"The most significant threat to our national security is our debt," Admiral Michael Mullen, Chairman, Joint Chiefs of Staff, August 27,2010


Tuesday, March 30, 2010

The Promotion Committee

On March 11, 2010, Mr. Obama, seeker of all things good for all people in need, issued an executive order promoting his goal of doubling US exports over the next five years. The press release accompanying the order was deceitful in that it included direct misstatements of facts about the position of the US vis-a-vis its exporting competitors around the globe. The US lost its number one position some time ago and now trails both China and Germany in absolute export dollar amounts but, even more important, when evaluated on a per capita basis, the US trails most all of its major exporting competitors. Now, the Obama gang, following a pattern of applying campaign logic (reach for the stars, speak in lofty terms, criticize others but never be introspective, avoid specificity in commitments and programs and always introduce either directly or subtly some form of fear) has recognized that the US is slipping and does not want to appear to be disengaged on what is a very important and growing problem. So, they issue an order and will be able to take cover behind this order as the reality of a growing uncompetitive America deals with countries that now produce more, sell more and accumulate more while America produces less, sells less and gets itself deeper and deeper into debt. Obama created an “Export Promotion Cabinet” to get exports going. Quoting directly from the order, here are Obama’s appointee’s to the Promotion Cabinet:

Sec. 2. Export Promotion Cabinet. There is established an Export Promotion Cabinet to develop and coordinate the implementation of the NEI. The Export Promotion Cabinet shall consist of:

(a) the Secretary of State;
(b) the Secretary of the Treasury;
(c) the Secretary of Agriculture;
(d) the Secretary of Commerce;
(e) the Secretary of Labor;
(f) the Director of the Office of Management and Budget;
(g) the United States Trade Representative;
(h) the Assistant to the President for Economic Policy;
(i) the National Security Advisor;
(j) the Chair of the Council of Economic Advisers;
(k) the President of the Export-Import Bank of the United States;
(l) the Administrator of the Small Business Administration;
(m) the President of the Overseas Private Investment Corporation;
(n) the Director of the United States Trade and Development Agency; and
(o) the heads of other executive branch departments, agencies, and offices as the President may, from time to time, designate.

If you ever don’t want to accomplish something, just create a committee of no real experience individuals such as the fourteen bureaucrats designated above. Not one ounce of business, competition or real life experience in the group. You can read the entire order by clicking on http://www.whitehouse.gov/the-press-office/executive-order-national-export-initiative  TheFundamentals would encourage you to also reference its posting dated February 23, 2009 entitled simply, “Exports” for the facts. By the way, Obama’s order never mentions the word “competition.” He never mentions the words “competitive advantage” or "product differentiation." Why do you think that is?

There are many major problems with what this government is doing; here are just two. First, they don’t approach a large problem such as the deteriorating competitiveness of the US as a problem to be analyzed, understood and then tackled with necessary remedial action for change. Second, they avoid the reality of a problem such as American uncompetitiveness because the principal solution to this problem requires a reversal of the very policies and programs that they have introduced, supported, passed into law, built bureaucracies around and secured the votes of millions of special interest beneficiaries in the process. How can one possibly correct bad theory when your livelihood and very political existence depend on the continuation of same?

In the Obama world, the road to prosperity is paved with the largesse of government support for special interest programs and legislation. There is no better example than referencing Obama’s very own actions. Can you imagine a world in which a committee of government bureaucrats successfully makes America's products and services more competitive in world markets? Would you like to buy a product that this committee endorsed? Why is America slipping behind? Why are other countries more successful in selling their products and services? Does America’s heavy reliance on government intervention in all aspects of commerce; constant lawyering, litigation and rule making and spectacular low result, high cost public unionization help its competitiveness?

Next, we will look at a labor practice where Obama can control the outcome. We will look at one other of his executive orders which was issued within weeks of taking office in January 2009. We will analyze whether his position on this “executive order” is consistent with this statement decreeing more exports. Or, could it just serve to make US exports even less attractive In world markets?

Thursday, March 25, 2010

The Government Housing Bubble

On Tuesday, Secretary Treasury Geithner finally embraced some reality about the derivation of America’s mess. Here are some of his comments to Barney Frank’s committee: "The performance of the GSEs was symptomatic of this larger regulatory and oversight failure. They were allowed to earn private gains for many years, but ultimately the taxpayer subsidized their losses. They were allowed to expand and manage their investment portfolios without regard to the risk they posed to the system. Over time, the GSEs (Fannie Mae and Freddie Mac) were permitted to guarantee riskier mortgages and mortgage-backed securities. They were not required to hold adequate capital and employed inadequate risk management."

