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June 30, 2011

America’s Fiscal War Against Children

Laurence Kotlikoff, an economic professor at Boston University begins an essay posted yesterday at Bloomberg saying, “Our war in Afghanistan may be ending, but our war against our children continues in full force.” He adds:

“Our fiscal position is so dire that it’s showing up even in our phony official deficit accounting. Last year the CBO projected that official U.S. federal debt would first exceed 90 percent of annual economic output in 2021. This year it projects 2018 as that critical date. That’s a three-year deterioration in just 12 months. Including the debts of federal agencies to one another, such as those of the Treasury to the Federal Reserve, the number has already passed 90 percent.”

And how big is the "fiscal gap?" According to Kotlikoff:

"By my own calculations using the CBO data, it now stands at $211 trillion -- a huge sum equaling 14 times the country’s economic output . . . ."

He concludes by writing of what it would take to “get our fiscal house in order” with the answer:

“. . . One answer is to raise all federal taxes -- personal income taxes, corporate income taxes, payroll taxes, and estate and gift taxes -- immediately and permanently by 64 percent. Another option is to cut all noninterest spending by 40 percent.

Alternatively, if we wait 20 years to change policy, these two figures become 77 percent and 46 percent, respectively. If we wait 40 years, until all the baby boomers have safely taken their leave, the requisite permanent tax increases and spending cuts are 93 percent and 53 percent.

“Thus, the longer we wait to address the problem, the larger the bill our children must pay either in higher taxes or lower benefits. This is the awful zero-sum nature of our generational dilemma and the moral challenge of our day.

“The growing fiscal gap leaves no doubt. Intentionally or not, we have placed our children in grave economic danger. Their protection must be our highest priority. Our leaders, if they actually care about their children and ours, need to stop playing word games. They need to forget about the “official” debt, forget about the “official” deficit, forget about the “official” debt ceiling, start seeing the economic forest for the trees, and set in place policies -- policies that go far beyond what’s being considered -- to eliminate the fiscal gap.”

Well said, Mr. Kotlikoff!

June 29, 2011

Virginia 2, Maryland 0

In two separate analyses, Virginia has come out ahead against its Maryland neighbor.

In the first, CNBC’s fifth annual study of America’s top states for business, Virginia garnered the #1 spot. According to CNBC, the study ranks all 50 states, using more than 40 metrics in ten broad categories of competitiveness, categories such as cost of business, workforce, and business friendliness. Maryland, on the other hand, had an overall ranking of #29, and outperformed Virginia in only one of the 10 categories.

In the second study, entitled “Rich States, Poor States," prepared for the American Legislative Exchange Council by Arthur Laffer, Stephen Moore and Jonathan Williams, Virginia ranked #3 while Maryland ranked #21. The rankings included such measures as gross state product growth, personal income growth per capita, and non-farm payroll employment growth.The study for ALEC was introduced by a message from Gov. Sam Brownback of Kansas that included the following comments:

"Rich States, Poor States should be required reading for governors, legislators, and those who serve them. Money is spent more efficiently by the private sector than by governments, so it is reasonable to expect that states with lower overall taxes have better economic environments than states with high taxes and more government spending. It is true that lowering taxes can be politically difficult: even fiscal conservatives start losing their enthusiasm for cutting taxes when special interest groups that consume a state’s tax dollars warn them that tax cuts will have dire consequences. But the consequences of being caught in a spiral of increased taxes and a decreasing rate of return on the tax base are much more dangerous. Arthur Laffer, Stephen Moore, and Jonathan Williams use a clear, concise format to expose the scare tactics of the tax-and-spend crowd and show how economic vitality follows lower taxes.

“It is true that the policies of the federal government have a direct effect on the economic environment of the entire country, but governors and legislatures are not rudderless. We can and must start to change our country’s economic course by providing an environment that rewards our citizens for their efforts and their risks. The founders of our country understood that a republic with its multiple states was the perfect incubator for vetting competing approaches to public policies.

