Archive for category State Finances
Schwarzenegger on the Public Pension Time Bomb
Posted by Tom in Democrats, State Finances, Unions on August 27, 2010
Arnold’s op-ed in today’s WSJ is worth the time. Basically he contrasts the unionized public employees with the poor unemployed working stiffs who are expected to support them through taxes. A couple of charts are telling:
![[schwarzenegger]](http://sg.wsj.net/public/resources/images/ED-AM115B_schwa_NS_20100826182703.gif)
He highlights the games played: phony portfolio return assumptions, “spiking” promotions, and retirement at 55. Points out the fact that private employees make less and have less retirement security–their 401k s have declined 20% in value since 2007 while state employee pensions have grown during that period. The public employee effectively has $1 Million in retirement savings!
He calls for a stop to taxes and borrowing to fund pensions. He wants a reversal of the massive retroactive pension increases passed eleven years ago. He wants greater employee contributions to the pensions.
Unfortunately, he fails to call for a constitutional amendment prohibiting public employee unions. This is the only effective way to break the unholy alliance between the democratic legislators and the public employee unions that get them elected. Until that is ended the dirty money game between the two groups will continue.
I commend a full reading of Arnold’s call for reform. Note that it comes from a RINO, and that is a positive step indeed.
August Reno Hayek Meeting: Nevada Hurting
I am late in thanking Randy York for the excellent discussion of Nevada’s deficit difficulties. Randy as president of the NV Manufacturers Association well knows the gravity of the over spending over the last several years and the temptation to add new taxes so that it can continue. Those potential taxes whether corporate income, gross receipts or the so-called Texas franchise tax will further hobble Nevada businesses.
Randy got everyone’s attention with some recent economic headlines: gaming revenues down, A&E layoffs, land prices and real estate valuations plummet. The state leads the nation in unemployment; Lyon County’s rate is up at 18.5%. And predictions for job growth will be down for many years. With the $3.2 Billion deficit in mind the state’s budget director Andrew Clinger said you would have to cut everything but education (55% of the budget) to balance the budget.
The Democratic majority typically favors tax increases or new taxes to protect coveted programs and insure public sector jobs. Steven Horsford, the senate majority leader has proposed a 50-50 deal, $1.5 Billion in taxes and $1.5 Billion in cuts. Problem here is the lack of detail and the temporariness of cuts against the permanence of taxes. With over half the legislature being public employees, it is difficult to see how devastating tax increases will not come about. And, it is not as if those public employee salaries and benefits are cheap. Randy showed compensation charts that make NV look like Bell CA!
Simply put, more government, more spending and more taxes will drive businesses from NV and further tank the economy. The only way to guard against this is to elect conservative candidates who will block tax increases and insist on expense reductions and government efficiency.
Randy listed key Assembly and Senate races: Assembly: District and conservative candidate: 5th-Williams, 13th-Hammond, 21st-Sherwood, 22nd-Stewart, 23rd-Woodbury, 27th-Jurado, 29th-Hill, 31st-Thompson, and 40th-Livermore. Senate: 2nd-Gustavson, 5th-Roberson, and 8th-Cegavske.
There has been some sentiment in our membership for a more active role in addressing the issues we discuss. Indeed, our tag line for the Reno Hayek Symposium is: “Articulating conservative solutions to current issues & supporting their intelligent champions.” As Randy ably pointed out, now is the time to support conservative candidates. To that end, we will have special meet and greet candidate interviews between now and the November election. The object is to raise money and where feasible offer “boots on the ground” help to get these folks elected. We will have both email and web notices of upcoming opportunities.
I also want to thank John Dunn for his NV4CFE (Yucca) update, Tom Gurnee for his China business comments, and Jerry O’Driscoll for expanding his recent WSJ article on the balance sheet recession.
Finally Joe Morabito announced a key federal race fund-raiser for Dr. Joe Heck who is running against Dina Titus; this will be held at his home on September 24th. RSVP to Nicole at 702-614-5900 or nsarouphim@gmail.com.
