Archive for category Government Regulation

Unions Cost Taxpayers Money

Representative Steve King from Iowa has a hell of an idea on How to Save $11.4 Billion This Year, posted March 4th in The American Spectator. Repeal the Depression-era Davis-Bacon Act, a subsidy designed to protect American blacks from being barred from construction jobs by mandating “prevailing wages” in public contracts. In practice prevailing wages are inflated union wages. As King points out, “Davis-Bacon wage rates are on average 22% higher than the standard wage rate in an area. Similar Heritage research revealed that, under Davis-Bacon law, the government pays four workers artificially inflated wages the same price it could pay five workers the local market rate.” So Obama’s “stimulus” which requires Davis-Bacon wages either costs the taxpayers a 22% wage subsidy premium or decreases construction employment by 20%!

So you would hope that given the serious deficit and 9+% unemployment, Obama would embrace this practical idea. Alas, you would be wrong. As pointed out editorially in yesterday’s WSJ, the White House is all about, Procuring the Union Agenda. Seems that Joe Biden’s “Middle Class Task Force” is drafting an Executive Order for Obama that would “oblige government procurement agencies to give contracts to “responsible contractors” who pay workers well and offer higher health, pension, sick leave and other benefits. These new mandated labor standards would have to be enforced across a company, not just at the unit bidding for a contract.” It is this new twist that puts the Davis-Bacon Act on steroids!

Unlike the disjunctive, “EITHER inflate taxpayer costs OR decrease employment” of Davis-Bacon, this executive order by expanding Davis-Bacon beyond the bidding unit will “BOTH inflate costs AND decrease employment.” The greatest adverse impact here is on small businesses, formerly the job creation engines of this economy!

So instead of competitive bidding to get the best quality at the best price, we have the Obama administration doing the unions’ bidding. Obama is owned by the unions; at least they own the biggest part of him!

Tom Motherway

No Comments

“Stimulus or Sedative?” Thomas Sowell Never Disappoints

Sowell opens his succinct RCP post with an Abe Lincoln story: President Lincoln asked an audience how many legs a dog has, if you call the tail a leg? Some shouted “Five” but Lincoln corrected them saying that the answer was four. “The fact that you call a tail a leg does not make it a leg!”

The professor uses that tale to drive home the truth about the “stimulus” and the “jobs bill.” The idea behind stimulus, for example, is to get investors to invest, lenders to lend, and employers to employ. Prime the pump, put a little bit of water in to get the well flowing. That little bit of water, the government money, was never meant to restore the economy by itself, but to get the private business sector going. What has happened?

  • After the Bush-started stimulus in 2008–business spending fell by 28%.
  • Durable goods spending fell by 22%.
  • Four months after the TARP billions–large TARP banks made 23% fewer loans.
  • The velocity of money fell faster than at any time in the last half century.
  • The WSJ reports the “sharpest decline in lending since 1942.”

Why would banks lend when, “from the White House to Capitol Hill, politicians are coming up with all sorts of bright ideas for borrowers not to have to pay back what they borrowed…”  Why would investors invest when a substantial number of the consumers are unemployed? Why would employers employ when faced with higher taxes and more Obamacare mandates? In short, the outlook is uncertain and certainly more big government than private sector oriented.

Sowell points out that none of this is new: during the Great Depression of the 1930s, money velocity, lending, investing and employment were all lower than they were in the 1920s. The anti-buisness rhetoric and anti-business policies did not inspire any more confidence then than they do now. “In an atmosphere where nobody knows what the federal government is going to come up with next, people tend to hang on to their money until they have some idea of what the rules of the game are going to be.”

Economists have estimated that Roosevelt’s New Deal prolonged the depression by several years, how long will Barack Hussein Obama, Reid and Pelosi prolong our current difficulties?

Tom Motherway

No Comments

Redistribution–Obama’s Supplemental Poverty Measure

Robert Rector highlights Obama’s New “Poverty” Measurement in today’s NRO post; as you may guess it has nothing to do with actual poverty.

“The current poverty measure counts absolute purchasing power— how much steak and potatoes you can buy. The new measure will count comparative purchasing power — how much steak and potatoes you can buy relative to other people. As the nation becomes wealthier, the poverty standards will increase in proportion. In other words, Obama will employ a statistical trick to ensure that “the poor will always be with you,” no matter how much better off they get in absolute terms.”