"Rich States, Poor States illustrates the outcomes of various tax policies at the state level throughout the country. The evidence is overwhelming and the proper course is clear: States should pursue policies that leave more money in our citizens’ pockets to help fuel and drive our economy.”

One especially interesting section of the ALEC report provides “10 Golden Rules of Effective Taxation.” Just two of them are:

  • “When you tax something more you get less of it, and when you tax something less you get more of it.”
  • “An economically efficient tax system has a sensible, broad tax base and a low tax rate.”

Some very useful information to remember come election time in November, especially when liberal/progressive politicians talk about “unmet needs” and raising taxes.

The reaction of Virginia Governor Bob McDonnell to the CNBC news can be found at the governor's blog.

June 28, 2011

Candidate for next month’s Porker of the Month

Since Citizens Against Government Waste doesn’t restrain rewarding its Porker of the Month to just elected officials, officials at the U.S. Environmental Protection Agency are making a strong case that they deserve to be next month’s Porkers. According to a report yesterday from Fox News:

“The Environmental Protection Agency has doled out nearly $100 million in grants to foreign groups and governments over the past decade, according to a new congressional report.

“The report from Republicans on the House Energy and Commerce Committee shows the pace of foreign grants has quickened under the Obama administration, with $27 million in EPA funds going abroad since early 2009 -- not counting projects in Canada and Mexico.

“The report said an unknown amount of EPA grant money has also gone overseas "indirectly" via grants to U.S. universities and organizations doing work in other countries.

"At a time of record debt and soaring unemployment here in the United States, the committee has discovered that EPA has intensified its foreign grants program," the report said.

“EPA defended the projects, noting that pollution is a global problem and describing the foreign initiatives as in the United States' interest.

"Pollution doesn't stop at international borders, and neither can our environmental and health protections; the local and national environmental issues of the past are now global challenges," EPA spokesman Brendan Gilfillan said in a statement.”

A copy of the report (requires Adobe) is available at the majority staff of the House Committee on Energy website.

A news report that attempts to attribute partisan motives is available at The Hill newspaper. In addition, this press release from the Energy and Commerce Committee includes links to a Human Events story, letter to the EPA Administrator, a list of 65 foreign grants awarded since the stimulus was signed into law, and a news video.

HT Big Government for the Fox News story.

June 27, 2011

Quote of the Day

"The modern-day dollar bill acquired its current design in 1957. Since then its purchasing power, relative to the consumer price index, has declined by a staggering 87 percent. Average annual inflation in that period has been over 4 percent, twice the rate Europe experienced during the so-called price revolution unleashed by the silver of Potosi.* A man who had exchanged his $1,000 of savings for gold in 1970, while the gold window was still ajar, would have received just over 26.6 ounces of the precious metal. At the time of writing (copyright 2008), with gold trading at close to $1,000 an ounce, he could have sold his gold for $26,596."

     ~ Niall Ferguson, Page 64 (paperback), "The Ascent of Money: A Financial History of the World"

*The New World city where Spain obtained much of its gold and silver.

June 26, 2011

Another Member of Congress Living in ‘La La Land’

Yesterday, we growled about Rep. Howard ‘Buck’ McKeon (R-Calif) who received June’s Porker of the Month award from Citizens Against Government Waste (CAGW) “for littering the fiscal year (FY) 2012 National Defense Authorization Act (NDAA) with what appears to be pork.” We commented that some members of Congress don’t understand that the nation is headed towards bankruptcy, as we growled on June 22, 2011.

We don’t have an award to hand out, but today we’ll growl about a bill (S. 929 -- the Literacy Education for All, Results for the Nation (LEARN) Act), sponsored by Sen. Patty Murray (D-Washington) and co-sponsored by such liberal luminaries as Senators Sherrod Brown (Ohio), Al Franken (Minnesota) and Bernie Sanders (Vermonth). According to the June 22, 2011 issue of The Taxpayer’s Tab from the National Taxpayers Union Foundation (NTUF):

“S. 929 would establish grant programs to create new initiatives for literacy and to improve existing efforts to teach children how to read.

