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Archive for January, 2010

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.

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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.

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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.”

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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.

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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.

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My jaw is gaping with amazement once more at the hare-brained political correctness that is infecting (or should I say infesting?) the United Kingdom. A story in the Daily Mail states that a recruitment agency was told not to advertise for “reliable” and “hard-working” people since that discriminated against…well, people that aren’t reliable and hard working. The silver lining to this dark cloud is that the the bureaucracy in charge of such matters backed down to avoid public ridicule, but the mere fact that this happened says a lot about what’s happening across the pond – and what’s beginning to happen in America:

When it comes to hiring staff, there are plenty of legal pitfalls employers need to watch out for these days. So recruitment agency boss Nicole Mamo was especially careful to ensure her advert for hospital workers did not offend on grounds of race, age or sexual orientation. However, she hadn’t reckoned on discriminating against a wholly different section of the community – the completely useless. When she ran the ad past a job centre, she was told she couldn’t ask for ‘reliable’ and ‘hard-working’ applicants because it could be offensive to unreliable people. ‘In my 15 years in recruitment I haven’t heard anything so ridiculous,’ Mrs Mamo said yesterday. ‘If the matter wasn’t so serious I would be laughing out loud. ‘Unfortunately it’s extremely alarming. I need people who are hardworking and reliable – and I am pleased to discriminate in that way. If they’re not then I really can’t use them. The reputation of my business is on the line. ‘Even the woman at the jobcentre agreed it was ridiculous but explained it was policy because they could get sued for being discriminatory against unreliable people. …She filed the advert for a £5.80-an-hour domestic cleaner at a hospital in Bury St Edmunds, Suffolk, through the Jobcentre Plus online service last Thursday. However, when she rang the nearest branch in Thetford, Norfolk, to make sure details would be available to jobseekers who turned up in person, she was transferred to a woman who said the wording was unacceptable.

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While most political observers are paying lots of attention to the stunning Senate race in Massachusetts, there were two important ballot initiatives in Oregon on Tuesday and in both cases 54 percent of voters decided to impose higher tax rates on some of their neighbors. This is a disturbing development since voters rarely get tricked into supporting such measures. The corporate tax initiative is somewhat of a nuisance initiative, boosting the minimum annual tax from $10 to $150, but the ballot initiative on personal income tax rates is much more significant. Oregon already has a 9 percent top tax rate on individuals, which is one of the highest in the nation, yet voters were willing to boost the rate even higher (11 percent for 2009-2011 and 9.9 percent thereafter). This will be good news for neighboring states with no income tax, such as Nevada and Washington, but it is a worrisome sign that government employee unions were able to fund a campaign that generated such a disappointing result. Here’s a brief blurb from the state:

It looks like Oregon corporations and high-income earners will pay higher state taxes as voters weighed in Tuesday on two hotly debated measures. …Measure 66 raises the income tax paid by households earning at or above $250,000 a year or individual filers who make $125,000 or more. Measure 67 raises the state’s $10 minimum corporate income tax. …The tax measures were strongly supported by the state’s teachers and other public employee unions. …Pat McCormick, spokesman for the opposing campaign, “Oregonians Against Job-Killing Taxes” described the results as “disappointing and discouraging.”

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