“The weird new poverty measure will produce very odd results. For example, if the real income of every single American were to magically triple over night, the new poverty measure would show there had been no drop in “poverty,” because the poverty income threshold would also triple. Under the Obama system, poverty can be reduced only if the incomes of the “poor” are rising faster than the incomes of everyone else.”

“The government’s own data show that the typical American defined as poor (according to the traditional, pre-Obama poverty measure) has two color televisions, cable or satellite service, a VCR or DVD player, and a stereo. He also has a car, air conditioning, a refrig erator, a stove, a clothes washer and dryer, and a microwave. He is able to obtain medical care. His home is in good repair and is not overcrowded. By his own report, his family is not hungry, and he had suf ficient funds in the past year to meet his family’s essential needs. While this individual’s life is not opulent, it is far from the stark images conveyed by the mainstream media and liberal politicians.”

So the “poor” will always be with us no matter how rich they become. Why do this you may ask? Obama’s stated objective is to exercise what he would call a primary function of government: redistribution of wealth. Doing this creates dependency on government and dependency creates voters for the re-distributor.

Of course, there’s a downside. Redistribution by definition removes capital from reinvestment opportunities. As a direct consequence the wealth of society is lowered. The standard of living goes down proportionately. Ultimately, there will be no more wealth to re-distribute. What’s left is a permanent underclass, dependent only upon other dependents!

I fear Obama is the ultimate Communist. Tzars. Government control of major industries. Promotion of public employee unionism. Create major new welfare programs when existing programs are near bankruptcy. And now, a redefinition of “poverty” from absolute terms to relative terms.

I’m reminded of Orwell’s Animal Farm, “while all of us are equal, some are more equal than others!”

Tom Motherway

No Comments

“idiocy of Yucca Mountain” Blasted by AEP CEO Morris

Today’s WSJ front page notes Democrats Revolt Over Energy. Apart from the subsidies wasted on wind energy used to enrich Chinese manufacturers and the EPA proceeding to regulate the air we exhale, the Yucca Mountain closing is coming under fire.

Big utility operators as well as some states like South Carolina and Washington are blasting the Obama administrations announcement that it will drop plans for a federal nuclear-waste vault beneath Yucca Mountain.

“The Energy Department’s move to formally drop its application for the Yucca Mountain waste site could hobble efforts to build more nuclear power plants—a strategy the Obama administration has promoted as a way to reduce U.S. greenhouse-gas emissions. Without a permanent solution to the waste-storage problem, several states, including California, won’t let new nuclear plants be built.”

“Michael Morris, chief executive of American Electric Power Co., said on Thursday that “there has to be a reaction,” because Yucca is the only site that’s been vetted and deemed capable of storing waste from the nation’s 104 operating power reactors. Speaking at a Wall Street Journal conference, he blasted the “idiocy of Yucca Mountain” being terminated as a repository, and said the government will have wasted $10 billion on the project if it doesn’t proceed.”

“Under federal law, Yucca is the designated site for the nation’s spent nuclear fuel and high-level radioactive waste. But the repository is more than a decade behind schedule. As a result, the waste generally remains at the nuclear reactors and DOE sites where it was generated.”

But what’s a few billion dollars wasted, a significant number of jobs lost, and the pronouncement of conflicting federal policies to this consummate totalitarian? 2012 can’t come any too soon!

Tom Motherway

No Comments

Tale of Two States & Health Care

Yesterday’s WSJ editorially gave us a snapshot of ObamaCare (Back to the ObamaCare Future) using the sad story of Mitt Romney’s Massachusetts venture into state controlled healthcare. Of course  Romney is now out burnishing his “conservative” credentials (read RINO) and the medical dictator job has devolved to Governor Deval Patrick.

What has happened? Costs have exploded–$47 M over budget. Spending has jumped 6.7% per year in a non inflation environment. Massachusetts insurance premiums are the highest in the nation having climbed at a 30% annual rate. Per capita health spending is 27% higher than the national average. Romney like Obama sold his healthcare as a way to control spending!

