Posts Tagged ‘Deficits’

Explaining California “lifers,” or why people stay in a failed state.

November 13, 2012 3 comments

I have been a resident of several states across the United States, but two in particular stand out. One is California, to which I moved when I was ten, left at fifteen, and returned to for college. The other is Minnesota, where I was born, but to which I did not return until after college.

Just recently, my total time spent as a Minnesota resident surpassed my time as a Californian, capturing a plurality of my life’s years. Many have found it remarkable that I left a tropical paradise like California for the frigid tundra of Minnesota, but if you can look past the weather, California simply isn’t a great place to live. As I have been saying for years, “it’s a nice place to visit, but I don’t want to die there.”

Many of my friends disagree with me. One has spent nearly 70 years (aside from higher education back east) in the same beach community. Another calls himself a California “lifer,” which I find eerily similar to how prisoners with life sentences describe themselves.

In any case, while California has many things acting in its favor, it is nevertheless a failed state that I simply cannot find attractive as a home. To be fair, Minnesota is also heading in the wrong direction, but if California is just about to break the tape, Minnesota is still putting its running shoes on.

Victor Davis Hanson at the City Journal recently attempted to explain why he is a California “lifer,” in an article entitled “California, Here We Stay.” Many reasons he cites make perfect sense. Family heritage is one, and it is perfectly understandable. Indeed, it is the best reason I can think of for why I live in Minnesota and not Texas. There is the weather, of course. And there are certain cultural and educational institutions that are very attractive.

On the other hand, hegemony and inertia cannot prevail forever – just ask Britain, Rome, Greece, even Akkad. The general rule is that it is better to be present for the incline phase than the decline phase, and I can’t help but think that even the best of California has hit its peak. If UC Berkeley were a stock, it’d be

Hanson is honest about California’s shortcomings. Finances built on rainbows-and-unicorns accounting methods; poor primary and secondary education; hostile business climate running the productive out of state; environmental extremism – all of these things are conspiring to choke off the best of what the state has to offer the world.

On the other hand, he makes a point that I simply cannot get behind:

Another reason to feel hopeful about California is that it’s reaching the theoretical limits of statism. To pay for current pensioners, the state simply can’t continue to bestow comparable defined-benefit pension packages on new workers, no matter how stridently the public-sector unions claim otherwise. And as public insolvencies mount—with Stockton, Mammoth Lakes, and San Bernardino seeking bankruptcy protection a year after Vallejo emerged from it—public blame is finally shifting from supposedly heartless state taxpayers to the unions. The liberal unionism of an aging generation is proving untenable, as we saw in recent ballot referenda in which voters in San Diego and San Jose demanded that public-worker compensation plans be renegotiated.

California is reaching the theoretical limits of statism? This strikes me as remarkably naive, and it sounds hauntingly similar to things like “it couldn’t happen here,” or “it can’t get any worse.” Or perhaps “there are no black swans.”

I for one prefer not to underestimate the statist impulses of a polity that has consistently pushed the once-bright beacon of hope that was California back into the dark ages of economic and social thought. And they did it in less than a century and a half to boot.

In my personal opinion, the decay in California is not over, and it is not close to being over. I know that making predictions is the easiest way to be proven wrong, but here goes nothing.

I think that California will continue to be held in a chokehold by statists until the situation becomes completely untenable on a state level. At that point, the citizens of California will become enraged – not at their elected Judas goats, but at the federal government for not bailing them out. Seeing the practical importance of California’s electoral votes to their parties, the statist kindred spirits in Washington will forge a bipartisan grand bargain to bail out California, complete with all the crony capitalism and blatant corruption that entails. California will then double down on its failed policies and things will get worse. Another bailout will happen in quick succession, and while token gestures may be made to restore fiscal sanity, the damage will have been done.

California’s future is not bright. Perhaps California “lifers” have a reason to stay if they are already wealthy or comfortable enough to avoid the worst of the coming catastrophe. But if you’re a common person, your odds are poor.  I fully expect to see the middle class, whose livelihoods are far more likely to hinge on the day-to-day health of the economy than the wealthy, to continue to flee.