The entire remarks are available for review at http://www.ustreas.gov/press/releases/tg603.htm

This document may grow to become a testament about the inherent flaws and weakness of unregulated government activity in any major sector of the economy. TheFundamentals has been spectacularly critical of Geithner. We see no reason to change our position based on this one accurate, no punches pulled assessment of the breakdown of all aspects of the United States government in the creation and subsequent care and feeding of the US housing bubble. Geithner’s remarks are the most explicit indictment of government in all respects – elected politicians, bureaucrats, lawyers and their special interest co conspirators. Barney Frank spent most of his time during Geithner’s presentation and Q and A period defending himself and the party in power and pointing the finger at the party out of power. Frank simply does not get it. He continues to see issues through the eyes of a person who knows deep down that he is responsible but he cannot accept responsibility so he dances, deflects and defends. It is absolutely pathetic to see such a weak individual in the powerful position he holds due solely to a lack of term limits. Frank and his associates are determined to condemn this country to more of his brand of “lowest common denominator” governing and regulating. Geithner accurately described it as, “a race to the bottom…”

OK. So what?

Each major bureaucrat in the national government could do what Geithner did on Tuesday. Each could self examine their function and self indict and, at a minimum, start to change the conversation in the United States from the Disney-like fiction about the benefits and successes of government activities and, instead, start the recognition process of seeing the weaknesses and flaws in government dominated activities. It is no different than the process an addict goes through if he/she intends to rehabilitate. They must embrace the reality of their situation.

To wit, Education Secretary Arne Duncan is the new boy dancing to the tune of low expectation, low common denominator self interest unions that have devastated the prospects of principally urban youth by forcing them to attend damaged school systems. Instead of clamoring for more money, which was the downfall of FNMA and FHLMC, Duncan should call for a long time out and a direct assessment of the horrible record of the NEA and AFT in our large cities school systems. His call should be to privatize education, introduce competition and eliminate the self interest dominated control of the teachers union. Where and when will we get a Geithner like analysis of this situation? It is time for an intervention Mr. Duncan.

To wit, Health and Human Services Secretary Kathleen Sebelius is in charge of Medicare and Medicaid. These programs and systems are broken, busted and bewildered. Health care costs in the United States are double per capita (see: TheFundamentals, September 24, 2009) than other major developed countries with no resulting longevity benefit.  Instead of a Geithner like analysis we get government double talk. Where is the honest analysis? It is possible that this person just doesn’t grasp the severity of the problem? We doubt it. More than likely it is timed deception designed to provide cover until she can move on to another job with better pay and benefits.

To wit, the Postmaster General, Mr. Jack Potter. His entity is no longer able to compete. His concessions to the postal union are matched by similar cushy contracts by SEIU and NTEU and the aforementioned education unions – AFT and NEA and numerous other public employee unions in providing spectacular wages and benefits for their employees as the revenues decline and the business models beg for revision. Where is the honest analysis?

Here is how Geithner described the housing bubble and the performance of Fannie Mae and Freddie Mac. “A colossal, devastating failure.”

Amen Mr. Geithner. Duncan, Sebelius and Potter could mouth the same words and begin a real period of introspection and change. You (Geithner) have to because you are living the reality of the mess. You can’t dodge it. Let’s hope your example, albeit rendered posthumously, is contagious.

We want to repeat several statements from above because of their significance. Unregulated government activity in any major section of the economy is inherently flawed. “A race to the bottom.” “A colossal, devastating failure.”  Give Geithner credit.  Read his assessment.  Demand this accountability from all the millions of government employees.

Tuesday, March 23, 2010

Canaries in the Coal Mine

Canaries were placed in mines because they detected poisonous gases and passed out before the miners succumbed. So the miners watched the canaries and got the heck out fast if the canaries were dropping. The three headlines cited below are early warning indicators. Few will heed them. Those that do will prevail. The parenthetical comments are quick summaries of the issue as presented by TheFundamentals.