NTUF adds the annual cost would be $2.35 billion.

A question for Sen. Murray: why isn’t all the money (federal, state or local) currently being spent on K-12 education sufficient to provide “high quality literacy education?” You can reach Sen. Murray on Capitol Hill:

  • Phone Number -- (202) 224-2621

For one member of Congress who definitely isn't living in the 'Beltway Bubble,' take a few minutes to watch this video (through Moonbattery) of Rep. Mike Kelly (R-Pennsylvania) [also available at You Tube]. It's Rep. Kelly's statement during an Education and Workforce committee mark-up, and as one person commented, "what a great American! Keep up the good work!"

June 25, 2011

Some In Congress Still Don’t Get The Message

Citizens Against Government Waste (CAGW) hands out “Porker of the Month” awards as “a dubious honor given to lawmakers, government officials, and political candidates who have shown a blatant disregard for the interests of taxpayers.”

June’s Porker of the Month has been named, and he is House Armed Services Committee Chairman Howard “Buck” McKeon (R-Calif.). He received the award:

“. . . for littering the fiscal year (FY) 2012 National Defense Authorization Act (NDAA) with what appears to be pork. The defense authorization bill, drafted and approved on Chairman McKeon’s watch, originally included a $1 billion slush fund – dubbed the Mission Force Enhancement Transfer Fund (MFET). The final MFET contains 111 legislative provisions costing taxpayers $651.7 million; 59 of the provisions, or 53 percent, appear to be similar to projects defined as earmarks in CAGW’s 2010 Congressional Pig Book.  According to Chairman McKeon, the bill – passed in the House by a vote of 322-96 – contains no earmarks.  However, the MFET did not exist in FY 2011, and it seems to be designed to allow members to secure pork for their districts without violating the congressional earmark moratorium."

CAGW continued their justification by writing:

“Luckily, Rep. Jeff Flake’s (R-Ariz.) amendment to eliminate the remaining $348.2 million from the MFET passed by a vote of 269-151 before the entire slush fund could be raided, but much of the damage had already been done.  CAGW is analyzing the 111 provisions to match as many as possible to both specific earmarks from 2010 and their sponsors in the House.  For example, on May 26, 2011, freshman Republican and Armed Services Committee member Chris Gibson (R-N.Y.) bragged in a press release that he secured $7 million for the SUNY Albany College of Nanoscale Science “to assess the desirability of establishing a Federally Funded Research and Development Center (FFRDC) for nanotechnology.”  Chairman McKeon has stated that his committee will not tolerate members “pressuring the Department of Defense to use any funds other than to comply with competitive, merit-based solutions,” and a Hill staffer was quoted saying the process “has been transparent.
“CAGW President Tom Schatz said, “If Republicans wish to retain their credibility on the earmark moratorium, House leadership must immediately inform every other House committee that schemes such as the MFET will not be tolerated.  In addition, there should be complete transparency for any communication, such as letters and phone calls, from members of Congress to the Pentagon that are intended to influence where MFET money should be spent.  The chairman’s tactics represent exactly the type of unaccountable behavior that the earmark moratorium was intended to eliminate.”
“The FY 2012 authorization bill also includes language which would keep the door slightly ajar for future funding of the alternate engine program for the F-35 Joint Strike Fighter (JSF) by requiring the Department of Defense (DOD) to reopen competition between the two engines if the JSF engine requires upgrades in the future. The alternate engine program survived on earmarks of $1.2 billion from FY 2004 through FY 2010, and the NDAA could still enable its zombie-like subsistence if President Obama does not veto the bill, as he has threatened.

Guess the chairman of the House Armed Services Committee hasn't heard the nation is facing a fiscal Armageddon.

