesses formed with millions of additional jobs. OK. I vote for money as one of the two.

A. And what is the other?

Q. Immigration has its problems, but there are pluses and minuses, and it is entirely possible that the prevent level of immigration (whether you like the level or not) could be absorbed in our economy with everyone fully employed if many of the micro-eco nomic restraints were eliminated. Thus, I have to say that it is not clear that immigration is the other item. Drugs? This is a major problem, but I don't think that eliminating the drug problem is number one or two. It certainly seems to be more of a n economic problem than abortions and immigration. Japan? If you are asking whether Japan is causing our economic problems, I would venture to say that this is not the case. It seems to me, from what you have been saying, that our economic problems are caused by ourselves, and that Japan somehow has avoided these problems and for such reason is in a better economic position at this time than our country is in. This leaves education. If everyone in the United States had an education at a reasonable pr ice and was trained to do a meaningful job, which he or she wanted to do, it would seem that this, coupled with availability of capital, would make our nation unbeatable in the world market place. Is this what you have in mind?

A. I think I should continue being the interviewee at this time because it is at this time that you are ready to understand the complete answer. Your analysis was very good, and you picked the two correct answers. I agree with most of what you have said , but I do have a lot to add about education. You ain't heard nothin' yet!

25. A College Education for $2 Per Hour - Unregulated

Q. How do you want to begin? It's such a vast field to discuss.

A. Let me ask you, do you believe there should be competition in education?

Q. Well, since you're putting it that way, I guess the answer is "Yes". But, I don't really know what's wrong with education which has no competition. Can you explain this first?

A. Education without competition was not always the case in the United States. Private education on a competitive basis was the rule for many years, but then a movement spread throughout the United States which argued that private education was unfair to persons who could not afford private education and that a common public education was more desirable, to ensure that everyone had access to a good education. It was felt that as many children as possible had to go to public schools to ensure the largest amount of money could be raised for and spend in public education, which would therefore be the best education.

Q. What's wrong with this?

A. Any time there is a monopoly or near monopoly, the quality suffers, and the costs go unnecessarily high. There is no magic in this outcome. It's wholly predictable. Thus, in public education, where parents are not allowed to sent their children at p ublic (tax-money) expense to private schools, the parents are unable to opt out of the school system if the teaching is bad, and the teacher's as a monopolizing union keep increasing their wages without any restraints such as required showing of productiv ity (e.g., students getting high-paying jobs or going on to colleges) or such as parents moving their children into competing private schools. The parents can't vote to change schools because they don't have the money to pay the private-school tuition. The government has taxed all persons to pay for the public schools, even though some or many of the parents would like their children to go to private school instead.

Q. What results do you see from public schools.

A. I think we all agree that public schools have not been successful in educating the children entrusted to them, for a variety of reasons.

Q. What is the answer?

A. Rich people have found an answer. It's called pay tuition and have freedom of choice. The schools which do a good job in the opinion of the parents receive the re-enrollawmallents and related tuition, and the disappointing private schools go out of b usiness. This is the way any free-market business should work, and education should be no exception, it would seem. But there is an exception, because the governments want to have a continued monopoly in public schools and not have competition with priv ate schools.

Q. Why is this?

A. Because the private schools would draw all the students and the public school teachers would be out of a job.

Q. Would the private schools draw all the students?

A. Yes. Even the students which are a drag on public schools. The same students which, it is claimed, are the reason that public schools should have their monopoly, to ensure that public schools are not left with the most difficult students.

Q. Why would even the most difficult students go to the private schools?

A. Because private schools would develop for profit to charge more and give extra needed attention to even the most difficult students, thereby taking away all students from the public schools except students whose parents forget to fill out or send in th e voucher, and were trapped into attending the public school by this predictable micro-economic restraint.