Virginia prepares to oppose national health mandatory purchases (Tenth Amendment issue)

http://www.washingtonpost.com/wp-dyn/content/article/2010/03/10/AR2010031003908.html

Moody’s warns about US debt rating (Deficits = Debt = Destruction syndrome)

http://www.nytimes.com/2010/03/16/business/global/16rating.html

Texas moves to include conservative doctrine and “founding fathers principles” in school curriculum (State differentiation issue)

http://www.nytimes.com/2010/03/13/education/13texas.htmlhttp://www.nytimes.com/2010/03/13/education/13texas.html

For those who believe in simple fundamentals such as “live within your means,” “no such thing as a free lunch,” “save for a rainy day,” limit your debts and pay them off as soon as possible” and “be charitable to those less fortunate,” what are we to do?  No, we are not going to get serious reduction of government spending from Sacramento, CA or Albany, NY or Springfield, IL. Charlie Rangel and Nancy Pelosi and Dennis Kucinich are not going to hold a news conference and announce support for loser pays litigation rules or right to work laws for federal employees. But there are states that realize that their economic freedoms which are the basis for their personal freedoms are significantly under their own state control and these smaller entities are much more likely to embrace financial responsibility and reject the special interest and fiscal promiscuity that now dominates the largest of the states. And these states, states like Virginia and Texas, and hopefully yours, are embracing the simple concept of recognizing that business and labor and education and health care providers need to compete to win; not be protected to be comfortable. The unions that run Springfield and Albany and Sacramento have seduced the politicians of those states into a curious suicidal mission guaranteeing second, third and even lower places for their citizens so that their relatively small number of beneficiaries getting public paychecks, benefits and pensions and the relatively small number of other protected insiders have a comfortable, cushy existence. In the old Soviet Union these beneficiaries were know as apparatchiks. The apparatchiks of Albany, Springfield and Sacramento are ignoring the canaries in the mine. TheFundamentals is betting that more states will embrace a positive and open approach to competition. These folks are paying attention to the canaries. This is not rocket science. But just watch the laggards in Sacramento, Albany and Springfield howl as they slip further behind the winners. Watch them run to Washington and kneel before their gods distributing largesse, rules, protection and handouts. The evolving America is not going to look like a national politicians dream. It will much more resemble an economic version of an athletic contest. The winners will standout and they will have embraced TheFundamentals.

One more canary reference.  Americans are ready to be led out of this deficits = debt = destruction syndrome.  Will that leader arise?  The people are way ahead of the politicians on this change.  Will the people sustain and persist?  Some think not.  They are ignoring this large canary.  We're betting on the people.

Thursday, March 18, 2010

What Happened to my Interest Income (see your IRS Form 1099)?

Two days ago, the minutes from the January 2010 meeting of the Federal Open Market Committee, which sets short term rates in the United States, were released. They included the following statement, “The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” You can access the entire press release about their actions at: http://www.federalreserve.gov/newsevents/press/monetary/20100316a.htm  

The public press interprets this action as a measure of the Feds thinking that low interest rates will promote a borrowing environment that will promote economic growth, a not entirely incorrect analysis but most certainly not a complete analysis. So, the stock market continues to hold to a tenuous rebound while most every indicator of real economic activity and growth either set or maintain new lows. The thinking is, “Rates are low, good times they are a comin’. Them Washington folk sure must know what they be doin’.”

Tax receipts at all levels of government go down. Spending either holds or rises. More deficits. More debt.

For the regular folk, there is a significant and maybe not so “unintended consequence” of the actions of Bernanke and eight of the other nine FOMC members voting to keep rates low. We don’t get paid for our bank balances. Any of us who have recently prepared our 2009 tax filings know that there is almost no such thing as a 1099 IRS Form for Interest Income of any dollar consequence. If you have a recently issued Certificate of Deposit or a Money Market Account at a bank or an investment firm you know of what we speak. Hundreds of billions of dollars are being placed with banks and investments firms and they are paying nothing for the deposits. Yet, if you go to borrow at the bank (for those of you who have forgotten of what we speak, borrowing at a bank is something that people do for worthwhile purposes unless you happen to have a lower Manhattan, New York City mailing address) you will find that the interest rates are not measured in basis points (a basis point is one, one hundredth of one percent or .001) as are the quoted rates for deposits but are measured in multiples of percents such as 5% or 8% or, if you borrow via the device of choice for many Americans, a credit card, the rate may be 15% or, heaven forbid, 21%.

Have any of you noticed a decline in the quoted rates for credit card borrowing to match the substantial reductions in deposit rates?

Why would the Fed permit this imbalance to occur? Banks pay almost nothing for deposits and receive substantial rates for loans or credit card borrowings? This can’t be good for economic growth can it?

Why don’t they just set the rates for loans much lower and then more people will borrow at the lower rates?

Why don’t they just tell the banks running the big credit card lending programs to lower their rates from 15 or 18 or 21% to 8% or 6%? That would surely lower borrowing costs for many people; lower their monthly payments; free up money to be spent on necessities and other expenditures?

