blank.gif (51 bytes) Special Report

The Year 2000 Chips?
Make Mine Chocolate

Or: Why Y2K?

By Lynn Harsh

t may surprise you that, as Evergreen Freedom Foundation’s resident techno-phobe, I bring you our first report on what has been dubbed Y2K—the Year 2000 computer "problem." The choice is logical. Until six months ago I resolutely believed that the Silicon Valley alone had all the technical talent necessary to solve the upcoming Y2K computer "glitches." It was I who gleefully surmised that we might have to go back to pens, paper and solar calculators for a while—an arena in which I still excel.

First, an explanation of Y2K for those of you who are already lost. To save electronic storage space, most computer programs have long used two digits rather than four to indicate the year of a date (1998 reads as 98). Therefore, these programs, operating from date-sensitive imbedded microchips, are incapable of comprehending dates beyond 1999. When December 31, 1999 folds into January 1, 2000, the "00" will be read as 1900 unless the particular program in question has been corrected—an extremely difficult proposition as it turns out. Millennium and Leap Year peculiarities add to the correction difficulties.

It wasn’t until the mid-80s that some computers were programmed to use four digits when indicating the year in a date. Older "mainframes" used by government and industry still use the two-digit format unless they have been converted.

Completely fixing this problem before the Year 2000 is impossible due to the hundreds of millions of code lines tucked into systems all over the world, and a lack of proficient Y2K programmers. Expert programmers are required to know, or be able to figure out, hundreds of archaic programming languages. In many cases the source code has been lost, or has never been recorded. Original programs, modified many times over the years, depend on someone understanding the particular network or system and evaluating the "spaghetti code" one line at a time to fix all date references.

Computers cannot solve the problem since they are just hardware, and, I might add, a convenient flat surface on which to place all the books I mean to read by next week. Computer programs cannot automatically self-correct this problem since they are designed to perform functions based on logic, not arithmetic.

Making the situation more difficult is the fact that many programs run in "strings," with one program dependent on another. One faulty program somewhere in the system is enough to create a disastrous domino effect. Since many industries are completely dependent on "program strings" to function while receiving data, interpreting data, sending data, etc.—major disruptions will certainly occur.

But before I go further, a disclaimer is in order. We consider it our responsibility to bring you reasoned, seasoned, information-challenged non-extremist rhetoric. To coin a phrase from a friend, maybe the "cammo, ammo, canned goods crowd" is right, but from us you will only read what we know is true, or what we believe can honestly be deduced. We are not "Y2K experts," but we know the experts and will steer you toward their information.

Furthermore, panic is not appropriate. Prudent concern and preparation is.

The Wake-Up Call

Where do I begin? Shall I tell you about my meeting with three Seattle executives, all at the top of their professions, who calmly discussed the Y2K remediation and contingency plans their companies had been implementing for the past four and five years? Or perhaps you would like to know about their matter-of-fact discussion with each other about what they have done to prepare their own kin.

Or maybe you would like me to recap a fascinating conversation between a Seattle stock broker and Y2K planner; the vice president of the Y2K technological planning and recovery company (on retainer by one of our country’s major banks); a friend of mine from the East Coast who is fast becoming a leading expert in local and state government Y2K efforts; and me, layman extraordinaire.

I can summarize these meetings by saying that, without exception, these hard-nosed business types are:

1) Arranging their business(es) for between three months and two years of general chaos, and in some cases the resultant opportunities;

2) Hoping that the chaos will all be over in a matter of months;

3) Concerned about crime waves because of our citizenry’s flagging character;

4) Preparing their families for the worst, though they fervently hope it is for naught.

Newsweek magazine was right when it published this quote several months ago: "There are two kinds of people: those who aren’t working on this [Y2K] and aren’t worried, and those who are working on it and are terrified."

Federal Government’s Response

A Clinton Administration report recently revealed that 35 percent of federal government’s 7,850 "mission critical" systems (public health & safety, national security, payroll) will not be repaired in time. The "non-mission critical" systems that must be fixed number more than 60,000.

The cost of fixing these programs has been woefully underestimated. The federal government’s repair bill started out at $2.3 billion and was recently more than doubled to $4.7 billion. We believe actual costs will easily top $10 billion. Nearly 1,800 Department of Defense military "mission critical" systems will not be ready in time. But the Defense and State Departments say they will be completely prepared by 2009. Comforting, isn’t it!

