I’m not sure if this is better or worse than the infamous Bridge to Nowhere, but the U.K. government has been spending millions of dollars in a futile effort to exterminate a duck. And because they are relying on government bureaucrats to kill the ducks, the cost-per-dead-duck is well over $750. I would suggest that they simply offer regular citizens a $50 bounty on each dead duck, but that might not work since the government has banned private gun ownership. Not surprisingly, this foolish program was instigated by the bureaucrats at the European Commission. Here’s a report from the Daily Telegraph:
For five years it has been subject to a ruthless European Union-inspired campaign of extermination. But now the ruddy duck could be about to have the last laugh. …The cull was supposed to have been completed this year, but despite the killing of 6,200 ruddy ducks, the population is starting to increase again. …And while the British government has been trying to kill off its population, ruddy ducks in Holland and France have grown in number, undermining the British effort. …Lee Evans, from the British Birding Association, said: “It is a pointless farce. They will never be able to kill every last bird. …“The cull has been a complete and utter waste of money because the government would have to kill every one and there is no possibility of that.” …The five year project to kill off the ruddy duck, co-ordinated by the Department for Environment, Food and Rural Affairs (Defra), is due to finish this summer. But 687 birds are still alive in the UK, up from an estimated 400 to 500 two years ago. …Andrew Tyler, director of Animal Aid, said: “This has been a completely hopeless slaughter. The whole premise is nonsense, as well as the logistics, and it has also been extraordinarily expensive. “The birds from Britain don’t seem to be going to Spain anyway, but even if ruddies are breeding with white headed ducks, that is a natural hybridisation that occurs in many birds.” …At one shoot earlier this month, an estimated 12 Defra officials, in eight boats, killed a total of 14 ducks on Ibsley Water, near the New Forest. …Half the cost of the UK’s £3.3 million ruddy duck cull has been met by the EU, with the other half provided by Defra. It follows earlier research by the department into eradicating ruddy ducks, said to have cost a further £1.3 million.
Arizona was hit hard by the housing bubble and that is causing considerable headaches for politicians – particularly since they allowed spending to explode during the boom years. Phoenix could be a poster child for this version of fiscal excess. The city budget grew by nearly 10 percent annually when revenues were buoyant, in part because government employees have compensation that is almost twice as high as workers in the productive sector of the economy:
Phoenix City Councilman Sal DiCiccio has pointed out that the average cost for a Phoenix city employee is $100,000. In just the past six years, the City of Phoenix budget grew by 59.6 percent, more than double the sum of inflation and population growth. …Clearly, there is a failure by the City of Phoenix to address fundamental reform in the face of shrinking tax revenues. Public safety should be the city’s first priority for funding, not an afterthought that depends on the promise of additional taxes. Many of the funds in the city’s total budget are dedicated for various purposes such as public art.
Perfect for next year’s State-of-the-Union address…or just about any other political speech. Not sure why I can’t get the picture to show up (at least on my computer), but you’ll see it if you click on the box. Amusing.
Here’s another study showing the benefits of comprehensive school choice in a foreign country. Interestingly, the author of the report about the Chilean system clearly is not a fan of competition, yet even his data shows higher scores for private schools and rising overall scores, even in the government schools – which is exactly what one would expect since competition encourages every type of school to do a better job:
Chile’s education system was decentralized in 1980, and a voucher-type subsidy was introduced to encourage private providers to enter the market. …Following the reform…, the subsidized private sector rapidly expanded…with 56 percent of enrollments in the municipal sector and 34 percent in subsidized private schools. The fee-paying private sector has expanded…to account for 10 percent of total enrollment. …test results have tended to improve over time, especially at 4th grade, but there are significant differences…fee-paying private schools on average score 19 more points than municipal schools in the SIMCE test, whereas subsidized private schools score 4.5 more.