Here’s why. You and I are the designated capital providers to Wall Street lenders, banks, investment firms and credit card programs. We are the ones who get to give them our deposits for nothing while they lend it out for rates as high as 21%! Their capital balances were devastated by the losses they incurred financing the bubble in real estate prices and other bad lending activities. They lost hundreds of billions of dollars by not being good stewards of their banking licenses. They lost billions of dollars by paying themselves exorbitant wages and bonuses based on the temporal, gossamer paper profits that disappeared as their self created house of cards collapsed. You think we got screwed when the fancy dudes at Treasury and the Fed bailed out Wall Street’s financial fools? Think again. Look at your Form 1099’s for 2009. You are paying much more right now for the ongoing bailout compliments of the geniuses at the Fed. Those low rates dictated by the Fed are your government’s ongoing subsidy of rebuilding the financial systems capital accounts. You are investing in rebuilding the capital account of your bank and your investment firm. Only it is done in such a manner that you get nothing to show for it. No stock certificate. No Senior Security such as a Debenture or a Preferred Stock. Not even a toaster. No nothing. Each dollar in a low earning bank deposit, CD or Money Market Account is a gift from you to the Federal Reserve Bank for their failure to do their job; or a gift to a fat cat banker who took risks for which there is no penalty or fine; or a Wall Street entity that Messer’s Bernanke, Paulson and Geithner and a ton of Wall Street lawyers deemed too big to fail. Washington DC bailouts are not just money borrowed from China. It’s money taken from you by not paying you for your money. If you or I took money from someone and gave them nothing in return we’d either go to jail or be called crooks or Ponzi schemers. In Washington DC they give these bad actors the Presidential Medal of Freedom and a government pension check.

Tuesday, March 16, 2010

For The Record (FTR)

FTR #1. There will be a lot of hoopla for the next few weeks about the greedy, inglorious basterds that we all know and love as “Wall Street.” Wall Street people are not wealth creators, regardless of the nonsense coming from their public relations machines. If they fail, as well many should, there will be some passing disruption akin to weeding out a vegetable garden. There may be limited, temporary disruption to the healthy productive plants but during harvest season the garden will be much more productive as a consequence of the weeding disruption. So it should have been when the greedy bastards (not everybody on Wall Street meets this definition) got caught outsmarting themselves with their aggressive holdings of crap securitized mortgage instruments. But, alas, the government, creator of all 20th century and now 21st century financial problems, decided to bail them out lest someone investigate their role in the fiasco. Well let’s set the record straight. The SEC has a budget of almost one billion dollars per year for an essentially recordkeeping oversight role that could be done in the private sector with computers for a fraction of the cost. The SEC should have done several things to blow the whistle on the greedy basterds. They did not. Instead, one sharpie and then a few others, with a computer and the $100 annual subscription fee to access the documents attached to the crap securitized mortgage instruments, analyzed them and concluded that they were a financial disaster waiting to happen in a very short time. So, they bet against the crap securities and made fortunes. They could have blown the whistle but as we subsequently have learned in the Madoff case, it would have been for naught. The SEC is way too important to listen to someone who is not in the territorial limits of the District of Columbia. Just to set the record straight, the greedy Wall Street basterds had more than casual support from their ignorant rating agency cohorts. More importantly, the finger prints of the national government in the form of the SEC, Department of the Treasury and Federal Reserve are all over this debacle. No one has paid for their complicity in this fiasco. This government refuses to self discipline. FTR.

FTR #2. The silly boy cum community organizer cum el presidente now wants to increase exports. His public relations releases for this cause du jour includes the following statement repeated sycophantly reported by NBC which appears to be the principal apologist/supporter for this rapidly failing (and that’s a fairly optimistic opinion) administration: “America is already the world's No. 1 exporter and the White House intends to stay in the lead, said a senior administration official who briefed reporters on the president's National Export Initiative ahead of the speech.” Read it all, if you have a couple of minutes to waste, at http://firstread.msnbc.msn.com/archive/2010/03/11/2225323.aspx  Now, just to set the record straight, there are problems with this statement and this “initiative.” As carefully researched and analyzed and presented by TheFundamentals is its February 23, 2010 posting, the US is not only not the “world’s No. 1 exporter” it is not even the No. 2. In dollar volume it is No. 3. Further, when analyzed on a per capita basis which means dollar value of exports per citizen, it drops to No. 9. Why does the government lie about our position? Well, if you have been reading TheFundamentals you know. For fifty years the US national government aided and abetted in many cases by state governments has taken a series of legislative actions designed to promote and protect certain groups of people which we know today as special interest groups. The most significant among these are public sector unions, attorneys and certain private sector entities. In so doing, these government bodies have forgotten the basics of economic intercourse which are price, quality and competitive features. The government has nothing to do with wealth creation. The government is a wealth destroyer. That is why it must be limited (see: USConsitution.) Wealth creation exists where enterprises are free to produce unfettered by government interference in the form of union promoting legislation, layers of rules and bureaucratic meddling and high taxes spent on non productive activities such as transfer payments and massive bureaucracies. There is as much chance of Obama increasing US exports as there is of Obama balancing a budget as there is of Obama paying down the national debt as there is of Obama even grasping that only through these aforementioned acts will US exports increase. FTR.