So Governor Patrick is proposing hard price controls on all Massachusetts healthcare. Regulators will cap insurance premiums; despite the fact that insurers pay out $1.12 in benefits for every $1.00 in premiums, a medical loss ration of 112%! He’s also filed a bill that will give regulators the power to review rates of hospitals and physicians; those that are deemed too high “shall be presumptively disapproved.”

Get the picture?  OBAMACARE!

But there was also a positive state healthcare story in the same paper same edition. Governor Mitch Daniels of Indiana penned an op-ed, Hoosiers and Health Savings Accounts, relating his quest five years ago for a consumer-directed heath insurance option for state employees. He got Indiana’s HSA enacted. For those choosing this option, each has his own health savings account supplemented with a high deductible (catastrophic) insurance policy; the state deposits $2,750 per year into these accounts which grow with interest.

What happened? First year some 4% of employees signed up; this year over 70% of the 30,000 employees signed up; there is $30M of employee money in these accounts growing with interest. These employees will save more than $8M compared to those who stayed with the traditional insurance. Indiana will save at least $20M this year since total costs have been reduced by 11% solely due to the HSA option. HSA participants ran up only $65 in medical costs for every $100 in costs incurred by the employees in traditional plans.

Indiana’s 70% HSA participation rate compares to a national rate of only 2%. Why? Public employee unions have rejected the HSA plans. As we know, Obama, being the puppet of the public employee unions he is, has denounced high-deductible HSA related insurance as “not real insurance.” (See: Where’s the Consumer) Obama doesn’t want consumer driven healthcare. He wants to control this 16% of the American economy. He wants to control your healthcare, make your decisions for you. You aren’t smart enough to do it yourself. But, don’t try to tell that to the Hoosiers!

Get the picture?  OBAMACARE!

Tom Motherway

No Comments

California Businesses Welcome in Nevada

One of the round table topics at our recent Reno Hayek Symposium dinner was state taxes and business environment. How did Nevada compare? Granted, Nevada has a deficit of some $880 Million, but that pales in significance to California’s, our immediate left coast neighbor has a current deficit of some $20 Billion. Remedies for each seem intractable but the pain index is surely greater the farther West you go.

Mark Bailey referred me to some testimony which highlighted a midyear 2009 comparison between the 50 states. The Tax Foundation presents an interesting comparison of data then available, “2009 Facts & Figures–How Does Your State Compare?’ I’ve shown below some selected categories (click image to enlarge):

Now this is just a thought, but I suspect that California taxes and fees and costs of doing business are going to increase. It’s a good bet they will increase at a more rapid rate than those in Nevada. Also, I would venture a guess that the total cost of living will proportionately increase and with the same dichotomy.

California businesses must compete internationally, particularly those in the tech world. And with the Obama deficit, debt, and unfunded liabilities about to create national pressure on all businesses, any advantage a business can gain at the margin will help it remain competitive worldwide.

So, all you frustrated California developers who have tech clients, come on over to Reno and take a look. We will be happy to introduce you to the people and the area. It’s really a friendly, help-your-neighbor place. Oh, and we’ll do our best to retire Harry Reid in November. Pity, but ol’ Nancy Pelosi will still be in office!

Tom Motherway


No Comments

Obama Can’t Answer Paul Ryan

Stephen Spruiell’s succinct report today in NRO, Ducking and Dodging, clearly sets out the Obamacare fiscal deficiencies highlighted today by Paul Ryan. Representative Ryan blasted Obama’s “insurance care” today and none of the Democrats could counter his arguments. Basically he pointed out that Obamacare front-loads tax hikes and Medicare cuts and defers costs, forcing the CBO to score ten years of offsets with only six years of spending! The true cost of the bill is $2.3 Trillion not the $950 Billion advertised by Obama.

Ryan focused further on other Democratic gimmicks:

  • Double Counting: “savings” are counted as offsets for spending and at the same time reserved to pay for future entitlements. Example, $52 Billion in Social Security tax increases.
  • “Doc Fix”: The bill’s 21% cut in Medicare reimbursements is put back in via separate legislation not subjected to combined CBO scoring.

And what does the wimpy Obama say in response? “We have some strong disagreements on the numbers, but I don’t want to get too bogged down!” If there were disagreement you would think he would have answered the criticisms.