Q. What's the reason for public schools wanting to have their monopoly?

A. The real reason is obvious. They do not want to be put out of business by any program of parental choice. Government bureaucrats are not able in many cases to run a decent school system, and public schools are undoubtedly aware of their shortcomings and fearful that parental choice would cause the public school to collapse. I might quickly add that in many towns away from major cities the schools are highly desirable and would undoubtedly survive. The quality of education is paramount. If a public school delivers this quality, it can expect to stay in business. But with cities and their problems, involving persons on drugs, crimes, high dropout rates, racial diversity and tension, city joblessness to look forward to, and numerous other factors, i ncluding the lack of quality of the teacher who was trained in the same school, the situation of many city schools is hopeless, and any type of private school voucher system (where the parent could pay private school tuition with government tax money) wou ld cause the public school system to shrink substantially or even collapse.

Q. Does this worry you?

A. Not at all.

Q. Why?

A. Because the facilities of the public school could and would be used by private schools, but organized along different lines. I envision that public school teachers, as part of a necessary restructuring, would look forward to the opportunity of running their own school from a single classroom or set of classrooms in the building, and work as hard as hell to provide a good education to the students who chose to go to his or her school. The teacher who does well in teaching the students can be expected to have more and more students until his/her classroom is filled, in which case the teacher may either hire more teachers and expand, or keep the class at its maximum size and live well off the profits from running a successful small private school.

Q. Do you think any public school teachers would want to do this?

A. Union pressure today would not permit any current teacher to advocate this result, but many public school teachers would be thinking this way, particularly if they were given the pink slip caused by massive student defection to private schools. More a nd more "public" school teachers would become excellent "private" school teachers, and have a much better life as a result.

Q. What about the race problem?

A. Are you asking me whether private schools would unfairly and unlawfully exclude applicants by race?

Q. Yes.

A. The answer is no more than what goes on today at Harvard or Yale, which I presume is little or no discrimination. Most schools would even lower the tuition to obtain members of the minority. The real problem is, I think, is your concern that minority members on the average may not have the same credentials as members of the majority, so that without any obvious discrimination the private schools would wind up more majority than the public schools, and create a further imbalance in the public schools.

Q. Yes, that is what I was thinking.

A. I said before that public schools would probably lose all of their students. Private schools would wind up competing for all students, and all schools would provide excellence in education for whatever type of student was attracted to the school. I d on't think we would want more than this.

Q. Thus, you seem to be saying, if I can read between the lines, that the problem of our public school system is that by having all types of people be brought together in communal public education, there is a problem of teaching to the lowest common denom inator and not attempting to draw out the best in the better students, which causes overall decline in educational output?

A. Exactly. Let diversity play its part. Let schools develop to specialize in these diverse types of students, and let all have a chance to develop to the extent they are capable, without being a drag on others. If this is politically acceptable, there would be a much greater productivity of the schools servicing a major city, which would enable such private schools to rival if not exceed the public schools in the outlying areas.

Q. What would be the micro-economic effect for such city?

A. Employers would have a better worker base, and bring in more jobs to the city. The costs of finding, training and retaining employees would go down, and the profitability of the businesses would go up, and the city would have a higher profit base to t ax.

Q. We have been speaking about the micro-economic aspects of public schools, presumably from kindergarten through the 12th grade, is that correct?

A. Yes.

Q. What about colleges and universities? What micro-economic problems do you see there?

A. The major problems are probably not curable. They stem from licensing, as to which there are four distinct parts:

  1. (i) licensing by the state Department of Education;
  2. (ii) licensing by the regional accrediting commission;
  3. (iii) licensing by the U.S. Office of Education; and
  4. (iv) licensing by the state guaranty agency.

Q. How does this involve any micro-economic restraint?

A. By reason of all the licensing for colleges and universities, and related required licensing of educational institutions which would attempt to compete with colleges and universities, the colleges and universities are in a monopolistic position.

Q. So what! What does this mean to the student who wants to go to college?

A. It means that the student is paying 10 times more than he would have to spend to get a similar education in an alternative school, if one existed.

Q. What do you mean? Please explain.

A. The way that the state politicians have set up higher education in each of the states in the United States, there is no opportunity for any competing schools to offer similar courses. If there were such an opportunity, the competing schools without th e regulation could offer their courses at 1/10th the cost, which would drive the colleges and universities out of business.

Q. Give me an example, please.

A. I owned and ran a post-secondary school (meaning, higher than high school) for 18 years. I learned about the way in which education is regulated, and it would be impossible under New York or federal law for a person to set up a competing college, to o ffer college courses in competition with degree-granting colleges, but without any degree.