It’s almost amusing to see the Securities and Exchange Commission jumping on the sinking ship of global warming alarmism. After all, only a government bureaucracy would take such a step at precisely the moment that the scam has been exposed. But I said it’s “almost amusing” because the added costs imposed on companies will be real, and this will hurt workers, shareholders, and consumers. But I will tip my proverbial hat to the Democrats. I remember several years ago trying to get the SEC to give shareholders more accurate information by having dividend checks show that corporate tax already was paid on the money. This would help people realize, of course, that declaring dividend income on personal tax returns was a punitive form of double taxation. Yet even though this was squarely in the SEC’s mission of supposedly serving investors, the Republicans in charge were politely dismissive. The moment Democrats get in charge, however, they move forward with a politically-motivated change that has nothing to do with helping investors. This is a good example of the old saying that Republicans are the stupid party and Democrats are the evil party:
A politically divided Securities and Exchange Commission voted on Wednesday to make clear when companies must provide information to investors about the business risks associated with climate change. The commission, in a 3 to 2 vote, decided to require that companies disclose in their public filings the impact of climate change on their businesses — from new regulations or legislation they may face domestically or abroad to potential changes in economic trends or physical risks to a company. Chairman Mary L. Schapiro and the two Democrats on the commission supported the new requirements, while the two Republicans vehemently opposed them. “I can only conclude that the purpose of this release is to place the imprimatur of the commission on the agenda of the social and environmental policy lobby, an agenda that falls outside of our expertise and beyond our fundamental mission of investor protection,” Republican commissioner Kathleen L. Casey said.
I was vaguely aware the there was a school choice system in the Netherlands, but I had no idea how good it was. Nearly three-fourths of all schools are privately controlled. Not surprisingly, the Dutch score very highly compared to other nations. Here’s some of the data from a recent study:
One of the key features of the Dutch education system is freedom of education—freedom to establish schools and organize teaching. Almost 70 percent of schools in the Netherlands are administered by private school boards… it is shown that the Dutch system promotes academic performance. The instrumental variables results show that private school attendance is associated with higher test scores. …a significant part of the high achievement of Dutch students in international achievement tests is due to the institutional features associated with school choice. …Money follows students and each school receives for each student enrolled a sum equivalent to the per capita cost of public schooling. …achievement levels are high, while relative costs are low. …Private school size effects in math, reading and science achievement are 0.17, 0.28 and 0.18, all significant. Given PISA’s scaling, this is close to 0.2 of a standard deviation in the case of math and science, and almost 0.3 of a standard deviation in reading. In other words, these are large effect size effects, indicating that school choice contributes to achievement in Netherlands.
The internal revenue code is a monstrous nightmare of special-interest loopholes and class-warfare penalties, but at least is generates some interesting stories. Here’s a report from Bloomgberg about a court deciding that the costs of switching from a man to a woman are tax deductible. Since I’m not a leftist, I’m not going to make the absurd argument that taxpayers are subsidizing sex-change operations. After all, the case revolved around how much of his/her own money the taxpayer got to keep. But I am an economist, so I’m going to say that tax loopholes tilt the playing field and encourage all sorts of inefficient outcomes. Indeed, this tax court ruling should be seen as a symbol of why tax preferences for health care should be eliminated as part of the shift to a simple, fair, and neutral flat tax:
Costs incurred in sex-change operations and procedures are tax-deductible, the U.S. Tax Court ruled. The Washington-based court decided yesterday that hormone therapies and sex reassignment surgeries are necessary to treat gender identity disorder, a disease, in the case of a Boston- area man who became a woman named Rhiannon O’Donnabhain. “The Court is persuaded that petitioner’s sex reassignment surgery was medically necessary,” Judge Joseph Gale wrote in a 69-page decision for the majority. The decision is the first to rule that sex-change operations qualify as medical care and overturns a 2005 Internal Revenue Service policy denying medical expense deductions in such operations on the grounds they are ‘cosmetic.’’ The case involves a $5,679 tax bill assessed by the IRS, which denied medical deductions claimed by O’Donnabhain after she underwent sex reassignment-surgery in 2000. O’Donnabhain, a civil engineer who joined the U.S. Coast Guard during the Vietnam War, was diagnosed with gender identity disorder in 1997. O’Donnabhain sued the IRS after it denied her deduction of $25,000 in out-of-pocket medical costs associated with the surgeries and other care such as hormone treatments and counseling, according to Boston-based Gay & Lesbian Advocates & Defenders, which represented her in court.
