Guest Post: Our Legacy Systems - Dysfunctional, Unreformable

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

America's legacy systems are like stars about to go super-nova.

There are two problems with the vast, sprawling legacy systems we've inherited from the past: they're dysfunctional and cannot be fixed/reformed. The list of dysfunctional legacy systems that cannot be truly reformed is long: Social Security, with its illusory Trust Funds and unsustainable one-to-two ratio of beneficiaries to full-time workers; Medicare, 40% fraud and ineffective/needless care; the healthcare system (if you dare even call the mess a system), 40% paper shuffling and 25% defensive medicine and profiteering; weapons procurement--the system works great if you like cost overruns and programs that take decades to actually produce a weapon; higher education--costs have skyrocketed 700% while studies (Academically Adrift) have found that fully a third of all college graduates learned little of value in their four years; the financial system--now that we've given the Federal Reserve oversight over Too Big To Fail Bank practices, do you really think we'll ever get rid of TBTF banks?
One place to start an investigation of any legacy system is to ask: how would we design a replacement system from scratch? The gulf between a practical, efficient replacement system and the broken legacy system is a measure of the legacy system's dysfunction.
We all know why legacy systems cannot be reformed or replaced: each has a veritable army of constituents and vested interests. Every single person drawing a check or payment from the legacy system fears reform of any kind, as each fears that their place at the feeding trough might be threatened.
As a result, reform is necessarily superficial, a simulacrum of real reform that satisfies the PR need to "fix the system" but actually hardens the system against future reform by adding layers of complexity that act as defensive complexity moats.
There is a fundamental asymmetry between those threatened by reform and the reformers. The reformers are trying to save the system from eventual collapse, but the benefits of their efforts often fall to the cohort of young people who have not yet become voters or entered the workforce; these citizens don't exist politically.
Meanwhile, those drawing paychecks, benefits or payments from the legacy system will fight with every fiber of their being to protect every cent of "their fair share." (Needless to say, every share is fair and deserved.) Those resisting reform are fighting to the death, so to speak, while the reformers have no equivalent motivation or political persuasion.
Corporations threatened by reform launch a ceaseless lobbying/PR attack on the reform, either watering it down, eviscerating the regulatory structure or co-opting the reformers into accepting a superficial reform rather than walk away with nothing.
Legacy systems have hardened into bureaucracies whose primary purpose is defending the fiefdom's budget and power from any threat. I prepared this chart to illustrate the life-cycle of bureaucracy:
As revenue flatlines and pressure for real reform mounts, the embattled institutions find that propaganda and facsimiles of reform are cheaper "solutions" than real reform. This is the key driver behind the flood of propaganda and all the phony "reforms" laid out in thousands of pages of befuddling bureaucratic self-preservation.
Real reform would mean powerful constituencies would have to take real reductions in staffing, power, benefits and in their share of the national income. Rather than reveal this double-bind--reform is impossible but the Status Quo is unsustainable--the legacy system deploys its gargantuan resources to laying down a smoke-screen of bogus reforms and ginned-up statistics.
America's legacy systems are like stars about to go super-nova. They have increased in size to the point where their stupendous mass guarantees that once their energy source (as measured in fossil fuels and money) falls below a certain threshold, the institution will collapse inward on itself.

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Hippocratic Oaf's picture

We're tween budget cuts and implosion

ATM's picture

The trillions of dollars we won't spend in the fture because we don't have the money. That's what budget cuts!

cifo's picture

There may be a chance to reform the banks. But no chance to get a functional gov+nsa (too late now, with all systems in place) and no chance to break the health-care triad (big pharma + for-profit private hospitals + doctor's guild).

CPL's picture

There will be no 'Bank' reform because no one here should be willing to trust an addict with the fuel of their problem.  No body will, would or should accept that as a possibility.

The Pharma/Big Med industry is just as much the broken banking system as is the collapsing insurance industry.  If you have a concern about the cost of a doctor, Medical schools are open everywhere on this planet and you and others are free to apply.  Word to wise though, 10-12 years of being flat assed broke and working like a dog isn't for most people.  Once over the training and mentoring then you can walk out the door and give away your services.

Want to change the world?  Don't like something about an industry?  Put your money where your mouth is a do something about it by becoming a contributor of that industry.  When you are done Docteurs sans frontiers has all sorts of good programs for Doctors and medical staff to help out and the organisational ability to help Doctors give back.  If you write a letter of admission today to every medical school near/around/worldwide you might be able to make it into a program in the fall if you show that you are serious in changing the world with medicine.