Q. Why would anyone go to the non-degree granting college?

A. If the non-degree granting college were able to start up, it could offer the same courses for only $2 or $3 per 50 minutes of instruction. A college education (without the state granted degree) would cost about 1/10th as much as a degree at New York U niversity, and the student or his parents could pay for college without having to borrow. NYU charges $30.40 per 50-minutes of instruction. Tuition on this scale, amounting to $14,750 per year, requires massive financial aid, in the form of student loan s, which must be obtained through the United States Office of Education and related institutions, and are not available to non-degree colleges, since they are not accredited by the regional accrediting associations as colleges. Thus, federal legislation inhibits the starting of non-degree colleges, and students are forced into paying 10 times as much tuition instead.

Q. Aside from price, why would a student want to go to a non-degree granting college?

A. Aside from a piece of paper (the degree), there would be virtually no difference between a degree-granting college and a non-degree granting college. The textbooks would be the same. The quality of teaching would probably be better, because teachers would not be forced to public, but would be paid to teach.

Q. What about the degree itself?

A. Institutions would develop which would offer to test graduates of non-degree schools and give them certificates that they are comparable to a graduate of a degree-granting school. Or in due course the certificate from a non-degree granting school woul d be accepted by employers and even desired, depending on how good the school becomes. Since non-degree granting schools would be focussing on education, the probability is that they would be turning out a better product, although admittedly a product th at did not learn how to row a boat, or play in a school orchestra, or put out a school newspaper. There are certain extras which non-degree granting schools would try to avoid, to enable them to be efficient, charge less, and teach more. This would be a superior, directed higher education at lower cost than the traditional campus degree-granting program.

Q. Why is there such a difference in tuition?

A. I found during my 18 years of owning and operating a school that government regulation is the whole difference. NYU charges $30.45 per 50 minutes of instruction, and with the amount of regulation I had I found it necessary to charge $14.00 per hour (h aving no scenic campuses and extracurricular activities or tenured professors to support). Without regulation, I can run a non-degree granting college in many subjects (but not all) for $2 to $3 per 50-minutes of instruction, and make an attractive profi t in doing so, but I must have no regulation whatsoever. The difference between my $14 tuition charge and the $2 or $3 tuition charge is attributable to regulation.

Q. What is the justification for the regulation?

A. The regulation exists to ensure, it is said, that the student is spending his tuition wisely. Thus, to avoid getting ripped off in the free market of education for $2 per hour of instruction, the student is forced to pay $14 per hour at my old school or $30 per hour at NYU.

Q. What micro-economic insight do you want to present at this time?

A. It seems clear to me that the country is better off having the option for a student to obtain a $2 per our education which can be paid on a pay as you go basis, with no student loans, and the ability to drop out with little loss, than to have the stude nt borrow $14,750 to pay tuition of $30 per hour, with a substantial loss if the student drops out.

Q. What about jobs. How does this relate to jobs, if at all.

A. Well, assuming that the education received is about the same, the person who paid less would be more attractive as an employee.

Q. I'm amazed at your response. Everything you say seems to be the reverse of what someone might think, initially. But go ahead, convince me. You've done a pretty good job of that so far.

A. Let me try to have you convince yourself. What micro-economic differences can you see between a student who applies to an employer for a job if (i) he owes $40,000 in student loans, payable at the rate of $80 per week ($4,000 per year) 10 years; or (i i) owes no student loans at all.

Q. I see what you mean. If the graduate starts off at $500 per week, he would receive net after taxes only $360 or so, out of which he would be paying $40 per week on the student loan. This would reduce his discretionary income to a small amount per wee k, and make his/her a dissatisfied employee in comparison to the graduate who received the same salary but had no student loans to pay off.

A. Correct. Thus, I as a prospective employer, would favor students coming from the non-degree granting school, recognizing that the student was going to make more money while working for me than the graduate of NYU, assuming that quality of education wa s about the same, and disregarding any books which might have been published by the faculty of one but not the other.