My only hope is that they don’t bring the politics of old California with them when they go.

Setting Fire to Straw Men and Slaughtering Paper Tigers

September 28, 2011 6 comments

If you’re a regular on, you have probably seen various picture-quotations popping up on your wall lately.  In a word, these need to stop.  They are almost universally moronic (see: Elizabeth Warren), and they never encapsulate the depth of thought required to address real issues.  In fact, the only purpose they serve is to make the public discourse all the more shallow.  My position is that we need more principles and fewer slogans.

Take this gem of stupidity for example, provided by rocket scientists over at “Americans Against the Tea Party”:

Click through and you’ll see exactly what I mean about shallow public discourse.  We see tax protestors, and then we see various things pointed out as government services which are supposedly beyond reproach.  There are multiple problems with this.

First, street signs, roads, sidewalks, power lines, etc. are indeed a part of the state budget (most power lines and utilities are in fact privately owned, but let’s extend the benefit of the doubt).  Because the tax protesters are in close proximity to these things, and probably use them on a daily basis, their arguments are somehow supposed to be less valid.

This is not so, and it is one of the most common rhetorical head fakes of the class warrior set.  Those people who talk about limited government are not talking about roads.  They are not talking about police, or fire departments, or even education as a general matter.  Cutting budgets for these are just about the last thing on the agenda.

The things that are crushing this country and the states within it are not the “night-watchmen” government services like the foregoing.  They are overwhelmingly transfer payments, corporate welfare, bureaucracy, and regulation.

Take California for example.  In state-issued budget charts, we can easily see that “Transportation, Total” is about $8.7 billion out of a $117 billion 2009-10 budget (and more than half of that is federally-provided funds!).  Even if we assume that all spending remotely related to transportation is justified, that is about 7.4% of the total budget. 

What about the other 92%?  Is it that unreasonable to think that perhaps something could be cut there?  That perhaps we do not need any more taxes to support the bloat that makes up the majority of government?  Congratulations “Americans Against the Tea Party.”  You’ve set fire to a straw man, and the nation is dumber for it.

My point is that we should all be thinking a little bit deeper about the real issues, so I’ll briefly touch on what I think those are: 

According to other publicly-available information, in the past 25 years the California budget has grown from $12.5 billion to $129.5 billion (although it peaked one year earlier at $135.9 billion).  That is a 1,036% increase.  What are the main drivers of the increase in state spending?  Transfer payments. 

Because we have decided that people deserve health care because they cannot pay for it, and because we have decided that people deserve to be given things because they have not earned them, we have blown up our budgets ten-fold.  But there aren’t any little arrows pointing to entitlements are there?  No arrow that points to lack of responsibility.  No arrow that points to vote buying.

Then there is the idea that whatever the government “provides” us is better than the alternative.  I find it insufferable when people defending government spending point to government monopolies as evidence of the great things that government provides us.  They are monopolies!  If we had a choice about how to fund our roads and street signs and sidewalks, I would imagine that we would find better ways to fund them than funneling real money through make-work bureaucrats, overpaying for labor, and ending up with sub-par facilities anyway.  In fact, just about any system of private financing would make more sense.

But let us assume ad arguendum that it is, in fact, the state’s responsibility to fund things like transportation.  Can we then justify even that 7.4% of the overall budget, as is clearly assumed by the picture above?  Even the most superficial investigation tells us no. 

Certainly main roads and highways should be built and maintained.  But what about light rail that nobody rides?  What about bus routes that nobody uses?  What about public transport options that hemorrhage taxpayer cash yet exclude private competitors by law?  What about “green” options that do nothing but prop up politically-connected businesses that have no way of sustaining themselves other than patronage?  Even under the assumption that the picture above has justified transportation spending, I believe that it has justified a fraction of the total.  Perhaps half if I am charitable.