When I saw this story on the Wall Street Journal’s Best of the Web, all I could think about is staging a contest between education bureaucrats are TSA bureaucrats to see which group should symbolize the inherent incompetence of the public sector:
Patrick Timoney, a fourth-grader at PS 52, South Beach, was nearly suspended after playing with LEGOs during his lunch period because one of the action figures was carrying at toy machine gun. He and his friends had planned a playdate with their respective toys, and were sitting around the cafeteria table when the principal walked in and saw the action figure carrying the fake gun. While the action figure was a standard LEGO policeman figure, the brand of the gun could not be determined. “She took him into her office in the middle of the lunch period and he was crying,” said the boy’s mother, Laura Timoney. “He was afraid.” The principal called Ms. Timoney and said she considered the toy suspension-worthy, and that she was going to double-check with a security administrator from the city Department of Education. According to Ms. Timoney, the administrator said the toy should be confiscated and returned to the parents at the end of the day, and that no other action was necessary. …She pointed out that another child had an action figure that was holding an ax, but that only Patrick was reprimanded.
Politicians in Washington have come up with something far more impressive than turning lead into gold or water into wine. Using self-serving budget rules, they can increase the burden of government spending and say they are cutting taxes instead.
This bit of legerdemain is made possible, thanks to the convolutions of the personal income tax, by adopting or expanding refundable tax credits. But in this case, “refundable” does not mean the government is returning money to taxpayers. Instead, it means that money is being redistributed to people who do not earn enough to be subject to the income tax.
This is hardly a trivial issue. According to the Congressional Budget Office, the amount of income redistribution being laundered through the tax code is now so large that the bottom 40 percent of the population has a negative “effective” income tax rate. In simple terms (though perhaps with profound political implications), the income tax is a revenue generator for a big share of the population.
And the problem is going to get worse if the President’s budget is approved. Buried in the fine print, on pages 188-189 of the Analytical Perspective of the Budget, you will see that the President is proposing to increase this hidden form of spending by more than $152 billion over the next ten years.
It is worth noting that proponents argue that it is okay to classify this new spending as tax cuts because it somehow offsets other tax payments, especially the payroll tax. I’m sympathetic to lower taxes on everybody, including the poor, but surely it is better to be honest and simply cut the taxes that people pay. The current methodology, by contrast, is open to abuse. Heck, I’m surprised politicians don’t classify other forms of spending as tax cuts. Maybe corporate welfare can be reclassified as a corporate tax cut (I better stop lest I give the political class any ideas).
Defenders also assert that some so-called refundable tax credits, particularly the earned income tax credit, are designed to encourage work. That is partly true, but credits like the EITC are withdrawn as income climbs, and this means poor people face punitive marginal tax rates, so the overall effect on hours worked may be negligible.
The right approach, of course, is to get the federal government out of the racket of redistributing income.
This is supposedly an actual letter to the government. I’m skeptical, but it is rather amusing because it could be true.
Dear Sirs,
I’m in the process of renewing my passport, and still cannot believe this. How is it that Radio Shack has my address and telephone number and knows that I bought a TV cable from them back in 1987, and yet, the Federal Government is still asking me where I was born and on what date.
For Christ sakes, do you guys do this by hand? My birth date you have on my social security card, and it is on all the income tax forms I’ve filed for the past 30 years. It is on my health insurance card, my driver’s license, on the last eight damn passports I’ve had, on all those stupid customs declaration forms I’ve had to fill out before being allowed off the plane over the last 30 years, and all those insufferable census forms that are done at election times.
Would somebody please take note, once and for all, that my mother’s name is Maryanne, my father’s name is Robert and I’d be absolutely astounded if that ever changed between now and when I die!!!!!!
I apologize, I’m really pissed off this morning. Between you an’ me, I’ve had enough of this bullshit! You send the application to my house, then you ask me for my address.
What is going on? Do you have a gang of Neanderthal asses working there!
Look at my damn picture. Do I look like Bin Laden? I don’t want to dig up Yasser Arafat, I just want to go and park my ass on a sandy beach.
And would someone please tell me, why would you care whether I plan on visiting a farm in the next 15 days? If I ever got the urge to do something weird to a chicken or a goat, believe you me, I’d sure as hell not want to tell anyone!