Q. Why do state politicians cherish higher education so much?

A. Because it is a cash cow. Think of state politics for a second. What is there at the state level which state politicians do? They don't have responsibility for (i) collecting garbage, (ii) putting out fires, (iii) ensuring the safety of citizens, (i v) making health inspections, (v) making building inspections, (vi) approving building and zoning plans and permits, (vii) running hospitals (other than mental), (viii) issuing parking tickets, or many of the other duties of city, county and local governm ent. The one big thing that state government does is control higher education, which it does not want to give up by permitting private non-degree granting colleges from springing up in competition with the cash cow of the state-chartered (i.e., state lic ensed) college and university, many of which are owned and run by the state or local governments).

Q. What you're saying is that state government, the Department of Education or the like, controls higher education and higher education dollars which come in from federal student loans and other sources, and that the states will not relinquish this cash c ow even though there is a substantial micro-economic restraint?

A. Yes.

Q. What is this cash cow, and who gets the money?

A. Higher education is like a religion. When you are part of higher education you somehow are anointed as a spokesperson for all the knowledge of the universe, and expect to be paid well for your knowledge, and as long as this occurs, you will continue t o vote for the politicians which allow you to live higher on the hog than you deserve from a competitive, micro-economic standpoint.

Q. You're saying that there is a bargain with the devil?

A. Well, what I'm trying to say is that politics of education in the United States has evolved into making state politics the headquarters for higher education, in charge of all the dollars which flow into the colleges and universities. This flow involve s department chairpersons, college heads, new facilities purchased from favored friends, salary increases, and money flowing every and which way, silently, without any clear path which can be followed by the public or press.

Q. Who benefits?

A. Just follow the money. Whoever gets the money benefits, and can be expected to vote once again for the person who gave him/her the money. This accounts for the longevity in office of state elected personnel, executive and legislative.

Q. How would this change if you were permitted to open up a non-degree granting college?

A. The money would come directly from the cab driver to me, and from me to my instructor, who would not be a member of the college professor's union. None of the money would hit the State capitol, other than as tax on profits, the same as the tax on prof its from a grocery store. This would destroy the political base of the state politicians, which is the micro-economic reason that educational reform is next to impossible.

Q. Does anyone concur with you in this view?

A. Yes, President Bush's economic advisor, Michael Boskind. I spoke to his assistant several days ago, and he confirmed that educational reform of the type I was talking about (similar to what I have already said during this extended interview) would be impossible because of the way that state politics in every state control education of this type.

Q. So, if I can summarize for a moment, the problem with higher education from a micro-economic standpoint is that the cost is too high, that persons are paying too much of their income to support a bloated bureaucracy which receives too much money for wh at it provides in educational value, and that the same education without the frills can be obtained in a free educational market (if one were to exist) for about 1/10th of the cost, which would be a benefit to students and their employers. Is that what y ou just said?

A. Right to the point.

Q. Doesn't the degree control quality?

A. Look at the graduates of many degree-granting schools and answer that question for yourself. You have graduates who become Nobel Prize winners and you have graduates in the same class who can't read or spell. The degrees themselves do not indicate wh ich group the graduate comes from, and the private testing service which I envision for private non-degree granting colleges might well find a large market testing the graduates of degree-granting schools. The proliferation of courses, including politica lly correct courses, has made a shambles of the structure of degree programs, and when coupled with life experience credits (given for breathing so many years), the granted degree says no more than you paid more than you should for whatever education you got.

Q. How would you restructure colleges and universities to maximize your micro-economic objectives?

A. I would eliminate accreditation, government loans as they exist today (which require an accredited college), and laws prohibiting competition with degree-granting colleges and universities, and let education float in a free market. Educational offerin gs of various types would arise, many of them I suspect in a vocational area to ensure that the graduates get jobs based on skills rather than jobs based on any curriculum for which a degree is being offered. Combinations of apprenticeship, vocational tr aining, and academic courses coupled with a lot of job-seeking skills and orientation would enable colleges to obtain new enrollawmallents in proportion to their success in finding jobs for their graduates and students.

Q. Do you feel that colleges should become vocationally oriented?

A. Colleges have become vocationally oriented because many persons cannot find a job merely because they obtained a higher education. Business colleges were among the first of the degree-granting colleges to pick up on this marketing need. Law schools a nd medical schools of course were doing this long before business colleges. But majors in English and history, for example, would be well served to learn as much as possible about a personal computer, including programming and peripheral equipment, to be able to offer a prospective employer some valuable skills, instead of the one skill of being able to think like a college graduate.