As for getting bogged down, Obama should start getting real bogged down in his record breaking deficits, unsustainable national debt and bankrupting unfunded liabilities. Instead he is hell-bent-for-leather to add to that trio of financial irresponsibility. And this at a time of high unemployment when small businesses won’t hire because of the uncertainty, regulation and taxes proposed with Obamacare!

I guess destruction of our economy is a small price to pay for these socialists to gain total control of that economy. You’d think they would see it as a bad bargain.

I pity our future generations.

Tom Motherway

2 Comments

Obamanomics Will Lead To Our Demise

I don’t know whether to laugh or cry to see the dynamic trio, Obama-Reid-Pelosi, ramming Obamacare down our throats at the small price tag of $950 Billion, oh yes and price controls on private insurers, expensive mandates on employers, and the government take over of 16% of the U.S. economy. Employers are not hiring, not investing, and not borrowing. At the very time jobs are needed businesses face health care uncertainty, higher taxes, falling consumer sentiment and high unemployment. Why invest if there aren’t going to be any consumers around to consume? Consumption is three quarters of the economy!

The only jobs the non-stimulus stimulus has created are government jobs–that would be the non-productive jobs that are a drag rather than a stimulus to the economy.

Speaking of economy, Robert Robb pens a dynamite article in Real Clear Politics today, The Chief Economic Worry About Democrats. With syllogistic logic he points out the elites lack of appreciation of investment capital and its function in the economy. Liberals assume a given level of economic output, a dangerously false assumption. Output doesn’t just happen it depends on investment capital. The government cannot supply that capital but can only redistribute what it takes by way of taxes. What it takes in taxes is withdrawn from private productive investment.

“Producers have to produce before consumers can consume. But producers cannot produce ex nihilo. Investment capital provides the financial bridge between production and consumption….In reality, however, the affluent provide most of the country’s investment capital. They are the ones with discretionary income. What the rich do with their money is very important economically.

“The Democrats want to raise taxes on the affluent and on corporations (which are repositories of investment capital). The numbers, and their effect on investment capital, are staggering..So, between Obama’s budget and the health care plan, that’s a shrinkage in the nation’s investment capital pool of up to $1.9 trillion over the next decade. But that’s only the beginning of the effects. Between Obama’s increased income tax rates, the income tax surcharge in the House health care plan, and state income taxes, the highest marginal income tax rate in most states will approach or exceed 50 percent. That will hugely discourage savings and investment by the affluent.”

“This tax-the-rich approach is justified as a matter of social justice. The government needs money, goes Democratic thinking, and it is fairer to get it from the rich than the middle class or the poor. Democrats also tend to believe that large disparities in income and large accumulations of wealth are evils to be ameliorated in their own right. The rich already pay a higher percentage of federal income taxes than they make in income. And the true social justice question shouldn’t be whether income or wealth disparities are increasing, but whether the lot of the poor is improving. Concentrating on the latter question leads to entirely different policy choices than concentrating on disparities.” (emphasis added)

Robb’s back to Adam Smith basics is brilliant, thus I’ve  perhaps over quoted in this post. What I suggest is a read of the whole article and selected comments following the article which are displayed by clicking on “COMMENTS” at the end of the article.

Tom Motherway

No Comments

“Catholic Charities in Albany NY Now Providing Free Syringes to Addicts”

Another well-intentioned, liberal Bush idea that Obama has continued and enhanced is the Office of Faith-Based and Community Initiatives. Michael Tanner of Cato calls it Obama’s Faith-Based Boondoggle. Michael, who has video-conferneced with our Reno Hayek Symposium meeting, correctly states that, “the damage done by government co-option of private charity goes far beyond money.” His point is that the addiction of federal dollars soon distorts the purposes of the charity–by dependency, sloth and ultimate control.

The Bush/Obama program of leveraging government dollars by using low cost (sometimes free) charity workers, is better than creating another government department to accomplish some social (not religious) goal. But the point is that the charity would ultimately accomplish the same or near same goal with private dollars. In short, there is no need to spend government dollars. Excuse me, your tax dollars.