Turning to the Federal Aeronautics Administration, congressional officials say that up to half our country’s air fleet may have to be grounded for days or months. Representative Steve Horn (R-CA) reported to his colleagues that as of February of this year, the FAA had a seven percent completion (preparedness) rate.

In March 1998, the General Accounting Office (GAO), Congress’ watchdog, reported that contingency (emergency) plans for federal agencies have become imperative since so few will actually have their systems fixed before the century ends. The GAO noted that some agencies currently on track could be thrown off by last minute foul-ups, such as new Congressional programs and mandates.

Nor surprisingly, the IRS is in trouble because of the "new and improved" changes in tax law ordered by Congress. It is very difficult to accurately fix an operating system when Congress keeps changing the rules. But before you chortle with glee, make certain you have an irrefutable, personal tax paper trail. And be sure you are sold on the flat tax, or at least something akin to it, because that is likely to be the emergency remedy.

I’m Okay. Are You Okay?

Most large corporations and businesses are already well into their "fixing and testing" phases. While this does not guarantee readiness, it does give them a giant head start. Most small-to-medium-sized businesses, however, haven’t a clue as to the potential Y2K impact on their livelihoods. They are resting in false comfort assuming that if the computers and programs sitting on their desks are Y2K compliant, they are all right.

But businesses need to analyze their level of dependency on their suppliers and vendors. How many of the elements necessary to the success of their businesses do they directly control? Are the suppliers of the various parts of their operation Y2K ready?

It is probably too late for medium-to-large-sized businesses to completely "fix" Y2K-related problems unless their testing phase is already underway. Some operating systems require as many as 30 or 40 different tools and most operators are proficient in fewer than half-a-dozen. As previously mentioned, the shortage of qualified programmers is acute. But it is not too late to develop contingency plans. This should be done right away!

Everyday Necessities

Light, heat, water, food and our bank accounts are items important to most of us. Believe it or not, most of these services depend in some way or another on date-sensitive encoded computer chips. And many are not ready to greet the new millennium.

For example, between the farmer and the grocery store are up to a dozen computer-related stops, some of them heavily impacted by date-sensitive encoded chips. A recent NBC television report discussing the importance of trains in the average American’s way of life noted that it takes only three days for the city of Los Angeles to run out of food if the trains stop moving.

All reports to date indicate that trains will at least be very confused, if not at a stand still for a lengthy space of time in January 2000. Train systems are riddled with automated, date-sensitive chips.

Some utility companies have wisely anticipated their Y2K needs and are meeting the challenge. Others, particularly some of the smaller utility companies, think the Y2K conversation is linked by a giant umbilical cord to the latest Elvis Presley sighting. You will want to know where your utility companies are in their Y2K readiness. It is not enough for them to say they are compliant; do they have contingency plans?

In a report to its stockholders, one major utility company said that great risks associated with unsuccessful Y2K repairs would be that the power may go down for some period of time, but if it does not, metering consumer usage and collecting money owed to the company may temporarily be in limbo. Customers will be unhappy!

Regarding Y2K, a February 1998 banking survey said that 60 percent of U.S. banks are in the "assessment" phase, 36 percent are in the process of fixing their programs and 4 percent are testing their "fixed" programs. Hopefully your bank is one of the 4 percent. Ask them. A 1997 annual report from one of America’s largest and best prepared banks, BankAmerica Corporation, said the following:

"Ultimately, the potential impact of the year 2000 issue will depend not only on the corrective measures BAC undertakes, but also on the way in which the year 2000 issue is addressed by governmental agencies, businesses, and other entities which provide data to, or receive data from, BAC, or whose financial condition or operational capability is important to BAC as suppliers or customers.

It is possible that if all aspects of the year issues are not adequately resolved by these parties, BAC’s future business operations and, in turn, its financial position and results of operations could be negatively impacted."

It is logical to assume that credit risks will increase, as will problem loans and credit losses.

Government Closer to Home

As far as the general public is concerned, the immediate important fact of Y2K—providing public safety and the basic necessities of life—fall primarily on the shoulders of the 85,000 political subdivisions in America. Our water, power, police, court, emergency and health systems are principally managed by state and local governments. How many of the 85,000 political subdivisions are ready? Very few. How many will be ready before the new millennium? Not enough.

Missing in Action

So where have our elected leaders been as this crisis has been brewing? Most of them have been hiding under the same rock I once used for refuge. and most of them are still there.

They are huddled in two different groups. Group #1 consists of politicians in a state of semi-permanent denial. Most legislators and state agency directors, as well as several federal level cabinet officials are in this group.