FTR #3. Let’s quit kidding ourselves about the failure of the Obama/Pelosi/Reid (OPR) health care entitlement legislation that will add massive spending to the annual deficits of the US long after this gang is enjoying their government pension checks. OPR run the national government in every sense of that term. They control all electoral and bureaucratic offices and personnel – over 2 million employees. Their majority in the senate is 59 – 41 and in the house they have about a 70 seat majority. And yet, they can’t get a simple majority to pass this legislation. Duh? Even Homer Simpson could see through the spin coming out of OPR about this legislation. What does it tell you when they can’t get any party out of power (POOP) votes and, even in their own party where they control all the goodies such as legislative favors and committee chairmanships, they cannot muster a simple majority out of a 70 vote absolute majority? The legislation stinks! All 2000+ pages of it. FTR.

Thursday, March 11, 2010

Seduction

Please click on and read this article entitled “Feds outline plan to nurse Great Lakes to health” http://www.denverpost.com/news/ci_14442676?source=searchles

Is this “plan” good government? When you read it did you think, “Boy, good idea; let’s get going.” Or did you think, “Is it just another spending plan? Is it designed to seduce a variety of audiences to rally around it and support it? Is it something the national government should embrace? Is it a power the people and states designated to the national government?”

What does government seduction look like? Let’s look at the above example. TheFundamentals thinks this "Great Lakes" example is representative of the process of seduction and greed that lead to promiscuity that leads to deficits = debt = destruction. So, we offer this “Great Lakes” example as a case study.

What are the characteristics of a government seduction plan?

1. Noble idea: rescue the Great Lakes. Great plan objective: save 20% of the “world’s” fresh water supply. Ideal concept: leave the Lakes better for the next generation. Backed up by apparent facts and statistics: protection of 100,000 acres of wetlands and a 40% reduction in the rate at which invasive species are discovered. We’ll come back to this obvious word parsing – think Clinton and his famous “it depends on the definition of “is” comment. Quotes from important people: well, the head of EPA is important to some people. If you read the article you will recognize that this seduction example contains all the necessary characteristics of a really good government seduction plan. There’s more.

2. Inclusion. A great seduction plan will always be inclusive. It does not appeal to one or two audiences. It appeals to ten, twenty, maybe even fifty audiences. In the article there is a key sentence – “The 41-page plan sets out ecological targets and specific actions to be taken by 16 federal agencies working with state, local and tribal governments and private groups.”

Sixteen federal agencies. State, local, tribal and private governments and groups. So, now the hook is set. Noble plan. Terrific objectives. Everybody is going to be included. Let’s get going.

3. Wait, there is still more to the seduction process. What is that you say? MONEY. Lots of money. We’re not talking a million or two. We’re talking a billion or two. A million or two won’t catch the eye of most bureaucrats, politicians and special interest groups so go for the big numbers. Billions always catch their attention.

4. Special interests. Keep them in the background. Don’t mention them. Stay on message. Stick with the ideals, the noble aspects. No need to mention the people who will really benefit. Who are they? You name it. Contractors. Consultants. Lawyers. Unions. See #2 above. SIXTEEN Federal Agencies will benefit. Note the subtle use of “private groups.” That list will be legion. They are the ones who have already planted their seed in the government agency receptacles. They are already figuring out how to get their piece of the programs billions. And they know that the spending estimate of $2.2 billion is just the beginning. They know that history tells them that this project will end up consuming 6 or 8 billion when it is done if it’s ever done. And they know that no one will be measuring results. No one will be saying stop. Eight or ten years from now someone will suggest a new program to deal with “rescuing the Great Lakes.”

5. Avoid any measurement or detail objectives. Government seduction plans are not measurable; they are way too important to be subject to examination. Avoid any form of public accounting. Avoid any employment of outside auditors to follow expenditures and measure results. Avoid accountability. Seduction and promiscuity are not exactly consistent with accountability. Parse the words. Don’t say there will be no Asian carp in the Great Lakes by 2014. Say that there will be a 40% reduction in the discovery rate of invasive species. Who knows what the heck that means? It means nothing. It can’t be measured. Remember creating and saving four million jobs? You can’t measure jobs saved. Make it vague. We’ll make up something later if anyone even cares.