Education is the equalizer to change something that bugs you and it's everywhere from universities to youtube.  Don't bitch about, get a plan together and do something about it.  Barring going postal of course.  I've heard of folks going back for a Medical degree in their 40's then squeeze another 20 year career out.  

darteaus's picture

Like the trillions of dollars we don't have now that we somehow spend anyway?

CPL's picture

Use the word inflation instead of the term 'cuts' now.  The inflation target increases, a fixed budget doesn't increase and all it takes is time.  The same 100 billion dollar budget five years ago buy's only 1/3rd of operational requirements today.  

I've been hearing of cheques being messed up and end dates slipping early for quite a few casuals/terms in the government since the end of may this year.  That and most of the contracts offered out there stopped May 31st, even supply arrangements for offices (pens/paper).  A handful were extended but cheques bounced on them as well.

So there are 'cuts', most of it though is contractual, but at the cost of toner/office stuff/people with bounced cheques.  it's just starting to eat into the full time civil servant base and the more people retire out of the civil service the tighter the noose becomes until it pops as the diagram shows.  It's a savage and destructive circle.


Rantabulous's picture

We just received our quarterly water bill (Australia). It was $220. Of which $20 was water use (in our home we treat water as a precious resource). The rest was 'service connection fee' and other nonsense.

Power bill is the same. The house next door is a holiday house - the guy is here on a weekend about once a month and his power bills are about the same as ours (a family of 4) - again it is all this goverment services bullshit they add to the bill - 'administrative fees'.

cifo's picture

Cheaper alternative is to disconnect from the main water main and get your own water well + pump.

darteaus's picture

Cheapest alternative:

Disconnect your power and water, and tap into house next door.  He's never there, right?

Rantabulous's picture

LOL - would actually probably work given how cheaply we live.

But yes to the former post - I am working towards the day when using the grid will be optional for us.

mvsjcl's picture

Need to see more white dwarfs.

akak's picture

I think they like to call themselves "little people" nowadays.

Ourrulersknowbest's picture

Caucasian little people...

Dave Thomas's picture

Caucasoid laterally-challenged diffrently-abled persons is the correct nomenclature dude.

akak's picture

Down with altitudinalism!

10mm's picture

Cloward- Pevin for 200 Alex.

Midasking's picture

Just let the system collapse and rebuild and honest one.  It is inevitable anyway.  Then we can all move on with our lives

10mm's picture


An honest one,never. But it is apparent that Obonzo and Putin agreed for Russian security to cover major events in the good ole US of A.   


TPTB_r_TBTF's picture

an "honest" system, rofl.


The GovT is the strongest mafia.

The strongest mafia always governs.


After the collapse, another mafia will build a new system for us.

If that mafia is "honest", then we will have an "honest" system, lol.


Muppet Pimp's picture

Well put, very accurate description. One thing I would add is that the mission of huge portions of the administration become how to blow all of the excess unneeded budget without being noticed by the media or other watchdogs. When years and years of unneeded budget growth pile up it becomes a real task to figure out how to burn all of the seized cash unnoticed. This is more likely than not why so much is spent on fancy suites at hotels, and conferences, there is a need to get those unneeded funds spent else they won't get as much the next year which would be unacceptable to the head beauracrats. It is really sick the contempt shown for taxpayers and the generations to come. Often warehouses end up full of all the unneeded items that were purchased and much of the taxpayer funds are spent hiding all the unneeded loot. There is a fear if it is sold at the annual auction the public might realize much of it is unused and would then inform the press. Truly something to behold.

Mike7.62's picture

Too true. When I was .mil, there was a free for all every September to spend our "budget" before the fiscal year ended. When asked why by FNG's like myself, we were told so that we could maintain/increase our "budget" for the new fiscal year. Talk about a waste.

Muppet Pimp's picture

I can't help but think the reason we are destroying 7billion dollars with of military equipment in Afghanistan is simply to be able to justify increases in military spending to buy new stuff. But rest assured any 'cuts' are going to be felt nearly completely by our service members. It is going to hurt us more than them, no matter how you cut it. One really sad thing though is how many sit there in Washington part of the charade. It is just surprising to me how either scared or gutless millions of those people are? Why are there not more people willing to step up and come clean with the good people of our nation? Baffling to me.

X.inf.capt's picture

this has been going on the '80s as a e-nothing, every september i remember painting rocks all over post trying to burn up paint our supply sgt bought to burn up our budget...its not 'entittlements' that bankrupted was the military industrial complex...thats why our police dept. has all these mraps now, from grant money...


