Archive for category State Finances
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
Yucca Mountain=Jobs and Money For Nevada
Posted by Tom in State Finances, Yucca Mountain on February 17, 2010
Kudos to John Dunn, Mike Nusbaum and Gene Humphrey for the excellent presentation on Yucca Mountain at our dinner February 16th. They along with Bill McCraley and Randy York have formed a non-profit to promote and manage their proposed “Yucca Energy Park” which would administer a Nevada Permanent Fund and manage the myriad of services and related businesses consequent on the development of Yucca Mountain as a nuclear fuel repository. Those would include nuclear spent fuel rod reprocessing, nuclear research, a nuclear power plant and related activities including R&D for alternative energy technologies. In other words their proposal is to benefit Nevada and its people by going beyond the “waste dump” pejorative of the nuclear repository, and fully developing the economic potential of all commercial aspects of nuclear energy: power generation, reprocessing, and R & D. In addition the Park concept also accommodates an R&D focus on potential/emerging alternative energy technologies.
The potential revenue to the state and its people is measurable in the Billions of Dollars, since every nuclear power rate payer now pays an assessment that goes into a fund specifically for Yucca which has accumulated over $30 Billion to date and continues by law to provide significant monies annually. The proposal is that half of the money received would go to operating expenses and the state, the other half would go directly to the rate payers in the state. The analogy here is the Alaskan Permanent Fund which derives revenue from the pipeline. In Alaska not only does the state benefit but the people directly benefit with annual dividend payments.
But just as important as the money are the jobs the project would produce. Many of the permanent jobs are high skill high pay jobs, some are maintenance and administration. The construction jobs would extend over a couple of decades. And the research positions would create a whole new area of opportunity for the university as well as private firms. So this is potentially a major diversification for the economy of the state. In short, the Yucca Energy Park is a SIGNIFICANT, HIGH QUALITY JOBS MACHINE for Nevada!
The timing of their efforts is particularly appropriate since Obama has finally decided to promote nuclear power as an eco-friendly step toward reducing reliance on foreign oil.
It is truly a pity that we have short sighted politicians like Harry Reid in Nevada–perhaps blind is a more appropriate descriptive characteristic! Harry is trying to kill what the people need most jobs and diversification of the state’s economy.
There are also positive indications in the press that states like South Carolina are considering legal action for force the federal government to proceed with the Yucca project.
We thank and applaud John, Mike and Gene for the presentation and will keep everyone posted as to the progress. If any reader wants to help with this they can (1) write, call or email the Governor asking him to move Yucca forward, and (2) contact the new non-profit by emailing me at tom@renohayek.com.
Tom Motherway
Entitlement Generation’s Generation…Our Schools Train Socialists But Not Much Else!
Posted by Tom in Economics, Education Facts & Policies, State Finances, Taxation, Unions on February 12, 2010
Our great grandparents ventured from the old world to settle this new world, risking, sacrificing, and working for a better life. Our grandparents braved grueling covered wagon treks across the plains, deserts, and mountains to stretch the boundaries of this new world while scratching out a better life for their families by sacrificing and hard work even though outcomes were none too certain. Our parents fought in foreign wars to maintain the freedom and livelihood that their families enjoyed in this new world and help establish those freedoms worldwide.
Sadly we, circa babyboom generation, became complacent. Things were handed to us. We expected them. When they weren’t there we got mad. We rebelled against authority. We had “rights.” In short, we were entitled!
Why work? Why pay tuition? Job, what’s that? The state will pay it and if it doesn’t we’ll protest. Our children are entitled to the best education free. They are entitled to reduced class size and private tutoring if need be. We are the entitlement generation.
And what we are and what we have spanned is an embarrassment to our heritage.
This from the Las Vegas Sun: “UNLV students let their voices be heard on proposed education cuts. Organized walkout of classes joined by president, chancellor.” Yes, UNLV President Neal Smatresk, Chancellor Dan Klaich, and Chairman of the Board of Regents Dean Leavitt participated in the protest.
And this today from the Las Vegas Review Journal: “Desert Oasis students walk out of class to protest budget cuts.” Over 400 students walked out to protest state budget cuts to education. Of course, they won’t be punished because they got permission from Principal Emil Wozniak before the walked out!
The leftist educators and their poorly educated students are “entitlees.” They don’t know the meaning of work, sacrifice, or individual responsibility. They are the embodiment of the leftist model. How will they compete in a world where people do understand those virtues?
Sadly, we have been spending our hard earned tax dollars to support the exorbitant costs in terms of salaries, pensions, and general waste of this public unionized system. Economically, it is unsustainable.
Tom Motherway
CA Dems Compete With DC Dems for the Hubris Award
Posted by Tom in Government Regulation, Nationalized Health Care, State Finances on January 31, 2010
How about this, California’s Democratically controlled state senate voted to enact universal healthcare for the state’s residents while outlawing private insurance and subsidizing coverage for millions in the process. All this for the 37 million Californians for the mere “estimated” cost of $200 Billion a year. This in a state where the $85 Billion budget is already $20 Billion in the red and unfunded liabilities are anybody’s guess!
As the OC Register points out, this is “hubris raging out of control in Sacramento.” Little wonder they call it the “Left Coast!”
Lisa Benson, Washington Post Writers Group
Reid’s Uneconomic Policies Hurt Nevada
Posted by Tom in Economics, Nevada, State Finances on January 11, 2010
No one ever ascribed intelligence to Harry Reid, though a lot of other appropriate descriptions come to mind. One of his particular deficiencies is economics. We all know the economic penalties he is proposing for all Americans with Obamacare, but too little attention has been given to his specific penalties for Nevada.
Bill McCraley remedies that lack of press in today’s Reno Gazette Journal with his letter: Senators’ Attitude Costly to Nevadans. In it he rebuts Reid’s efforts to keep California garbage out of Nevada arguing that the alkaline desert around Winnemucca is particularly suited for storage and recycling and that Reid’s attitude just takes industry and jobs out of the state. Bill also pans Reid’s Yucca debacle for the same reasons concluding that we Nevadans are marginalized by this negativism.