And what of the funding options available?  Again, assuming that it is the state’s duty to fund this sort of thing, what makes us think that we are doing it correctly by using taxes?  Why spread the costs among everyone, despite the fact that usage varies?  I would argue that a system of user fees would a far more equitable way to go.  This would put the burden of transportation use on those people who actually use transportation.  And like the sign says, it would require no taxes. 

If I had one piece of advice to give my facebook friends it would be this.  Think before you post.  What seems like a cutting commentary on social issues ends up making you look like an idiot.

Welcome Aboard the “S.S. Apparent”

June 17, 2011 Leave a comment

Gosh, what would we plebes ever do without Ezra Klein to tell us that water is wet and the sky is blue?

Well, Captain Obvious of the S.S. Apparent has nosed his ship to port again.  Permission to come aboard, sir?

In today’s I-just-can’t-believe-it jaw-dropper, Captain Klein tells us that “better Medicaid coordination would cut costs.”  I know what you are thinking, but it is true!  Ironically, doing things better saves money.  (Yes, I just used the term “ironically” ironically.  How meta.)

But there are a couple of totally unwarranted assumptions at play here, and although I know Captain Klein would never deign to comment on the blog of a mere commoner, I shall rhetorically ask him a few questions all the same.

1) If all it takes to cut costs is “better coordination,” why have we not done this yet?

Is it because, perhaps, better coordination is not quite as easy as you make it seem?  Is it because, perhaps, good coordination is an impossible dream in a bureaucracy of such galactic proportions?  Is it because, perhaps,  people in control of a top-down bureaucracy of any sort will be terminally unable to provide optimized solutions?  In fact, the only way to take Klein seriously here is to have a willful lack of awareness of the problems associated with the “pretense of knowledge.”  (If you’re actually going to read that, you might as well supplement it with this.)

2) What makes you think that cost cutting is the goal?

Sure, there’s some mention of “if you had to cut Medicare…” and a sop to “deficit hawks,” but let’s be real here.  The ultimate goal of Medicare and any social entitlement is absolutely not delivering products and services to the widest number of people at the most cost-effective rate, is it?  We already have a mechanism for that, and it’s called the market.  In actuality, Medicare is about taking from some, giving to another, and reaping the political rewards.  Medicare is self-perpetuating, self-inflating, and ultimately self-destructive because it is – at the very core of its existence – a political program.  It will never be anything more.

3) Why should we “save” Medicare?

Because this would seem a ridiculous question to Klein, who knows nothing beyond the tiny intellectual box he lives in, I’ll concede a few points for the sake of the question.  I’ll concede that seniors “deserve” medical care.  I’ll concede that the “government” should provide it to them.  And I’ll concede that payment should come from people other than those receiving care.

Even with all that conceded, I challenge anyone to come up with a cogent argument for saving the system as we know it.  In the face of massive debt, massive deficits, unfunded promises, a stultifying regulatory regime, and a demographic time bomb of heretofore unimagined proportions, why should this relic from the baby boom be something that we seriously consider a viable solution now?  It is undeniable that Medicare could be run better if we fundamentally destroyed it and built it back up.  Why spend so much valuable time, effort, and money futzing around at the margins? That’s about as dumb as an Ezra Klein column.


When Limits Aren’t Limits, Limits Don’t Work

May 19, 2011 Leave a comment

I think the idea of a spending cap is generally a good one. We have a Constitution specifically designed to cap the activity of the government, but since that’s now being used as a napkin at White House state dinners, the idea of starving government of its sustenance will have to do. However, I am wary of the ultimate efficacy of a budget cap.

In an article called “Republicans tout spending caps as government hits debt limit” The Hill reports that:

The Treasury Department announced Monday that it was tapping into a pair of government employee pension funds as it reached its borrowing capacity. Sen. Bob Corker (R-Tenn.) and Rep. Jack Kingston (R-Ga.) both responded to the news by touting their spending-cap proposals as the way to rein in the nation’s debt.

Schadenfreude about the government pension raids is unwarranted at this juncture. First of all, should the pensions come up short, you and I will end up paying for them anyway, probably out of our retirement, which is apparently not special enough to be guaranteed by the government.