Mike7.62's picture

Used to be any surplus .mil equipment of reasonably high value and easy transportability came home and was sold. Nowadays with the increased .gov "worry" IRT domestic terrorists and militia's, the idea of selling military surplus to citizens tends to be worrisome for TPTB, and they probably deem it cheaper to destroy it in place rather than act as suppliers to their enemy, namely the US citizen.

Abbie Normal's picture

That's the problem with starting a war in a a land-locked country -- no ocean to just dump the leftovers.

Luke Landers's picture

But isn't this also why the federal government has resources to spy on everyone?

TrustWho's picture

Excellent thought for the young taxpaying masses to comprehend. 

Occupy Wall Street should re-focus (if it is not dead from apathy) and understand moar government is NOT THE ANSWER.

malek's picture

The first voter gave this article a rating of 2, LOL!

Me wonders what that person considers his/her fair share?

Sandmann's picture

When the USSR collapsed Yeltsin took Russia out of the Union. Who will take Texas or Arizona or Kansas or Iowa out of the Union ?

Dull Care's picture

The sooner secession happens, the better. Having one huge political entity breeds the Hyde like dystopian, welfare/warfare state.

BraveSirRobin's picture

"When the USSR collapsed Yeltsin took Russia out of the Union. Who will take Texas or Arizona or Kansas or Iowa out of the Union ?"

People with guns, most likely.

g'kar's picture

The first legacy system cuts should be the deadbeats who haven't paid a dime into the system but continue to bleed it dry.

samsara's picture

Charles you could have saved your breath and just reprinted the Dr. Seuss story of

Meet Thidwick, the Big Hearted Moose.

adr's picture

If we cut the system, what do we do with the 150 million people dependent on it?

I say let them burn. I'll take my grandmother in, she cooks far better than my wife.

The system was over as soon as the burden of responsibility was shifted from the individual to the state. Which means it was over as soon as it was thought up. I can't get my communist Massachusetts friends to grasp that concept. They keep saying its the government's job to help the less fortunate, the government's job to help those affected by disasters, government's job to make sure everyone is equal, government's job to wipe out oppression.

I ask them, how is the government going to do that? Where is the money going to come from?

They say, by making laws to enforce fairness and through taxes.

I then say, well what gives one entity the right to choose what is right for everyone? What happens when even taxing all income at 100% still will not pay for all the programs and benefits the government promised?

The reply of, the government is the only fair enforcer of fairness doesn't go over well with me. I get called a bigot.

I reply with, you really don't understand do you. You liberals are the true bigots. You do not allow for any view other than your own. A libertarian allows everyone to have their own views, they just ask that you do not try to enforce those views on others. Time will show whose views are right. Are you so insecure that you can not allow for any other viewpoints in the case that you are wrong and have to admit it? How bigoted is it to try and pass laws to make it illegal to have any other view than the statist liberal mindset? Can you answer that?

I get, no your views are old fashioned and discriminatory. That is being a bigot.

If I allow for multiple views and don't care what other people think, yet you can only allow for one point of view and will make it illegal to think any other way, how am I the bigot? wow.

I then follow with. How about this. If a black man wants to start a business that caters only to black people and won;t allow white people to enter the doors. I say I'm fine with it and it should be his right to do so.

The liberal replies with. Well he should be allowed to do that because of what white people did to blacks.

Pointing out the hypocrisy once again. So its ok for a black person to discriminate, but it isn't ok for a white person to open a whites only restaurant?

I try to explain that discrimination is a human right, and you can't have freedom without discrimination. Freedom means you can do what you want and if your decisions cause you to fail, well then you fail. Any entity that wishes to enforce one singular view on others is the opposite of free. If a black man wants to have a blacks only restaurant, fine let him do it. If nobody wishes to eat there, then his decision will cause him to go out of business, in which case discrimination failed. The market will self regulate, that of which there is no demand will not be successful. If a chain of blacks only restaurants is successful then that means there was a demand for it, and the market says discrimination works.

MisterMousePotato's picture

"If we cut the system, what do we do with the 150 million people dependent on it?"

It's much worse than that. Look at the labor participation rate. Look at the population. Consider the number (20-30 million) who work for .GUV. And, finally, the number 'in' 'the private sector' dependent on .GUV as the ultimate source of their money. I mean, nurses and Blackwater and its employees are 'in the private sector', right? So they wouldn't be at all affected by any cutback in .GUV, right? And, finally, look at what those 40 or 60 million slobs in the private, private sector make. $30k a year?

The problem cannot be fixed.