Well, I have to go now, ’cause I have to go to the other end of the city and get another copy of my birth certificate, to the tune of $60. Would it be so complicated to have all the services in the same spot to assist in the issuance of a new passport the same day?? Nooooo, that’d be too damn easy and maybe make sense. You’d rather have us running all over the place like chickens with our heads cut off, then find some idiot to confirm that it’s really me on the damn picture – you know,the one where we’re not allowed to smile?! (bureaucratic morons) Hey, you know why we can’t smile? We’re totally pissed off!
Signed – An Irate Citizen.
P.S.. Remember what I said above about the picture and getting someone to confirm that it’s me? Well, my family has been in this country since 1776 ……..I have served in the military for something over 30 years and have had security clearances up the yingyang……….However, I have to get someone ‘important’ to verify who I am – you know, someone like my doctor WHO WAS BORN AND RAISED IN INDIA !
The new budget from the White House contains all sorts of land mines for taxpayers, which is not surprising considering the President wants to extract at least another $1.3 trillion over the next ten years. While that’s a discouragingly big number, the details are even more frightening. Higher tax rates on investors and entrepreneurs will dampen incentives for productive behavior. Reinstating the death tax is both economically foolish and immoral. And higher taxes on companies almost surely is a recipe for fewer jobs and reduced competitiveness.
The White House is specifically going after companies that compete in foreign markets. Under current law, the “foreign-source” income of multinationals is subject to tax by the IRS even though it already is subject to all applicable tax where it is earned (just as the IRS taxes foreign companies on income they earn in America). But at least companies have the ability to sometimes delay when this double taxation occurs, thanks to a policy known as deferral. The White House thinks that this income should be taxed right away, though, claiming that “…deferring U.S. tax on the income from the investment may cause U.S. businesses to shift their investments and jobs overseas, harming our domestic economy.”
In reality, deferral protects American companies from being put at a competitive disadvantage when competing with companies from other nations, and therefore protects American jobs. This video has the details.
The American Enterprise Institute just held a conference last month on deferral and related international tax issues. Featuring experts from all viewpoints, there was very little consensus. But almost every participant agreed that higher taxes on multinationals will lead to an exodus of companies, investment, and jobs from America. Obama’s proposal is good news for China, but bad news for America.
Here’s another depressing column about how government workers are getting showered with high pay and lavish benefits while people in the productive sector of the economy are bearing the economic pain of financing a bloated welfare state:
…government unionized workers often have gold-plated health benefits packages that are among the most expensive in America. Several years ago, for instance, the Employee Benefit Research Institute noted in a report the growing gap in both salaries and benefits between the private and public sector, estimating that state and local governments paid on average about 120 percent more on an hourly basis for employee health premiums than private employers. …n places where government unions have the most influence, like California, New York and New Jersey, the cost of public health plans is well beyond what’s typical in the private sector because public workers in these places make little or no contribution toward premiums, often don’t have co-pays for doctor visits, and have a rich array of supplemental benefits that are rare in the private sector… Many of these benefits, by the way, don’t merely apply to current government workers but also to retirees because many states and cities now offer public workers attractive retirement packages that start at 50 for public safety workers and 55 for everyone else and which include full-health benefits until retirees reach the age that Medicare kicks in. …The health care deal, moreover, represents only the latest victory in what has been a very good period for public workers. In most places these workers have largely been insulated from the impact of the devastating recession. Hundreds of billions of dollars of the so-called federal stimulus bill actually went to insuring that state and local workers did not lose their jobs, one reason why the unemployment rate for government workers remains under four percent. …we can’t blame all of this on the Obama administration. Indeed, the Bush years were quite good for public sector workers too. In fact, the last 50 years, ever since governments began allowing widespread organizing by public workers, have been one upward arc for government workers, so that today they surpass their private counterparts in pay, benefits and working conditions. And now they’ve gotten their hands into the tax code, too.