Members of Group #2 are different. They know the problem is huge, and that it just plain got away from them. They are trying to figure out how to let the "other" political party be the bearer of bad news as well as the recipients of the political fallout. Our president and vice president, governors, most federal and state legislative leaders, many federal cabinet directors, and a handful of state agency directors are in Group #2.

Particularly galling is the fact that huge sums of taxpayer dollars will be spent because governments at all levels have unnecessarily waited until the last minute to fix their computer problems. The economic principle of supply and demand is very evident as wages for proficient programmers are increasing rapidly as the Year 2000 approaches.

A computer programmer friend of ours has contracted with a particular state to work on developing contingency plans for its state agencies that will not make the immoveable deadline. Because of the scarcity of programmers, this state agreed to increase his multiyear contract by 25 percent each quarter of each year. This exponential increase (financed by taxpayers) is necessary because the state cannot afford to lose programmer expertise in midstream.

Expect programmers currently working for state and local governments to leave their salary-capped, public-sector jobs for higher, private-sector, market-rate wages. Government agencies will be forced to increase wages and general expenditures dramatically for their Y2K projects, passing on the tab to taxpayers, of course.

Civil Liberties At Risk?

It’s a good idea to take an interest in the future since that’s where we will be spending the rest of our lives. And it is likely that, to varying degrees, Y2K will impact nearly every facet of our lives for some space of time. How far-reaching will the effects be? No one knows. Some say its impact will be felt for months; others say it will not be over for years.

If we experience food shortages, bank irregularities, a breakdown of court system records, payroll malfunctions, and the incapacitation of agencies important to the government (like the IRS), expect federal and state governments to intervene relatively quickly. Most Americans (unable to weather several months of economic unpredictability) will welcome this intervention even if it means forsaking important personal liberties. We have become a needy, whiny bunch who expect government to fix our problems—and fast! (I do not mean to suggest that various levels of government have no role in helping fix the damage.)

It is sobering to realize how deskilled most of us have become. We depend upon a myriad of services from others for our daily existence. It seems our interdependence has both given us strength and made us vulnerable.

But where problems exist, so do opportunities. Leaders on the political left understand this and are making plans. What about our mainstream, conservative leaders? Do they have a plan? Maybe, but, if so we can’t find it. With elections on the horizon, we encourage you to pin down your elected, and wanna-be elected officials on this issue. Insist on concrete answers to your questions.

Personal Preparation

The future usually arrives before we are ready for it. We advise you to begin preparing yourself, your family, and your businesses in a manner that suits your own needs. Please, do your own research; draw your own conclusions.

Following are some of our suggestions. This is not a comprehensive list, merely a place to get started:

1) Plan your Year 2000 New Year’s Celebration close to home unless a potential extended absence doesn’t matter. Planes and trains may be significantly delayed.

2) Organize your financial records, including tax statements, student loans, credit card statements, bank statements, insurance records, etc., so you can prove the long-standing status of your accounts. Maintain a hard copy of all your vital records such as social security earnings and pension accounts.

3) Provide for emergency supplies as you would in case of an earthquake. The amount of supplies you determine are necessary should be based on your own personal research. Some people will choose emergency supplies sufficient for a week; others will plan for a year. You must research and decide for yourself.

4) Make certain your gas tanks(s) read "full."

5) If possible, have an emergency supply of cash, in case banks and ATMs are temporarily incapacitated. Please do not wait until the last minute to do this.

In the unlikely event that we breeze through January of the year 2000 with little or no negative Y2K impact, you will be well-prepared for any natural disaster. You can recycle extra food and supplies through your household, bury the Top Ramen, and redeposit the cash in your bank.

We also urge you to contact your school district, utility and water companies, phone companies and your local law enforcement agencies. Ask for a response in writing regarding their compliance and contingency plans.

Let the Research Begin!

A handful of excellent books are available on Y2K. Dozens of Y2K information sources are available in that mysterious zone called the World Wide Web. We recommend the following:

w Surviving the Year 2000 Computing Crisis by Peter de Jager & Richard Bergeon, Wiley Computer Publishing (an excellent, intelligible resource for business owners.)

w Time Bomb 2000 by Ed and Jennifer Yourdan

w www.yardeni.com

w www.wiley.com/compbooks/

w www.y2ktimebomb.com/ DSAJVP/index.htm

Lynn Harsh is a research analyst for the Evergreen Freedom Foundation, a Washington-based public policy group.u


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