“Government funding is antithetical to the nature of charity. After all, the essence of private charity is that it is voluntary. Tax money is based on coercion. There is neither compassion nor love behind a grant of money forcibly taken from taxpayers who may have no desire to support the charity in question.”

“There is no reason for government to be in bed with private charity. Charity is thriving in America. We are the most generous nation on earth. Every year, Americans contribute more than $300 billion to charity. In addition, more than half of all American adults perform volunteer work. That time and effort is worth more than another $300 billion. And that does not include the countless dollars and time given to family members, neighbors and others outside the formal charity system. A few extra dollars from Washington add little to this amazing success story.”

The proper role of government is the crux of all political difference. Big and all-intrusive or small and limited, that is the question. Our founding fathers set up a limited federal government with checks and balances and specifically delegated powers. Roles and powers not delegated to the federal government by the people were specifically reserved to the states or to the people. The founding fathers would be shocked to see how far the federal government has evolved from their vision.

The principle of subsidiarity is an organizing principle that matters ought to be handled by the smallest, lowest or least centralized competent authority. This concept is applicable to government, management, and society. The parent, the family, the school, the church, the social group, the village, the city, the state and only then should the central authority, the federal government be competent to handle any given issue or concern. Let’s see… that would leave defense, postal service, national currency, and… what else to the federal domain? Read the constitution! You will be surprised.

Point is…if we continue to cede our obligations and our rights to the central authority, we will become dependent serfs….without moral fiber, character, or courage. That we can gather, speak, give to charity, volunteer, teach our children, defend ourselves and our families is our strength, our essence. Once ceded, never retrieved. Let charities do charitable work….yes even in healthcare!

A friend and member of our group on reading about Catholic Charities providing syringes to addicts in Albany wagged, “what’s next, condoms?” Makes me, a practicing Catholic, question– as have others–whether Catholic Charities is indeed Catholic, or for that matter, a charity!

Tom Motherway

No Comments

Government Competency–An Oxymoron!

Government residential real estate finance is the subject. Whether that is a proper role for government is one question; another is whether government is the dumb patsy that makes the smart guys rich. Let’s start with a video Ron Tomsic sent me yesterday, The Indymac Slap in Our Face, on the Think Big Work Small website, which tells of the profitable, rent-seeking relationship between the Federal Government and a Goldman Sachs/George Soros bank, OneWest Bank. Since these fellows are playing fast and loose with your money, please link to the video before reading on.

To verify the government locked in profit given to these Obama fat cats, I checked with Mark Toomey, our real estate finance expert. Mark’s comment:

“I’ve seen this video at least twenty times this week. Sadly, it’s pretty accurate. The $75,000 note from the consumer may reflect a judgment against the borrower for a non purchase money second and if that’s the case, I highly doubt they’ll ever collect it; more than likely, it will be included in the inevitable BK the consumer is headed toward.”

Worse yet seems to be the regulatory snafu our bureaucrats at Fannie/Freddie, the Fed, and HUD have caused with conflicting regulations the incidental benefit of which will be to keep the trial lawyers in business. Another Democratic constituency!

Mark continues: “Honestly, I think the bigger story is one the media will not pick up on for another two weeks. Residential lending has been virtually shut down in the last week now that the new GFE regulations have been fully enacted. Three dueling regulatory bodies have merged in to the perfect storm. My weekly conference call with the fixed income guys at Blackrock have turned in to a death watch of sorts; the scenario’s I laid out to them in December (ones at which we all laughed) have now come to pass, and we may very well be looking at the last decent funding month for residential mortgages nationwide. The pre-pay speeds have dropped off the table in the last ten days, and it is getting worse. Kiss getting a VA loan good bye.”

(Definitions: “GFE” means good faith estimate typically dealing with all essential and non-essential elements of a real estate closing. “Pre-pay speeds” mean the anticipated rate of pre-payments assumed by secondary market buyers of mortgage pools.)

Mark concluded with his dark Irish humor: “Greece today, New York tomorrow. Guns and gold, Tom, guns and gold.”

When government gets into businesses it shouldn’t be in the opportunities for incompetency and fraud are multiplied exponentially. The favored fat cats of the liberal left, Wall Street, trial lawyers, unions, etc. profit and all from your tax dollars! Truly a wonderful system we have.

Tom Motherway

No Comments