So there you have it. When you read the article were you seduced? Or were you skeptical?

Couple of closing comments. Is financial seduction legal? Probably not but no one who can stop it is either interested in stopping it or is held accountable for not stopping it. The government machine of politicians, bureaucrats and special interests live for these seduction plans. Judges, who should make the aforementioned live within the constitution just don’t have the cojones to do their job and face down the legislators who can cut off funding for the judiciary. The constitution is quite clear in enumerating 18 activities for the national government. Distributing money to the states, tribes, local government and private parties is not one of the enumerated powers. The members of congress and the president all take an oath to defend and uphold the constitution. Vagueness in the wording of the constitution has been used by thousands of elected officials and judges to disregard their limited powers and expand their activities into massive wasteful spending that now threaten the very republic they are sworn to support.

The size and power and armaments now held by the government seduction machine may no longer be controllable by “We the People.”  There is going to be an inevitable clash over the deficits and the debt.  But complaining will do naught to deal with this mess.  There are so many beneficiaries of government seduction plans and greed fulfillment that it may be too late to enact corrective measures.  Remember, these activities do not exist without public funds.  Public funds come via taxes and debt.  If you want to put an end to wasteful spending, the funds must be cut off.

Tuesday, March 9, 2010

Executive Order 10988

On January 17, 1962, John F. Kennedy signed executive order #10988 which authorized national public employees to unionize and, thereby, forced the national government to negotiate contracts with union's representing employees. This order has done more to change the relationship between America's national government employees and its taxpaying citizens than any other act since the founding of the republic.  What TheFundamentals displays below is an advertisement issued shortly thereafter encouraging government employees to join their union, Service Employees International Union (SEIU.) What is the most powerful union for government employees today? SEIU!  2.2 million members. What organization leads TheFundamentals list of special interests? The SEIU! Just think about this situation. These workers enjoy wages almost double (in many cases, triple) that of the average American worker. They receive benefits (vacations, holidays, snow days, health insurance, etc.) way beyond that received by the average American worker. Their pension plans read like something Marie Antoinette would have composed for her court with generous payments after abbreviated work periods. Can this be changed? Of course. It might be something we voters wish to ask our candidates later this year as we are deciding for whom to cast our ballot. By the way, in one of the most flagrant examples of presidential power abuse of the electorate, BObama just appointed the head of  SEIU, Andy Stern, to his taskforce to examine ways to reduce the national debt (http://www.seiu.org/ .) The joke, if you enjoy gallows humor, is on us. Ask Andy Stern how much interest he has in reducing the national debt.  Don't forget to ask him to be specific about the savings that the SEIU will contribute to that end.


Friday, March 5, 2010

The Lonesome Man on the Mound

The United States is about to lose its politician pitcher. Who is this man, Jim Bunning? What can we tell about a man who stood alone and said “Enough” and when he could have used some help, some defense, some support, he found himself alone on the mound?

Jim Bunning was a major league baseball pitcher before becoming a politician. That qualifies as real life experience because you can get fired. He started pitching for the Detroit Tigers in 1955 and pitched his first no-hitter in 1958. He joined the Philadelphia Phillies in 1964 and pitched a perfect game for them on June 21 which was Father’s Day. How often does a pitcher pitch a perfect game? Well, in the National League, where Bunning pitched his, the previous one had occurred in 1880. There have now been 18 total in both leagues. As Wikipedia points out, more people have orbited the moon than thrown a perfect game. The US has had more presidents than perfect game pitchers. Obama’s wife has more aides and staff members than have ever in history thrown a perfect game. Oprah has been on more diets; Clinton more interns and girlfriends; Rangel more junkets; Tiger more waitresses; Sanford more trail treks and so forth.

The fact that this man pitched both a no-hitter and a perfect game places him in even more exclusive company. That feat has been accomplished by only six pitchers in history.  Good baseball trivia question.  Name the other five.

What causes a man to be able to accomplish these rare feats? TheFundamentals would suggest a few skills and traits: confidence; knowledge of the opponents; darn good curveball; really good fastball; some good fortune and a good defensive team backing you up. One more thing about Bunning. He didn’t always do what he was told to do. He often waved off pitch suggestions from his manager and catcher. He was and is his own man.