More information about Citizens Against Government Waste is available here. You can reach Rep. McKeon's office on Capitol Hill by calling (202) 225-1956.

June 24, 2011

Arlogance: Alive and Well in Rosslyn

This week’s City Paper asks whether Arlington County’s “Artispheric Ambitions” expected too much. City Paper adds: “it was supposed to be a Kennedy Center for young people. And the night before it officially opened, at a boozy art party staged by Brightest Young Things and the Pink Line Project, you almost could’ve sworn that’s what it was.”

The article, reported by City Paper's Alex Baca, explains:

“But eight months later, as Artisphere approaches the end of its fiscal year, the resident arts center doesn’t look quite as magnetic as its administrators first expected.

“It’s only attracted 48,169* visitors since October, well short of the 250,000 initially projected by Arlington Cultural Affairs, the agency that oversees Artisphere. And by the end of June it looks like it will only have brought in $174,202 in revenue from ticket sales and rental fees—less than a quarter of the initially expected $789,912.Compare those numbers to what Arlington is spending on the place. Artisphere—which occupies the space that once housed the Newseum—cost $6.7 million to renovate, and it has an annual operating budget of $3 million. Even with grants from the Rosslyn Business Improvement District and a cushy rent-free arrangement with the property owner, taxpayers are picking up a large chunk of Artisphere’s tab.

“And so the county is taking a hard look at its investment. As first reported by ARLNow.com, by the end of this summer Artisphere’s staff and county officials will have crafted a revamped business plan they say they’ll implement immediately . . . .”

An April 7, 2011 staff document (requires Adobe) responds to County Board questions during an earlier budget work session. The Board questions related to “the originally approved FY 2011 Artisphere budget and what changed in the FY 2011 revised budget and the FY 2011 budget after mid-year as well as what changed between the FY 2012 proposed budget and the revised FY 2012 budget based on the new funds requested in the County Manager’s recommended add- back list.”

Although City Paper says Artispere has been a “dream” for a decade, the April 7 staff document shows the Artisphere has received formal Board action at least 15 times between September 8, 2007 and January 22, 2011. Nor does the “list does not include actions related to the procurement of various capital contracts or the amendments of those contracts.” A more significant item from the staff report, however, is what this growing arts boondoggle is costing Arlington taxpayers. The staff report says:

"Artisphere budget actions are shown in the table below; the revised FY 2012 County Manager recommendation row reflects the additional $500,000 in net tax support included in the County Manager’s priority add-back list.  Note that the allocations of expense and revenue may need to be adjusted upon completion of the revised business plan." (the table is on the second page of the staff document)

Art in the capable hands of county staff, not to mention Board micromanagement? Wrong! Goes to show that you can never have too much oversight.

June 23, 2011

So It's All Political. Who Knew?

William McBride, an economist with the Tax Foundation, introduces a selection of quotes from the Congressional Budget Office's long-term budget at their Tax Policy Blog. He writes:

"The federal budget is complex, and the partisan chatter surrounding it tends to muddy the water further.  That's why it's important to get it straight from the horse's mouth."

We growled about the CBO forecast yesterday, but what is especially interesting about Mr. McBride's post is his addendum:

"Addendum: The Daily Beast has this news:

"House Majority Leader Eric Cantor has dropped out of bipartisan talks convened by Vice President Joe Biden to reach a deal on deficit reduction, and Republican Sen. Jon Kyl is said to be pulling out as well. Cantor said his decision to leave was the result of a disagreement over whether to raise taxes. Democrats, as well as leading economists, say it's impossible to close the deficit without increased revenues, but Republicans have categorically ruled out any tax hikes."

"This economist says it is certainly possible to close the deficit by cutting spending.  It's just politically unlikely."