Q. Do you believe college is for everyone?

A. No. I think college is great, but it is more and more becoming a high-priced luxury which fee rational people can afford. I urge people to consider obtaining vocational training and a job first, and then go for higher education, at a time when your a bility to select may be better, and your education can be more vocationally oriented and helpful. Also, you will be in a better position to afford the education, and try to avoid the costly tuitions and student loans. That's my advice. If you're rich a nd want to go into politics right away, go to Harvard or Yale College, then law school (Ivy League preferably), then become an assistant U.S. attorney or assistant district attorney, and then run for office.

26. Proprietary Schools - Destruction by Discriminatory "Regulation"

Q. How important is vocational training?

A. Years ago, before the technological advances of the past 25 years, employment opportunities were readily available to persons who had no technical or vocational training. Crop after crop of "college grad" were absorbed by big business, which gave what ever training was required to the new hires. With the phenomenal increase in technology, much of what is computer hardware and software based, the traditional training of higher (or degree-granting, particularly liberal arts) education has become increas ingly inadequate preparation for employment and is causing a fundamental change in higher education.

Q. What fundamental changes do you see?

A. I see that the traditional curricula of degree-granting colleges has become more costly as the (i) monopolistic evils of statutory protection from competition and (ii) political power of state education departments and their constituency have accelerat ed their combined destructive effect from a micro-economic standpoint.

Q. What effect is this?

A. Tuition is increasing uncontrollably with higher salaries for the professors and instructors; students are increasingly unable to afford a "higher" education; colleges and universities have been citadels of everything, offering more and more courses wi th less and less substance, in an effort to attract students of all types, with the consequence of higher overheads at a time of declining student enrollawmallent, and present reorganizations and cutbacks in programs throughout the entire nation; and an d ecided direction toward the traditional markets of schools offering programs which are anything but "higher education".

Q. What do you mean by this, that colleges are turning to programs which are not "higher education".

A. What I mean is that colleges and universities in their protected monopolistic status granted to them to award degrees without competition from non-degree granting schools are increasingly offering vocational programs and turning away as much as they ca n from their heritage as institutions of higher education.

Q. So what's wrong with colleges becoming vocational education schools?

A. The evil is that they are increasingly giving up the reason for which they have been granted their privileged status by state legislatures and are moving into the field of vocational training without having to comply with the onerous rules and regulati ons which apply to proprietary vocational schools.

Q. I've heard you refer to "proprietary vocational schools" before and I think now it would be useful if you explained what they are.

A. Proprietary vocational schools are schools which are set up by or or more individuals, usually in corporate form, as a small business for profit. The origin of most of these "proprietary schools" as they are often called is to offer one or more specia lized programs to train students to obtain employment in a single field or closely related fields and, hopefully, to branch out into several fields if they become successful.

Q. So far, I don't see any problem.

A. Well, to turn the tables for a moment, let me ask you how much money a state has for use in financing a state-financed school of higher education?

Q. Well, millions of dollars of taxpayer money, I guess.

A. Right, and how much do you, the interviewer have available to you, if you chose to set up a proprietary school to train people to become radio, television, cable, newspaper, magazine interviewers, if you thought you would like to teach students what yo u know?

Q. Well, to be perfectly honest, not very much, which is why I can't start a school in the first place.

A. And for those brave souls who start a small proprietary school, how much do you think they can put together from their savings to start the school of their dreams?

Q. Well, I get the point. Not very much, and certainly less than $100,000 and perhaps more like $25,000 or so.

A. Correct, and with that money they are required to comply with so many rules and regulations that they have no money left to provide the instruction they want to give. And at the same time, the colleges and universities are free without any regulation to open up vocational programs in competition with the proprietary schools using state-owned or state-financed assets.

Q. So what are you saying?

A. Well

[Author's note to himself at this point: Topics to Cover: 1. Hard choices - means micro-economic changes - but some changes wouldn't have to be made if the major two changes are adopted.]