Proponents of sound science and economic growth certainly have many reasons to be happy. The global-warming crowd has been exposed as a bunch of fraudsters, the Copenhagen “climate change” summit collapsed in failure, and there now appears to be no chance that the US Senate will pass legislation to cripple the American economy. But while we are winning the battles, the war is far from over. As Walter Williams warns, there are many special interest groups who have invested money in the scam and they will not give up:
Mounting evidence of scientific fraud might make little difference in terms of the response to manmade global warming hysteria. Why? Vested economic and political interests have emerged where trillions of dollars and social control are at stake. Therefore, many people who recognize the scientific fraud underlying global warming claims are likely to defend it anyway. Automobile companies have invested billions in research and investment in producing “green cars.” General Electric and Phillips have spent millions lobbying Congress to outlaw incandescent bulbs so that they can force us to buy costly compact fluorescent light bulbs (CFL). Farmers and ethanol manufacturers have gotten Congress to enact laws mandating greater use of their product, not to mention massive subsidies. …Then there’s Chicago Climate Futures Exchange that plans to trade in billions of dollars of greenhouse gas emission allowances. Corporate America and labor unions, as well as their international counterparts have a huge multi-trillion dollar financial stake in the perpetuation of the global warming fraud. Federal, state and local agencies have spent billions of dollars and created millions of jobs to deal with one aspect or another of global warming.
I’d say only a government would be stupid enough to sign a contract that obligates them to pay somebody more than $100K each year for doing nothing, though it’s possible the corporate bureaucrats at the auto companies may have done something equally stupid in their deals with the UAW. But the real lessons to be learned here are, 1) that governments sign absurdly generous agreements with unions because they have no reason to be responsible when spending other people’s money, and 2) what makes unions so destructive are not necessarily salaries, but rather the accompanying rules that make it all but impossible to weed out bad employees. In any event, here’s a New York Post story that should anger all taxpayers:
A Queens teacher who collects a $100,000 salary for doing nothing spends time in a Department of Education “rubber room” working on his law practice and managing 12 real-estate properties worth an estimated $7.8 million, The Post found. Alan Rosenfeld hasn’t set foot in a classroom for nearly a decade since he was accused in 2001 of making lewd comments to junior-high girls and “staring at their butts,” yet the department still pays him handsomely for sitting on his own butt seven hours a day. …The DOE can’t fire him. “We have to abide by the union contract,” spokeswoman Ann Forte said. So Rosenfeld simply collects his $100,049 salary — top scale for teachers — plus full health benefits and the promise of a fat pension, about $82,000 a year if he were to retire today. His pension will grow by $1,700 each year he remains. He could have retired at age 62, but he stays. He has also accumulated about 435 unused sick days — and will get paid for half of them when he retires.
While speaking in Canada earlier this week, I authored a column in the Financial Post. I hope the entire piece is worth reading, but here are a few of the highlights:
The Obama Administration claimed that spending more money would keep the unemployment rate below 8% in the United States, yet it climbed to 10%. The United Kingdom and Canada also suffered continued stagnation after adopting so-called stimulus packages. Ironically, statist nations such as France and Germany that resisted the siren song of Keynesianism better weathered the global economic storm. …While many factors influence economic performance, the negative impact of government spending is one reason why small-government jurisdictions such as Hong Kong (where the burden of the public sector is below 20% of GDP) have higher growth rates than nations that have medium-sized government, such as Canada and the United States. The same principle explains in part why big-government countries such as France often suffer from economic stagnation. …Most studies using current economic data show that economic performance is maximized when the public sector is less than 20% of GDP. And if historical data is used, the evidence suggests that government should be even smaller. Ironically, John Maynard Keynes might not be a Keynesian if he was alive today. He certainly would not be a proponent of big government. In correspondence with another British economist, he agreed with the premise of “25% [of GDP] as the maximum tolerable proportion of taxation.”
Back during last year’s debate over the so-called stimulus, the Cato Institute took out a full-page ad in several newspapers to highlight the fact that hundreds of economists, including Nobel laureates, rejected the notion that making government bigger would boost growth.
We published that ad because we couldn’t believe Obama was asserting that “every economist, from the left and the right” endorsed a bigger burden of government spending. As one might expect, the ad had a big impact on the debate, particularly thinks to alternative media coverage such as blogs and talk radio.
The establishment media was a bit slow to pick up on the story, but our motto is better late than never, so yesterday it was good to see ABC News expose Obama’s nonsensical claim about “every economist.” The story even quotes me and links to one of my blog posts, though it would have been much more effective to link to Cato’s stimulus ad (I’m not bashful, to be sure, but even I’m willing to admit that Nobel laureates rank higher).
