Oregon & California's Google formula

by Art Hyland

March 2010 -- This is about how Google makes money, and how states like Oregon & California lose it. They both have utilized essentially the same mathematical principles but achieve considerably different results. Just as a reminder, Google is a “for profit” corporation, one of those targeted types of entities that has the audacity to think it’s good to spend less money than they receive.  California and Oregon on the other hand are governments, and...well... they do the opposite.

In basic internet parlance, a “hit” is when an internet user clicks on a website whereupon the information contained thereon can be seen exclusively as a page on the user’s computer. Because millions of computer users use Google for finding information online, Google sells key word or phrase positioning routines that allow buyers of advertising space, who might have heretofore bought magazine, newspaper or tv ads, to buy sophisticated online ad space to attempt to be seen, or hit, by Google users seeking information. Because hits are all recordable and compilable, Google can then bill their ad customers for the amount of hits they receive via users going to their websites via some Google influenced routine.

Although Google receives just pennies or fractions of pennies per hit, it nevertheless collects billions of dollars because of the tremendous accumulation of these seemingly insignificant activities. These minute, but incremental transactions were discovered for their revenue potential by the mathematicians who started Google and figured out a way to capture this market in what is now a bit more obvious to a lot of people who wished THEY had done so.

This abbreviated synopsis of Google leads me to a discussion of the process utilized by governments such as California and Oregon, and how they systematically used the same principles as Google to achieve just the opposite results.

For five or more decades California and Oregon have been incrementally building government welfare programs resulting in a large and growing dependency class receiving financial support in the form of checks, support or assistance such as Oregon Trail cards. At the same time, they greatly expanded and nourished the public employee sector resulting in a growing and now very large state employee class complete with unions demanding and receiving consistent, recession-proof salary increases, expanded and expensive benefit packages, as well as incredibly generous retirement packages. And so, just like with Google, these incremental financial transactions, built, computed and compiled in the billions of lines of paycheck and personnel accounting data over the decades, all add up to a lot of money.

For California and Oregon, these incremental transactions create expenses and liabilities, while in the case of Google, they're revenues and assets, all while accumulating almost zero debt. Once again, which kind of enterprise is Google? Oh yes, a “for profit” corporation that makes and spends its OWN money, and strictly accounts for all of it, retaining a healthy reserve in case of an economic downturn. And California and Oregon? They’re governments that spend OTHER people’s money, spend far more than they take in, and accumulate unsustainable liabilities.

It is a fact that many California and Oregon politicians have moved up to the U.S. Congress to share their knowledge of unbridled government spending. Pelosi, Waxman, Boxer, Widen, Merkley, and Wu are among a long list of politicians who have bought their way into federal government power by pushing unfunded but popular government programs for which they receive political support from voting groups who receive the benefits. Not only did they take their spending habits to Washington D.C., but they discovered that the U.S. Congress can depend upon the Fed and Treasury to print or borrow whatever amount Congress spends over what the government receives in revenues. It’s a liberal politician’s ultimate power fantasy experience: it’s better than any super video game because his life is never at risk, money is no object, those who matter to him win because of his effort, and the congressman get all the credit. 

I wish we could simply leave our politicians behind the turnstiles of their fiscal themepark fantasyland, but unfortunately the boat they are in is the same one we have to ride.

Is it not useful to observe, then, that the legislatures of both California and Oregon, as well as the U.S. Congress has been dominated by the Democrat party the past 30 plus years?