Then there’s the fact that the government doesn’t mind playing chicken with pension funds that it has no intention of leaving high and dry, rendering this move a scare tactic cynically designed to appeal to older voters.

And finally, it is less important to the point that I would prefer to make here.  So let’s instead take a look at the spending cap ideas.

Corker’s plan would set a cap on discretionary and mandatory spending, which would eventually lower the current spending rate of 24.7 percent of the nation’s gross domestic product (GDP) to 20.6 percent. If lawmakers fail to meet that cap, the Office of Management and Budget (OMB) would be required to make cuts throughout the federal budget to meet the prescribed limit.

…Kingston’s plan would go even further than Corker’s, capping spending at 18 percent of GDP. Like Corker’s plan, it would also require OMB to make across-the-board cuts to get spending to meet that cap if lawmakers cannot. Both proposals would require a two-thirds majority in Congress to override the caps.

Okay, not terrible. Given that tax revenues have averaged somewhere south of 20% for basically the entire history of the modern federal tax regime, pegging the cap to 18% seems to make sense. 20.6% sounds like a good way to reduce deficits without ever getting rid of them. But I remain skeptical of both.

My reasoning is simple. In Washington D.C., something like “18%” does not actually mean what you and I think it means.

Rather than “18 out of every 100,” the more likely definition in our illustrious capital is something like “18 out of every 100, not counting the special break for interest group A, B, C, D, and E, minus the tax credit for constituency F, G, H, and I, adding back the subsidy for likely voting blocs J, K, L, M, N, and O, using the ‘special’ math accepted by groups like the Office of Management and Budget, exempting the Defense Department, not counting previously planned increases in Medicare, Medicaid, and Social Security, and subject to emergency appropriations every time Congress holds a committee meeting.”

Try saying that three times fast. In effect, I believe that 18% is actually somewhere in the neighborhood of 18 – 98%. Roughly. 

Of course there’s precedent. Washington D.C. is littered with the corpses of numerical projections and “hard” caps. Obamacare for instance was very tactfully excoriated by the CBO for making projections that any sane person realizes will never come true. Despite its promise that it would help reduce deficits, CBO reports have consistently contained language indicating that this deficit projection remains dependent on several assumptions, each of which is somewhat speculative. In CBO-speak, that translates to “snowball’s chance in hell.” They passed it anyway.

And all through the health care “reform” bill’s passage, the OMB was the White House lapdog, sending out projections rosier than a Pasadena football game. In both Corker’s and Kingston’s plans, the OMB is supposed to be the office that makes the mandatory cuts once the cap is reached. Do you think they’ll be able to remove their collective nose from the president’s anus quickly enough?

And speaking of health care, Medicare was passed in 1966 with a $3 billion budget. Some 25 years later in 1990, it was expected to cost an inflation-adjusted $12 billion. Actual cost? $107 billion, but hey, what’s an extra 3,567% among friends, right? Actual cost another 20 years later? $447 billion.

No big deal. This will totally work.

But the most egregious example of “Washington math” that I can think of is the official inflation number.  Despite running the dollar bill printing press nonstop for going on three years, the Fed assures us that inflation is not a problem, and to date it has been underwhelming, for a variety of reasons which are all temporary in nature.

But the piece of evidence most commonly pointed to in this case is the fact that the CPI has not gone up appreciably.  “You’re not feeling the effects of inflation,” you’re told, “as you can see here, our chart says that there isn’t any.”  That’s all well and good until you remember that the CPI, despite being the “official” measure of inflation, specifically excludes both food and fuel.  When you add back those things (which literally everyone needs to survive), you see quite a different picture.

Again, I think capping federal spending is a great idea for a government that hasn’t had a real idea since the 18th century.  My skepticism stems from the same math that tells us that we have nothing to worry about from inflation.  Next time the CPI creeps up, will they just drop an item from the tabulation?  And next time a Middle Eastern country looks at us funny, will we exclude the inevitable war from the spending “cap”?  If history is any indication, the prospects of success are dim.