The bloodsuckers and leeches in the U.K. government are a bit more honest than their counterparts in the United States. Unlike the American revenue-estimating system, which assumes higher tax rates raise revenue, the British bureaucracy admits that the new 50 percent tax rate will raise very little revenue. The UK-based Times reports:
High earners will cost the public purse hundreds of millions of pounds through tax dodges as they avoid the new 50p rate of income tax, a minister indicated yesterday. Lord Myners, the City Minister, said that the Treasury had “significantly reduced” its estimate of the revenue to be earned from the historic change. …Lord Myners told peers that “behavioural consequences of the new higher rate of taxation” — shorthand for tax avoidance — had forced the Treasury to lower its expectations. …Mike Warburton, senior tax adviser at Grant Thornton, one of Britain’s biggest accounting firms, said…“People are taking obvious avoidance measures because they are not prepared to pay 50 per cent tax”… “People were prepared to pay 40 per cent but the Treasury don’t seem to understand what drives people. The minister has at last admitted that the 50 per cent tax rate was a blatantly political measure and not designed to raise new revenues. This is all to do with the politics of envy.” Lord Myners said that there were “very small numbers of people” who appeared to have moved abroad as a result of the tax change.
I’m finishing up a swing through Canada, giving speeches for the Fraser Institute to audiences in Vancouver, Calgary, and Toronto. I’ve been talking about the size of government and the future of capitalism. As you might imagine, several people have asked about the battle in America over government-run healthcare and how the sysetm in the United States today compares to the Canadian system. I make two points. First, I tell tham that America’s health care system already is largely run by government. Obama’s proposal simply increases the level of control from perhaps 70 percent to 80 percent. Second, I tell them that the surviving remnants of a free market in the United States are worth preserving. Politicians have made the American system very cumbersome and expensive, but it is nonetheless the place where people want to be when their lives are on the line. So it’s quite appropriate that this bit of news was just unveiled:
Newfoundland and Labrador Premier Danny Williams is set to undergo heart surgery this week in the United States. CBC News confirmed Monday that Williams, 59, left the province earlier in the day and will have surgery later in the week. The premier’s office provided few details, beyond confirming that he would have heart surgery and saying that it was not necessarily a routine procedure.
Why is it that Canadian politicians come to the United States, but the medical traffic never heads in the other direction? Somebody should ask Obama to provide an answer.
The Office of Management and Budget has released the President’s FY2011 budget and the Congressional Budget Office has released its semi-annual Budget and Economic Outlook. Much of the coverage of these documents has focused on deficit numbers. This is not a trivial concern, particularly since the Bush-Obama policies of bigger government have dramatically boosted red ink.
But the most important numbers in the budget documents are the estimates of what is happening to government spending. The good news is that burden of government spending is projected to decline over the next few years from about 25 percent of GDP to less than 23 percent of GDP.
That’s the good news. The bad news is that federal government outlays only consumed 18.2 percent of economic output when Bush took office. In other words, notwithstanding the good news cited above, the size and scope of government has increased dramatically since 2001. The worse news is that the long-run spending forecasts show a cataclysmic expansion in the burden of government. The “optimistic” estimate is that the federal government will consume more than 30 percent of GDP by 2050 and 40 percent of GDP by 2080.
As I noted a few days ago, Paulson’s bailout was the worst possible way to do a bad thing. To the extent that the government had to inject money into the financial system, I explained, it would have been far better to use the “FDIC Resolution” approach, which at least addresses the moral hazard issue by wiping out shareholders and getting rid of incompetent management. Paul Volcker made the same point in yesterday’s New York Times:
The phrase “too big to fail” has entered into our everyday vocabulary. It carries the implication that really large, complex and highly interconnected financial institutions can count on public support at critical times. The sense of public outrage over seemingly unfair treatment is palpable. Beyond the emotion, the result is to provide those institutions with a competitive advantage in their financing, in their size and in their ability to take and absorb risks. …To meet the possibility that failure of such institutions may nonetheless threaten the system, the reform proposals of the Obama administration and other governments point to the need for a new “resolution authority.” Specifically, the appropriately designated agency should be authorized to intervene in the event that a systemically critical capital market institution is on the brink of failure. The agency would assume control for the sole purpose of arranging an orderly liquidation or merger. Limited funds would be made available to maintain continuity of operations while preparing for the demise of the organization. To help facilitate that process, the concept of a “living will” has been set forth by a number of governments. Stockholders and management would not be protected. Creditors would be at risk, and would suffer to the extent that the ultimate liquidation value of the firm would fall short of its debts. To put it simply, in no sense would these capital market institutions be deemed “too big to fail.” What they would be free to do is to innovate, to trade, to speculate, to manage private pools of capital — and as ordinary businesses in a capitalist economy, to fail.