So, what does this have to do with the topics that TheFundamentals addresses? Bunning is retiring from the senate at the end of the year. He decided recently that it was time for the government to stop passing more spending legislation without paying for it. He has often been a maverick in the senate. So he stopped legislation to extend unemployment benefits. You can imagine the outcry. After several days of getting no support he backed off. He actually stopped for several days an extension of unemployment benefits and some other spending projects. Can you imagine? What audacity?

Here is a long quote from the head of the AFL-CIO, Richard Trumka: “Last Friday Senator Bunning single-handily blocked a vote on a House bill (H.R. 4691) that would have provided a short-term extension of the federal highway bill. Because authorization for the highway bill has expired, highway trust fund money cannot be collected or spent, and employees at the Transportation Department whose salaries are paid out of the trust fund have to be furloughed.

Yesterday Transportation Secretary Ray LaHood announced that 2,000 employees are being furloughed, primarily at the Federal Highway Administration (FHA), the Federal Motor Carrier Safety Administration, some portions of the National Highway Traffic Safety Administration (NHTSA), and some portions of the Research and Innovative Technology Administration (RITA).

The lapse of highway bill authorization means construction workers will be sent home from job sites because federal inspectors must be furloughed. Secretary LaHood also released a list of 41 federal lands construction projects in 17 states, Washington D.C., Puerto Rico, and the Virgin Islands that will be halted because federal inspectors are being pulled off the job. Halting these projects will make it harder for local economies, businesses, and working families to recover from the worst recession since the Great Depression.

There is simply no excuse for Senator Bunning holding these 2,000 furloughed workers hostage. Or for his holding construction workers at 41 projects across the country hostage. Or for his holding 1.2 million jobless workers hostage.

Senator Bunning embodies everything that is wrong with the U.S. Senate today: the ability of individual small-minded, selfish politicians to single-handedly prevent the majority from helping people who need help and solving our country's problems. “

Trumka had his say. Here is ours. Trumka has never met a subsidy, a bureaucrat, a protective piece of union legislation or a government program that he didn’t like. Who will stand up to the Trumka’s when Bunning is gone? Who will replace him? Will he/she stand up to the special interests like the AFL-CIO and say “enough?” In November, these politicians will ask for your vote. They might even say that they will stop the government spending.  Ask them where they were when the man on the mound needed some help. Ask them what project(s) will they stop? What government spending plans they will stop? What government employees they will terminate? How many will they permanently furlough? What government agencies they will eliminate? What bureaucracies they will shut down? What debt they will repay? What special interest groups they will send home without a government check? ASK THEM WHERE WERE THEY WHEN THE LONESOME MAN WAS ON THE MOUND?

To paraphrase Trumka, “What’s wrong with the senate today?” TheFundamentals thinks that there are not enough small minded, selfish politicians in the senate to say “Enough.” There are too many large waisted, greedy special interest folks like Trumka with their hands out and their lawyers in tow. There are not enough furloughed government employees. 2,000?  What the heck? We need 200,000 furloughed.

One last thing about the man on the mound; from his USSenate biography:

“Although his election in the U.S. Senate and induction into the Baseball Hall of Fame stand out as top moments in his life, the all-time high point in his life was his marriage to Mary Catherine Theis. Together, they raised nine children and have 35 grandchildren and 4 great-grandchildren. Jim and Mary make their home in Southgate, Kentucky and are active members of the St. Therese Catholic Church in Southgate, Kentucky.”


Thursday, March 4, 2010

Comments on the Illinois Plan for Fiscal Rehabilitation

Last week, TheFundamentals posted an essay on the alternative routes available to insolvent public entities such as the state of Illinois. Three alternatives were reviewed: tax increases, rationalization (cost or expenditure reductions) and bankruptcy. TheFundamentals argued in this essay that many private concerns used rationalization successfully to cut costs, cut employees and rebuild a strong competitive product/service offering for future growth. The reason this salvation can occur is due to the discipline of the marketplace in overseeing the private rationalization exercise. No such discipline exists with public entities. Therefore, those who choose the rationalization route for public entities are literally “kicking the can down the road” unless there is the added discipline of debt limits and debt repayment requirements. Debt has proven to be the undoing of the fiscal responsibility required for the sustainability of a democratic representative government. Every insolvent public entity, from Greece to Portugal to California to Illinois has ended up with an excess of liabilities over assets or an inability to meet current obligations with available resources (the classic definitions of insolvency) because of debt.  Now, to the Illinois plan.