Cutting Only 9% of Spending is “Explosive”? Guess it Depends on What You’re Cutting.

March 1, 2011 Leave a comment

Scott Walker is certainly making a name for himself over in Wisconsin.  The new governor previously dazzled with a plan to rein in the Democratic political machine public sector unions, and now he has proposed an “explosive” new plan to cut spending.  Wherein “explosive” is defined as a cut of only 9% out of a single category.  Talk about your shifting goalposts.

The problem is, Scott Walker has proposed cutting money from education.  $900 million to be exact, which sure sounds like a lot, until you realize that it represents only a small fraction of total spending, and that total spending is far too high anyway.  But predictably, the calls for “Cut Spending Now!” have turned into “Anything But That!”  A plan to cut a piddling 9% off of a single category in a state that expects budget deficits of $3.6 billion in the coming years is anything but explosive.  Unless it’s a sacred cow being slaughtered, I suppose.

Then again, it is worth noting how little effect education spending has had over the years.  In this almost-famous Cato Institute graph, we see that ridiculously massive growth in federal education spending has translated to stagnation and regression in student performance.  Granted, this is federal, and not state, spending, and education is an issue properly left to the states.  But it would be foolish to think that these data are wholly inapplicable based on who is writing the check.  Observe:

It appears as though our country’s public education strategy is “throw enough shit at the wall and some of it will stick.”  Unfortunately, it doesn’t look like anything is sticking.  If you dig deeper, you soon find out how the public education system is being used as a jobs program for the politically favored, with layer upon layer of useless administration drawing crazy salaries and unearned pensions.  (Is it any wonder it’s all unionized?)

In the end, I am not sure if this is one more power play by Scott Walker to dismantle the “New Tammany Hall” that is the organized public sector, but I do not care.  It is a move that makes fiscal sense, educational sense, and moral sense.

A Word from Wisconsin, and My Fundamental Problem with Unions

February 23, 2011 5 comments

By now, all of my readers are likely to be apprised of the situation in Wisconsin, vis-a-vis public sector unions.  If not, the brief story is that new governor Scott Walker and the newly Republican state congress are attempting to pass a law outlawing collective bargaining rights for certain public sector workers, except over limited wage increases.  Naturally, this has led to much hissing, spitting, and general venomousness. 

Because when I want a raise at work, the first thing I do is march on the Capitol…

Everyone knows that we are out of money.  Wisconsin is trying to plug a $3+ billion budget shortfall.  And everyone knows that the public sector unions are a huge part of the problem.  They are institutionalized corruption.  First, they collect dues from their members, then they funnel those dues to politicians, then once said politicians are elected, they receive overly generous and completely unsustainable benefits packages, leading to more dues collected, and so on. 

That’s why teachers’ union members cannot be fired, even if they have sex with children; that’s also why police union members cannot be fired, even when they drive drunk and beat their wives; that’s also why so-called public safety officers have run up seven-figure legal bills defending civil suits over their abuse of citizens – with no consequences

But really, it’s all about a “living wage.”  Yeah…that’s the ticket.  (And for no good reason, the Wisconsin bill excludes the police!)

Much has been made about the nature of public sector unions, as opposed to their private sector brethren, but I don’t see it.  Yes, I understand how electing the people you are going to “negotiate” with for your next pay raise is the very definition of a conflict of interest, but that obscures the fundamental problem.  In my opinion, there is very little difference.

The reason why I find so little difference between public sector and private sector unions is because neither one operates outside the aegis of the government.  Sure, one group gets their overinflated paychecks signed by the state comptroller, and the other group gets their overinflated paychecks signed by a corporate officer, but both groups’ paychecks got overinflated in the same way.

The union labor movement, public and private, has been amazingly thorough in ensconcing themselves in the highest levels of the power elite.  And that is exactly why unions are not viable without specific governmental intervention.  For example, a majority of states still don’t have right-to-work laws, and thus they allow unions to force membership on anyone unfortunate enough to get a job in a union shop, whether they want to join or not.  In this context, it is simply silly to assume that private sector unions are any different than public sector unions.  After all, the coercion carries the force of law whether you work for the state or not. 