Steve Chapman skewers Republicans for being the party of big government when they were in power, but also notes that they are right to criticize Obama’s reckless fiscal policies. Chapman hopes that the GOP will actually propose to shrink the burden of government. A good start would be an apology for all the wasteful programs of the Bush years:
After the administration floated a plan to cap non-defense, non-security discretionary spending for the next three years, the opposition party erupted in jeers. The complaints were many: It affected only one-eighth of the budget, it came on top of big increases, and the savings would be trivial next to the deficits that are in the pipeline. …All the criticisms, as it happens, are true. Obama’s claim of stern fiscal discipline — “we are prepared to freeze government spending for three years” — collapsed into comical irrelevance as soon as he listed all the programs that won’t be included: national security, Medicare, Medicaid and Social Security, which happen to be the Four Horsemen of the Fiscal Apocalypse. There’s more: Unspent stimulus funds amounting to $165 billion. Other “mandatory” programs like unemployment and food stamps. Interest on the debt, which will triple in the next three years. Obama is going on a hunger strike, except during mealtimes. …Still, it’s odd to hear complaints about excessive spending from the people who brought us the bloated budgets of the Bush years. During his tenure, federal spending did not retreat under the relentless assault of tight-fisted conservatives. In fact, during the Bush administration, total federal spending, adjusted for inflation, climbed by 72 percent. What was originally a fiscal surplus became a deficit, reaching $1.8 trillion in 2009, Bush’s final budget year (to which Obama contributed only a minor amount). Not until he had been in office for more than six years did he veto a bill because it cost too much. Bill Clinton may feel your pain, but next to his successor, he looked like Ebenezer Scrooge. …If the GOP really wants to highlight the administration’s budgetary excesses, the right response is not to merely ridicule how little he offers in the way of savings, but to offer bigger and better savings of their own. Otherwise, they may find that the public disgust with runaway spending can scorch incumbent Republicans as well as incumbent Democrats.
Maybe I have an outdated copy, but I don’t see college football listed in the enumerated powers of the Congress. And it doesn’t seem to be mentioned in any of the amendments. Yet the busybodies in Washington now want to exert their control over how the college football national championship is decided?!? Somebody needs to tell them to go jump in a lake. Here’s a report from Sports Illustrated:
The Obama administration is considering several steps that would review the legality of the controversial Bowl Championship Series, the Justice Department said in a letter Friday to a senator who had asked for an antitrust review. In the letter to Sen. Orrin Hatch, obtained by The Associated Press, Assistant Attorney General Ronald Weich wrote that the Justice Department is reviewing Hatch’s request and other materials to determine whether to open an investigation into whether the BCS violates antitrust laws. “Importantly, and in addition, the administration also is exploring other options that might be available to address concerns with the college football postseason,” Weich wrote, including asking the Federal Trade Commission to review the legality of the BCS under consumer protection laws. …”The administration shares your belief that the current lack of a college football national championship playoff with respect to the highest division of college football … raises important questions affecting millions of fans, colleges and universities, players and other interested parties,” Weich wrote.