I'm not an economist, but I do believe the primary cause of the current fiscal mess is the result of out-of-control spending and not out-of-control taxation. For readers who continue to think the only thing that is needed to solve the problem of America's fiscal mess is "one-part spending cuts" and "one-part tax increases" are invited to look closely at the chart below, which Chris Edwards of the Cato Institute references in his Cato @ Liberty blog today. I may wear glasses, but it tells me the problem is that we're spending too much, way too much, and not that we need to raise taxes.

UPDATE (6/23/11): Jennifer Rubin introduces her comments about the CBO report at her Washington Post blog, Right Turn, today by saying:

"The Congressional Budget Office put out a very scary report today. It’s scary for the country and our economic future and it’s scary for Democrats who have done nothing to address the looming debt crisis, preferring fear-mongering instead."

June 22, 2011

Debt, Doom, and America’s Future

According to Jeff Dunetz at Andrew Breitbart’s Big Government today, the Congressional Budget Office (CBO) report, released earlier today, “warns of economic doom for America.” Jeff writes:

“America is about to be handcuffed. No, we didn’t collectively break some law leading to us being arrested and having to suffer through the traditional “perp walk.” The latest Congressional Budget Office (CBO) projection of our long term debt indicates it will be so burdensome that it will limit  lawmakers’ ability to adopt tax and spending priorities in good times and reduce flexibility to deal with recessions. The report says that our high debt will make financial crises more likely and long term growth less likely.”

Here’s how CBO summarized their report in the abstract:

This Congressional Budget Office (CBO) report presents the agency's projections of federal spending and revenues over the coming decades. Under current law, an aging population and rapidly rising health care costs will sharply increase federal spending for health care programs and Social Security. If revenues remained at their historical average share of gross domestic product (GDP), such spending growth would cause federal debt to grow to unsustainable levels. If policymakers are to put the federal government on a sustainable budgetary path, they will need to increase revenues substantially as a percentage of GDP, decrease spending significantly from projected levels, or adopt some combination of those two approaches. In keeping with CBO's mandate to provide objective, impartial analysis, this report makes no recommendations.

Here are the report’s “key points” as described by the CBO director himself at his blog:

“The retirement of the baby-boom generation is a key factor in the nation’s long-term fiscal outlook. It portends a significant and sustained increase in the share of the population receiving benefits from Social Security, Medicare, and Medicaid. Moreover, under current law, per capita spending for health care is likely to continue rising faster than spending per person on other goods and services.

“As a result, if current laws remained in place, the federal government’s spending on Social Security and the major mandatory health care programs (Medicare, Medicaid, the Children’s Health Insurance Program, and the health insurance subsidies that will be provided through insurance exchanges) is projected to grow from roughly 10 percent of GDP today to about 15 percent of GDP 25 years from now. (By comparison, spending on all of the federal government’s programs and activities, excluding interest payments on debt, has averaged about 18.5 percent of GDP over the past 40 years.) That combined increase of roughly 5 percentage points of GDP is equivalent to about $750 billion today.

"CBO presents the long-term budget outlook under two scenarios that embody different assumptions about future policies governing federal revenues and spending.

  • The extended-baseline scenario adheres closely to current law, following CBO’s 10-year baseline budget projections through 2021 and then extending the baseline concept for the rest of the long-term projection period. Under that scenario, revenues would reach 23 percent of GDP by 2035—much higher than has typically been seen in recent decades—and larger percentages thereafter. Nevertheless, annual spending would be greater, and federal debt held by the public would grow from an estimated 69 percent of GDP this year to 84 percent by 2035. (At the end of 2008, that debt was equal to 40 percent of GDP.)
  • The alternative fiscal scenario incorporates several changes to current law that are widely expected to occur or that would modify some provisions that might be difficult to sustain for a long period. Under that scenario, which many budget analysts believe is a more realistic picture of the nation’s underlying fiscal policies, revenues would remain close to their historical average of 18 percent of GDP, and federal debt would exceed 100 percent of GDP by 2021 and would balloon to nearly 190 percent by 2035.