Finally A Stimulus That Has Its Intended Effect
Posted by Tom in Deficit, Democrats, National Debt, Nevada, State Finances, Stimulus/Bailout, Unions on August 11, 2010
What is this latest $26 Billion stimulus, is it number 5 or 6? I’ve lost count. But this one you can bet will work effectively to accomplish its intended purpose…..to buy votes for Comrade Obama and his leftist cronies. It goes directly to the public employee unions, specifically the teachers. That increases union dues which in turn increases political donations. This stimulus rewards spendthrift states–takes from fiscally responsible states like Indiana and gives to bankrupt states like New York and California. Seems we find the most registered Democrats in those fiscally irresponsible states!
Today’s WSJ pens a great editorial on the subject, “Stimulus Pushers.” As the title suggests, Hussein Obama is the dope pusher further addicting these leftists spendthrifts with a high powered dose of bailout. The addicts don’t care about the hidden costs or the consequences; they just want the fix.
A few principled governors like Haley Barbour of Mississippi are pushing back. The federal government is hijacking state budgets. Rick Perry of Texas is in disfavor with the DC crowd so Texas gets penalized in the legislation. What’s astounding in this is the sheer hubris, the sheer abuse of power with the simple justification that the leftists have the power.
Two points are clear: One, this stimulus only postpones the day of reckoning for these bankrupt states. And, two, these parasites if left unchecked will eventually kill the host—the private sector that pays taxes will no longer be able to afford the excessive pay and benefits sucked up by the public sector. Atlas will indeed shrug!
For Nevadans, Reid must go, and the Pelosi’s democratic lackeys must be defeated. By piling up deficits and debt they are stealing from our children and grandchildren, the height of immorality!
Sig Rogich…Why Endorse Harry Reid?
Posted by Tom in Nationalized Health Care, Nevada, Politics, State Finances, Yucca Mountain on March 17, 2010
Sean Whaley of Nevada News Bureau reports extensively on Sig Rogich’s Nevada NewsMakers interview effusively touting Harry Reid for re-election. Rogich formerly the big Republican donor and Bush advisor is co-chairman of “Republicans for Reid.” Sig credits Harry for “building McCarran International Airport;” seems to me the marketplace for gaming may have had something to do with that! He then talks about water rights negotiations saying “who would you rather have at the table?” the answer is anyone other than Harry. He talks about what Harry has done for Nevada but can’t really come up with specifics; in reality Harry has done more for Nebraska with the “Cornhusker Kickback” than he has for Nevada. Finally and stupidly, he blasts Sue Lowden for her favorable position on Yucca noting that Reid opposes Yucca. Yeah Sig, Harry helps by keeping jobs and money out of the state and failing to exploit this opportunity for not only a repository, but also reprocessing, power generation and research all bringing high value jobs and money to Nevada. For reference, see NV4CFE.org.
Has Sig who once supported Reagan turned into a RINO? Possibly. Or has Sig simply lost his Icelandic guts and fears standing up to Reid perhaps because Harry, an early practitioner of Chicago politics, has threatened Sig’s clients and the threat carries? Maybe. Here’s another theory, has a deal been made? Sig endorsed Harry in early 2009, in June of that year Harry dropped his longtime support of the LA-Vegas maglev train and instead endorsed construction of a competing Victorville-Vegas rail project, Desert Xpress Enterprises. Surprise, Sig Rogich is a partner in, backer of and spokesman for Desert Xpress!
When you think of it, with the Cornhusker Kickback alone, Harry has taken Nevada taxpayers money and given it to Nebraska! He’s pushing job killer Obamacare through the Senate. Why would anyone want to support him. All toll, given the harm Harry’s done and is doing, we are better off without him. Only Sig Rogich can explain why he supports this embarrassment to Nevada.
Tom Motherway
NJ’s Chris Christie-”No More Road Down Which To Kick the Can”
Posted by Tom in Economics, Education Facts & Policies, State Finances, Unions on March 6, 2010
Another honest politician telling it like it is, Chris Christie told 200 of New Jersey’s mayors that the old game of tax and spend is over. See Ron Smith’s Baltimore Sun post, A leader opts for painful honesty in the Garden State.
“We have no time left,” said the governor, “We have no room left to borrow. We have no room left to tax. So we merely have time left to do this. We are all reaching the edge of a cliff. And it reminds me a bit of that part of ‘Butch Cassidy and the Sundance Kid’ where he had the seminal decision to make. So what did they do? They held hands and jumped off the cliff. We have to hold hands at every level of government, state, county, municipal, school board. We have to hold hands and jump off the bridge.”