I’m going to have to stop this series soon because it is getting too depressing. This Wall Street Journal column containts more surprising data, including the fact that pension costs for California bureaucrats jumped by 2000 percent in just one decade (revenues rose by 24 percent in the same period). The most shocking factoid, though, is that more than 15,000 former bureaucrats get pensions of more than $100,000 per year:
[California] is in a precarious position, with a 12.3% unemployment rate (more than two points higher than the national average) and a budget $20 billion in the red (only months after the last budget fix closed a large deficit). Productive Californians are leaving for states with less-punishing regulatory and tax regimes. Yet so far there isn’t a broad consensus to do much about those who have prodded the state into its current position: public employee unions that drive costs up and fight to block spending cuts. …California needs to take on its public employee unions. Approximately 85% of the state’s 235,000 employees (not including higher education employees) are unionized. As the governor noted during his $83 billion budget roll-out, over the past decade pension costs for public employees increased 2,000%. State revenues increased only 24% over the same period. A Schwarzenegger adviser wrote in the San Jose Mercury News in the past few days that, “This year alone, $3 billion was diverted to pension costs from other programs.” There are now more than 15,000 government retirees statewide who receive pensions that exceed $100,000 a year, according to the California Foundation for Fiscal Responsibility. Many of these retirees are former police officers, firefighters, and prison guards who can retire at age 50 with a pension that equals 90% of their final year’s pay. …A 2008 state commission pegged California’s unfunded pension liability at $63.5 billion, which will be amortized over several decades. That liability, released before the precipitous drop in stock-market and real-estate values, certainly will soar. …State Treasurer Bill Lockyer, another prominent liberal Democrat, told a legislative hearing in October that public employee pensions would “bankrupt” the state. And the chief actuary for the California Public Employees Retirement System has called the current pension situation “unsustainable.”
Like most statists and interventionists, former Treasury Secretary Henry Paulson raises the economic equivalent of monsters under the bed when justifying more government. Here’s a blurb from a story about his recent testimony on Capitol Hill:
…former Treasury Secretary Henry Paulson on Wednesday defended his decision to complete a $182 billion bailout of American International Group Inc., arguing that the unemployment rate would have risen easily to 25% without the bailout. “If the system had collapsed millions more in savings would have been lost,” said Paulson, who was Treasury Secretary at the time of the bailout, at a hearing. “Industrial companies of all size would not have been able to raise funding and they would not have been able to pay employees, this would have rippled through the economy.”
For the sake of argument, let’s assume he is right and that the economy would have collapsed without huge amounts of money being pumped into the financial system. Does that justify Paulson giving money to his friends on Wall Street? Not at all. The crowd in Washington could have used what’s known as the FDIC-resolution approach, which would have resulted in the government paying healthy financial institution to take over the insolvent ones. In effect, this is what happened during the savings & loan crisis twenty years ago. It’s not an ideal libertarian solution since tax dollars are pumped into the financial system and there is some degree of increased moral hazard since consumers/customers have less reason to monitor the safety and soundness of the banks they patronize. But the FDIC-resolution approach has one enormously good feature, at least compared to the Bush-Paulson-Obama-Geithner bailout: Bad banks are shut down, meaning that shareholders lose all their money and senior managers lose their jobs.
There was no justification for bailing out the institutions that went under water. To the extent a system-wide collapse was a real possibility, the FDIC-resolution approach would have worked. Indeed, it would have worked much better since the economy would not be plagued by the zombie banks that are only alive because of handouts from the Treasury (similar to what happened in Japan). But politicians instead chose the approach that was bad for the economy, but good for raising campaign cash and increasing the power of government.
This may not be as dumbfounding as being told not to advertise for reliable people in England, but I certainly was shocked to see that nearly one-in-five federal bureaucrats is paid more than $100,000 – and that doesn’t even include overtime and bonuses! Or how about the fact that number of bureaucrats making more than $170,000 at the Department of Transportation jumped from one to 1,690. No wonder the average bureaucrat makes 76 percent more than someone in the productive sector of the economy. If you want to get angry, read Jeff Jacoby’s column:
Since December 2007, when the current downturn began, the ranks of federal employees earning $100,000 and up has skyrocketed. According to a recent analysis by USA Today, federal workers making six-figure salaries – not including overtime and bonuses – “jumped from 14 percent to 19 percent of civil servants during the recession’s first 18 months.’’ The surge has been especially pronounced among the highest-paid employees. At the Defense Department, for example, the number of civilian workers making $150,000 or more quintupled from 1,868 to 10,100. At the recession’s start, the Transportation Department was paying only one person a salary of $170,000. Eighteen months later, 1,690 employees were drawing paychecks that size. All the while, the federal government has been adding jobs at a 10,000-a-month clip. Between December 2007 and June 2009, federal payrolls exploded by nearly 10 percent. “Federal workers are enjoying an extraordinary boom time in pay and hiring,’’ USA Today observes, “during a recession that has cost 7.3 million jobs in the private sector.’’ And to add public-sector insult to private-sector injury, data from the Office of Personnel Management show the average federal salary is now roughly $71,000 – about 76 percent higher than the average private salary.