Voicefather's picture

I taught college environmental science for a while. We had a big final project paper for the end of class where students had to propose a plan to deal with a pollution or environmental issue of their choosing. I shit you not, 50% of the submitted plans were to have the government spend money to educate the public about the topic.... and that was it. Another 40% were to have the government put in place fines and penalties to deal with the issue. 10% might come up with an actionable plan, like a technology or technique to actually deal with the problem.


It has become entirely too easy for people to fall back on the crutch of government. The mindset has clearly become to just throw money at the government and they will solve any problem as if it is some magic wand that eats taxes and shits solutions.

put_peter's picture

and the western nworld was at which stage???

BraveSirRobin's picture

We are at "Bloat" stolling towards cutting. The system will perpetuate bloat as long as possible.

Also, please remember, cutting is not a choice, but forced on the system (revenues simply dry up, and more physically cannot be extracted from the system due to social, economic, or demographic degradation).

Binko's picture

I'd add all unionized goverment workers to the list of legacy systems that are dysfunctional but can't be reformed.

Case in point: here in northern california the regional rapid transit (BART) workers are on strike. The workers who drive the mostly automated trains or man the stations make an average of $70,000 a year with copious overtime on top of that as well as golden benefits, full medical and lush retirement. But they are striking because they want a 21% increase over 4 years. 

These jobs require a highschool diploma and basically consist of standing around and manning the fort. There are literally millions of people in California who would do this work for less than half this much. In fact, I'd guess that, if they listed the jobs as available at $15 an hour there would be a riot of people applying. 

These is a massive societal disconnect when Government jobs provide vastly better pay and benefits and security than private sector jobs. How do we support this ponderous mass of local government, country government, state government and federal government where millions of lucky workers get good wages, benefits, medical and retirement when the majority of the public are scrambling to find low wage, low or no benefit jobs with no security.

Under a fair and sustainable system the average goverment wage and benefit package would adjust up or down so that it equalled the average in the private sector. But, of course, nothing like that will ever happen. Goverment drones will cling to their unsustainable riches until the whole system disintegrates. 

10mm's picture

I agree with part of your statement.Problem is the market was not allowed to deleverage and bottom out.Those working and making 15 bucks an hour in Kalifornia would have to work 2 jobs at that rate.So we get unhealthy workers/slaves in a over priced shit market thats proped up.It's gonna end bad no matter what.As far as skill set to work requirement,i agree.All around fraud,but it's by design.

MisterMousePotato's picture

Under a fair and sustainable system the average goverment wage and benefit package would adjust up or down so that it equalled the average in the private sector.WRONG. (Should be less. Substantially less.) Am I the only person on the planet who knows what the average take for a FED.GUV employee is? They are, literally, the one percent.

But, of course, nothing like that will ever happen. RIGHT.

Goverment drones will cling to their unsustainable riches until the whole system disintegrates. RIGHT.

WAMO556's picture

ALL of this leads right back to the FEDERAL RESERVE SYSTEM!

Just saying

assistedliving's picture

deep doo doo is right

how to take the 'dependents' off the dole?  same way as TBTF and thats exactly what we're doing via 'trickle down'.

the question is how much the lumpen can tolerate (we aint Japanese for goodness sake)

we cant even get a grip on HFT's; those social benefactors

got a better way Guns and Roses fans?

i say legalize and tax drugs, cut pensions, slash defense, and dare i say it on ZH.....a FTT.  there.  i said it

Hongcha's picture

I put California between BLOAT and BUDGET CUTS right now.  Like a cancer, it eats only to proliferate itself.  William Burroughs had that one right (first chapter of Naked Lunch, IIRC).  Irreversible.  Even less fortunate, this one's a brain cancer so it has a lot of power.

As an American I was vehemently taught, at a very young age, that Govt. was Generally Good or we gonna fix it next election.

Since 2005 I have been telling family & friends, circle the wagons, head for the hills, keep dry powder.

Hongcha's picture

Binko, I know attorneys who would be happy making $70k right now.  I am going to have some workarounds to get to work this week.

Stuck on Zero's picture

Here in our beautiful city in Southern California we had a County Mental Health (CMH) system with a staff of several hundred including 80 psychiatrists.  A judge noticed that every time he sentenced someone to "Mental Health" the guy was back on the street in a few days.  The judge ordered the head of the CMH to appear and explain.  The CMH head explained to the judge that budgets were tight and that they could only treat 8 patients.  The rest were released.  This infuriated the judge and he ordered the CMH head to make provisions for 24 beds within two weeks or face contempt of court. 


orangegeek's picture

Another pretty picture supported by some "modeling words" to reiterate that we....wait for it.....are fucked as we know it.