“Governor Christie has wasted no time in implementing budget freezes through executive action. No doubt there will be a political firestorm in New Jersey as the pinch is felt by politically powerful entities such as the teachers, police and firefighters unions. Whether he can survive tackling the growing fiscal crisis with actual solutions is the question. He told the mayors to get ready for cuts in state aid in his upcoming budget, which will be presented March 16, but he promised he would give them a hand by implementing pension, benefit and arbitration process reform, something that will be bitterly opposed by the aforementioned unions.”
Ya gotta like this guy. We need a lot more like him–telling it like it it is. Hopefully voters will be smart enough to listen!
Tom Motherway
What’s Obama Up To?
Posted by Tom in Centrally Managed Economy, Deficit, Democrats, Economics, Financial Crisis, Individual Freedom, National Character, National Debt, Nationalized Health Care, State Finances, Statism, Taxation on March 5, 2010
On paper Obama appears to be a smart guy and reasonably well informed. I suspect he knows:
- We face $1.4 Trillion annual deficits for the next decade.
- Our current national debt is $12.3 Trillion and will grow by $1 Trillion a year.
- Estimated unfunded liabilities from social security and medicare are $107 Trillion.
- States with aggregate deficits of $350 Billion, debt of $1.9 Trillion, and unfunded liabilities of $1.4 Trillion are asking for federal handouts.
- Unemployment is 9+% with private sector growth stalled.
Why then would he promote a radical takeover of healthcare with 10 year costs of $2.3 Trillion that adds $1.86 Trillion to the deficit over the next 20 years, that creates employment taxes and mandates, each discouraging private sector employment, and that fails to solve the demographically certain failure of medicare, social security and medicaid? We’ve proven our inability to handle two, no three if you include medicaid, major entitlements, why add another? And why would he risk his party’s control of Congress and his own ability to govern to attain this goal that a majority of Americans don’t want?
Obama is smart enough to know that Obamacare will exacerbate the financial straights of the United States. It’s uncertainty will decrease private sector employment. It’s taxes will decrease private capital for investment. It will cede financial and technological leadership to other countries. In short, we will be worse off tomorrow than we are today. Why would he risk that…want that?
It is clear that he knowingly intends to drive us further to the brink. It is also clear that given his apparent intelligence he has an end-game in mind. Take our admitted crisis, you know the “never-let-a-crisis-go-to-waste” kind, explode it into a gigantic, off-the-clff catastrophe, then come up with a one-of-a-kind, popular solution that involves “shared pain” and if we are all lucky, someday “shared gain.” Call it a Cloward-Piven Strategy on steroids. (See: Cloward-Piven Strategy: Is It Obama’s? and references cited therein.)
As Larry Kudlow said in NRO, One Giant Government Leap Backwards,” One of the most galling features of this plan is a taxpayer-subsidized government-insurance entitlement for people earning up to 400 percent above the poverty line, or nearly $100,000 for a family of four. In other words, a middle-class health-care entitlement that will add millions of people to the federal dole. It’s all too reminiscent of the political dictum of the old New Dealer Harry Hopkins: tax and tax, spend and spend, elect and elect.”
So will Obama’s “Fiscal Responsibility and Reform Commission” turn out to be the VAT Commission with a European 12% sales tax on top of the income tax, excise tax, etc. And those on top of the various state sales, income and property taxes? All this to finance BIG GOVERNMENT? If so, we will then all have the advantage of being “in the same boat,” “equal,” and “happy” in an ever declining country and economy.
So for the literarily inclined, Obama wants us on Hayek’s Road to Serfdom where we will encounter Orwell’s Animal Farm with 1984’s Big Brother in control. As Obama recently said in response to a push-back, “we won the election.” And win the next election and the next, he aims to do with the creation of more and more dependency on him and less and less individual responsibility.
I won’t be around to witness the outcome but I hope the next generation will become informed and engaged, lest our grandchildren and great-grandchildren suffer horrible consequences.