Tax increases. The plan presented by the Civic Federation requires huge tax increases. Any call for any tax increases presumes a need to raise funds to pay for existing and future government spending programs, personnel and activities. Think about this aspect of the Plan in terms of a failed business such as General Motors. The only way General Motors can raise revenues is to sell more cars or charge more for the cars they do sell. They cannot sell more cars when the market is in decline and/or their share of the market is in decline. So, if they rely on “raising revenue” to solve their insolvency situation they have to raise prices on the cars they sell. The markets will then turn away from their cars and go to lower priced competitors. This move will expedite the failure of the company. GM will and should go out of business. And so it is if Illinois raises revenue. Illinois will become even less competitive with the other 49 states and Illinois will become a moribund political entity such as the state of Michigan. Tax increases are not the answer.

So, what does this lead TheFundamentals to conclude about the Civic Federation’s Plan? It is more of the same. An attempt to placate bureaucrats and special interests by making a few cost cuts now and causing some small pain to government employees while relying on more taxes from an already overtaxed, less competitive work force. It will only kick the can down the road which is and has been the approach of the imbedded politicians and their padded bureaucracies and benefitting special interest groups.

No state, no city, no country can compete with the burdensome costs placed on the private economic wealth creating activities by the current American established political, special interest dominated government scene. The characteristics of this scene are huge tax requirements, huge penetration by government in every commercial, societal and cultural activity and an out of control litigation burden on any human activity. There is no tax increase that can fix it. There is no cost cutting scheme that will sustain it. There is only one route for Illinois and its fellow traveler states to follow and that it the Federal Bankruptcy courts. The cabal of government intrusion in the form of law, rules, regulation, bureaucracy and costs and unions, lawyers and special interests must be destroyed.  Do not pass GO. Do not collect $200.00. Go directly to Court!

Tuesday, March 2, 2010

Fiscal Rehabilitation for Illinois: A Plan

The Institute for Illinois Fiscal Sustainability at the Civic Federation has issued a “Fiscal Rehabilitation Plan” for the state. The entire document can be reviewed at:  http://media1.suntimes.com/multimedia/illfiscalplan022210.pdf_20100221_15_28_27_19.imageContent

Here is some background and the key components of the Plan proposal:

Illinois’ Fiscal Crisis

Illinois is facing a financial crisis that is expected to result in a deficit of at least $12.8 billion going into fiscal year 2011, which begins on July 1, 2010. As in other states, the economic recession that started in December of 2007 has contributed significantly to Illinois’ poor fiscal health.

However, Illinois also entered the recession in worse fiscal condition than most other states because of a failure to deal with its structural deficit, a situation in which a government’s growth in expenditures consistently outpaces its growth in revenues. One of the biggest problems has been Illinois’ historically underfunded retirement systems, which have put increasing pressure on the State’s operating budget.

The Civic Federation is deliberately proposing this plan as a comprehensive package. Without pension reforms and spending cuts included in this plan, the Civic Federation opposes any new revenue increases.

The Civic Federation offers the following proposal:
• The State must first enact reforms of its retirement systems. These reforms must include additional employee contributions and reduced benefits for new State employees.
• Expenditures must be cut by at least $2.1 billion. General Funds spending should be rolled back to FY2007 levels, with the exception of Medicaid and General State Aid to elementary and secondary education. These areas will be kept at FY2010 levels to prevent loss of federal stimulus funds and protect critical funding to local school districts.
• Employee contributions to the retirement systems and the State’s group health insurance plan must be increased. Along with other changes detailed in the report, these measures are expected to save the state more than $400 million.
• The Civic Federation opposes any revenue increases until pension reforms are undertaken and at least $2.5 billion in budget cuts and savings have been made.
• The state income tax rate should be increased from 3% to 5 % for individuals and 4.8% to 6.4% for corporations. This increase is expected to raise about $6.0 billion in new revenues.
• The State should repeal the income tax exemption for federally taxed portions of retirement and Social Security income. This step is expected to raise $1.6 billion at the personal income tax rate of 5%.
• The State should enact a $1 a pack increase in cigarette taxes and end specific business tax deductions or credits that are outdated and economically inefficient, such as the income tax credit for research and development.
• If this budget plan were enacted, the State would pay down more than $10 billion or nearly 84% of its $12.8 billion deficit in FY2011.
• Because the remaining $2.1 billion budget gap would not be closed until FY2012, the State should continue to spend at FY2007 levels until the backlog of bills associated with the deficit are paid off.
• All other new revenue in FY2012 and beyond will be needed to make the required statutory pension contribution, which will increase in future years.

TheFundamentals will comment on this Plan Thursday, March 4, 2010. We welcome reader participation.