"Those projections of federal debt under the long-term scenarios do not include the harmful effects that rising debt would have on economic growth and interest rates. If those effects were taken into account, projected debt would increase even faster."

At the CBO webpage for the 2011 Long-Term Budget Outlook, there are links to the full summary, full document, and supplemental material such as the director’s blog and an Excel spreadsheet of the underlying data. Don’t rely on the mainstream media to translate reports; rather, read the actual source material.

June 21, 2011

The ‘Fine Print’ in ObamaCare

A month ago, Ralph Reiland began an op-ed in Investor’s Business Daily by writing:

“Remember when House Speaker Nancy Pelosi got all wound up in March 2010 about the passage of ObamaCare and told the assembled conventioneers at the National Association of Counties that the bill's reforms were going to make health care in America "very, very exciting"?

“To lift "the fog of controversy" off the legislation, all Congress had to do, she explained, was "pass the bill so that you can find out what's in it."

Now we learn just how important it is to follow former Speaker Pelosi's admonition to "read the bill." More than a year after passage of the Patient Protection and Affordable Care Act, to use its formal name according to Wikipedia, the Associated Press tells us this evening (HT Drudge Report) that:

“President Barack Obama's health care law would let several million middle-class people get nearly free insurance meant for the poor, a twist government number crunchers say they discovered only after the complex bill was signed.”

“The change would affect early retirees: A married couple could have an annual income of about $64,000 and still get Medicaid, said officials who make long-range cost estimates for the Health and Human Services department.

“Up to 3 million more people could qualify for Medicaid in 2014 as a result of the anomaly. That's because, in a major change from today, most of their Social Security benefits would no longer be counted as income for determining eligibility. It might be compared to allowing middle-class people to qualify for food stamps.”
AP also reports this situation keeps Medicare’s chief actuary awake at night. Taxpayers needn’t worry about staying up at night since they’ll just have to pay the bills.

Since H.R. 2 passed the House of Representatives on January 26, 2011 (according to the U.S. Congress' Thomas system) to repeal ObamaCare, what is the U.S. Senate doing? Zilch! Nada! Nothing! However, as Rassmussen Reports (TM) reported yesterday:

“A new Rasmussen Reports national telephone survey finds that 53% of Likely Voters at least somewhat favor repeal of the health care law, while 42% at least somewhat oppose it.  Those figures include 38% who Strongly Favor repeal and 27% who are Strongly Opposed.”

Do America’s political elite need another wake-up call in November 2012 in order to repeal ObamaCare? In the meantime, Arlington County taxpayers can call Senators Mark Warner or Jim Webb. The switchboard number on Capitol Hill is (202) 224-3121.

June 20, 2011

Arlington County & the Outrage over Renewable Energy

The Arlington County Board "accepted" a 'community energy plan' (CEP) on May 18, 2011, that seeks to reduce greenhouse gas emissions by 70%, largely through so-called renewable energy sources such as solar panels and wind power. Background information on the CEP is available at the May 18 Growls and an earlier April 27 Growls, including the embedded links.

Let’s take a look at renewable energy and its ability to provide Arlington, let alone America, with the needed energy to power out future. As one might suspect, alternative energy has its roots in global warming, or climate change as environmentalists now like to refer to it as, and the Intergovernmental Panel on Climate Change (IPCC). In his UK Telegraph column on June 18, Christopher Booker writes the IPCC’s latest report “is packed with even more hot air than usual.” He explains:

“What is the link between a beautiful stretch of north Devon countryside, the brother of Diana, Princess of Wales, and that ever more curious body, the United Nations Intergovernmental Panel on Climate Change? The starting point for teasing out this riddle is a hefty new report just published by the IPCC on renewable energy. This has engulfed the IPCC in controversy yet again, after a preview of the report made headlines by claiming that, within 40 years, nearly 80 per cent of the world's energy needs could be met from renewable sources, most notably through a massive expansion of wind and solar power.