Is there any doubt that Detroit would be better off without such labor laws choking off the auto industry’s competitiveness?  Of course there is no doubt – but the private sector unions have Michigan’s government in a stranglehold, and they are not about to loosen up.  Neither is this some David vs. Goliath fight.  For all the talk about the Chamber of Commerce’s influence on the 2010 elections, the labor movement would prefer you not to know that, when it comes to spending on government lobbying and electioneering, unions are the “big dog,” and it doesn’t matter whether they are public or private.

And the labor movement doesn’t just influence elections – the people they elect often pass laws perpetuating the union’s influence far beyond election day.  And they have been hard at work increasing the labor movement’s scope, to the point of absurdity.  For example, did you know that in the highly publicized “labor” battle between millionaires and billionaires NFL players and team owners, federal labor law forced the taxpayers to pick up the bill for this mediation, simply because these overprivileged millionaires belonged to a union?  I can think of better uses for my tax dollars, thank you.

Did you know that the government can label a company a “sweatshop” for being non-union and thus prevent it from working on county projects?  And to give you an indication of the fairness of the process involved, consider this gem of a quote from your friendly local legislator:

“(Union organizers) would not be sitting there if something wasn’t going on,” Councilman James R. Ellenbogen, D-Banksville, said in announcing his support to an audience filled with union activists and company employees. “This is not a court of law, but I’m a working guy and I believe what they say.”

So slander is totally fine, just as long as you’re “a working guy”?  You can call one of the few remaining steel companies in the United States a sweatshop simply because “something’s got to be going on”?  And then you have the temerity to wonder why there aren’t any sizeable steel companies in the United States anymore?

Of course, none of this changes the overarching principle.  It does not matter whether your union represents government workers or not.  Your union exists because of the government.  Remove the intervention and you’ve removed the problem.

Then again, that is not an acceptable solution to the labor movement – they like their special privileges, thank you very much.  But it would be far more fair to those who are currently on the outside looking in.

Obama’s Sophistry on Earmarks

January 26, 2011 Leave a comment

In case you were paying attention to the State of the Union speech last night (and you were probably playing a drinking game, so I’ll give you a pass), you noticed Barack Obama say this:

If a bill comes to my desk with earmarks inside, I will veto it.

If that wasn’t enough to make you erupt into peals of laughter, let’s run a few hypothetical scenarios.  The next time Congress wants to pass a “doc fix,” postponing the planned cuts to Medicare reimbursements, let’s just have a Congressman insert an earmark. 

In case you’ve been keeping score at home, those planned cuts to Medicare reimbursements were the linchpin of Obamacare’s laughable promise to reduce the deficit.  Honestly, I’m envisioning Ron Paul earmarking $2 billion for something like the “East Texas Chicken Farming Museum and Cultural Center,” and inserting that into one of Obama’s pet pieces of legislation.  Try calling that bluff, Barack.

And Dr. Paul scampers off impishly into the night…

That would be a game of chicken (pun intended) that Obama would lose immediately, but if we could count on Obama to actually be honest, earmarking would be far more effective than any no vote.  On a more serious note, the best way to end the wasteful wars in the Middle East could very well be by inserting earmarks into the periodic funding bills necessary to keep our guns blazing away over there.  How about an ironic earmark for an Iraqi war memorial inserted into the bill for Iraqi war funds?

Of course, anyone who believes that Obama would ever follow through is of the most credulous sort.  This means that when Obama vetoes legislation that he already disagreed with, these people will tend to believe him when he says it was “because of the earmarks.”  And that, naturally, was the whole point.  Make a show of being tough on spending without doing a single thing you weren’t already planning.

In case that wasn’t enough sophistry for you, it turns out that the White House has already backed off its pledge, according to Cato.  Why?  Because an earmark is not an “earmark.”  Naturally.

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