Tom Motherway
Tale of Two States & Health Care
Posted by Tom in Centrally Managed Economy, Democrats, Economics, Government Regulation, National Character, State Finances, Statism on March 2, 2010
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
California Businesses Welcome in Nevada
Posted by Tom in Business, Economics, Government Regulation, Nevada, State Finances on February 26, 2010
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
Tenure, Unions, Administrative Bloat=Public School Education
Posted by Tom in Education Facts & Policies, State Finances, Unions on February 22, 2010
Today’s WSJ editorial, No (Tenured) Teacher Left Behind, addressed the problem of tenure in our public school systems. Tenure, the contractual right not to face employment termination without just cause, has been used in colleges and universities to insure academic freedom. It’s used in the federal judiciary to guarantee judicial independence. It has become a handicap to competent jurisprudence and quality secondary public education.
While academic freedom at the university level can arguably be justified given the variety of disciplines and research orientation, there is no possible justification for tenure at the secondary level. At the university level tenure is earned by research and publication over several initial years of work; if not granted after a stated period it is never granted. At the secondary level public employee teachers are granted tenure as a matter of course, typically after three years. No real qualification is required other than not showing up on a police blotter during those initial years! Public school administrators typically find less than 2% of new teachers unsatisfactory even though students fail to meet basic academic standards year after year and even in LA where the drop out rate is 35% and growing. Finally, “academic freedom” at the primary and secondary levels is an oxymoron!
Tenure as fostered by the teachers unions begets the mediocrity for which unions are generally known. There is no striving for excellence only striving for conformity and strength in numbers. As I have said ad nauseam, public employee unions have no place in our political system; the unholy alliance between union members and politicians will bankrupt our society. This is especially true in education where we are dealing with our most precious resource, our future!
What about Nevada? We spend way in excess of inflation, a 48% increase in Nevada’s education spending from 2006 to 2009! Yet we consistently have test scores lower than the national average. (See the National Center for Education Statistics)
We need a system in which excellent teachers can be retained and financially rewarded. We need a system in which the deadwood, protected by tenure and teachers unions, can be discarded.
So when you hear cries against education cuts please remember that spending has grown dramatically beyond the combination of population growth and inflation over the last several years. Student progress as measured by test scores has not kept pace. So a logical conclusion would be to look for educational barriers elsewhere. I submit that tenure along with teachers unions would be good places to start.
Tom Motherway
IT’S THE SPENDING, Stupid!
Posted by Tom in Congress, Deficit, Economics, Financial Crisis, Financial Policy, National Debt, State Finances on February 20, 2010
John Mauldin’s letter this week follows last week’s Greek tragedy with the “pain in Spain” and future of the Euro. How long will the Germans support the spendthrifts?
He then again brings the same spendthrift problem back across the pond concluding with a reference to Dan Henniger’s WSJ February 18th Wonderland column, It’s the Spending, America. Dan treats the runaway spending which has only accelerated under Obama, Reid, and Pelosi. This despite economists of all stripes saying it is unsustainable. I wanted to comment on the column but couldn’t get the graphic. John Mauldin supplied it and here it is:
“We’ve been grinding toward this moment since 1932. It has always been a question of political physics just how high government could go in the U.S. before it arched over and down. Now we have Washington, California, New York, New Jersey and others all arriving at the same time of reckoning. And all for the same reason, public spending by the public sector—its politicians, its unions, its massive schools of pilot fish.”
This blog has previously railed against Dual Bankruptcies-Federal and State which will indeed occur unless the entitlement spending is reined in and reined in hard. Obama’s deficit reduction commission will wind up a side show unless Social Security, Medicaid, and Medicare are substantially cut, painful as that definitely will be.
Social Security should be means tested and stopped for the upper quartile earners after payments into the system have been returned with some small rate of interest. Cost of living increases should not occur unless the CPI growth exceeds 5% for the year. Retirement age should be lengthened for those under 50 and premiums be increased. Medicaid should be limited to cover only serious illnesses not every sniffle and scratch. Medicare should be means tested and again limited to serious illnesses not every sniffle and scratch; premiums should be increased.
Political will and guts is hard to come by these days. But is seems we should at least be able to expect the current administration to cease its expansion of spending, Obamacare being the prime example followed closely by cap and trade.
Hey, Barack, Harry, Nancy–what part of UNSUSTAINABLE don’t you understand?
Tom Motherway