“What only came to light when the full report was published last week was the peculiar source of this extraordinarily ambitious claim. It was based solely on a paper co-authored last year by an employee of Greenpeace International and something called the European Renewable Energy Council. This Brussels-based body, heavily funded by the EU, lobbies the European Commission on behalf of all the main renewable industries, such as wind and solar. The chief author of the Greenpeace paper, Sven Teske, was also a lead author on Chapter 10 of the IPCC report, which means that the report's headline message came from a full-time environmental activist, supported by a lobby group representing those industries that stand most to benefit financially from its findings.

“Not surprisingly, expert critics of the IPCC have been quick to point out how this seems to reinforce the revelations 18 months ago, which did more to discredit the UN body's authority than anything in its history. At the centre of those scandals was the discovery that the more alarming predictions made by the IPCC's major 2007 report – such as a claim that most of the Himalayan glaciers would be gone by 2035 – were not based on proper science at all. They were simply scare stories originating from environmentalist lobby groups, used in a way that broke all the IPCC's own rules, which insist that its reports should be based only on properly accredited scientific studies.”

In wrapping up his column, Booker writes there are few “hard facts . . . in the IPCC's latest propaganda exercise. Its only purpose is to provide politicians, such as our Energy Secretary, Chris Huhne, with a piece of paper they can wave to claim that their dreams of covering the Earth with wind turbines have been fully vindicated by "the world's top climate scientists.”

The Economist published a lengthy analysis on June 17, 2011 of the IPCC’s collaboration with Greenpeace, writing:

“The full report shows where the number came from, and that’s why its publication sparked a fuss. One of the report’s 11 chapters is an analysis of 164 previously published scenarios looking at the energy mix over the next four decades under various assumptions. The scenario which had the highest penetration of renewables put the total at 77% by 2050. The research involved was done by the German space-research institute, which has long worked on energy analysis, too; its experts were commissioned to do the work by Greenpeace, and a Greenpeace staff member with an engineering background, Sven Teske, was the scenario’s lead author when it was published in a couple of different forms in peer-reviewed journals. It has also been published, in bigger, glossier format, by Greenpeace itself under the grating and uncharacteristically fence-sitting title Energy [R]evolution.”

The June 18, 2011 issue of The Week That Was, published by the Science and Environmental Policy Project concludes their comments on the IPCC/Greenpeace “affair” saying (requires Adobe):

“As the dubious science of the IPCC was unraveling, the UN Framework Convention on Climate Change (UNFCCC), under which IPCC festivities take place is asking member nations for donations to increase its roughly $25 Million budget by 15% because it has taken on new responsibilities, including gearing up to dispense $100 Billion per year by 2020 in payments from developed nations to developing nations as compensation for global warming.

“Perhaps it’s time for UNFCCC and IPCC to demand payments from the multibillion dollar environmental industry, which raises great sums playing to the false fears the IPCC creates. This would relieve the taxpayers of Western nations from the obligation of supporting an organization that is dedicated to lessening their standards of living. Further, it would remove the last shrouds covering the claim that the IPCC is an objective, scientific organization and identify it for what it has become– an organization for promotion of the environmental industry.”

Canada’s National Post captioned a June 18, 2011 op-ed by Rex Murphy about this story, “Inviting the fox into the henhouse.” Murphy wrote:

“This is not just letting the fox into the hen house. This is giving him the keys, passing him the barbeque sauce and pointing his way to the broiler.”

A great deal of the credit for unearthing the IPCC ties with Greenpeace are due to Steve McIntyre at his blog, Climate Audit.

Finally, while we’ve covered a lot of ground here, there’s one more reference worth mentioning, i.e., a June 19, 2011 article by Russell Cook at American Thinker.

June 19, 2011

When A Government Agency’s Watchdog Fails

Among their other duties, Inspectors General at the federal government level are charged with preventing waste, fraud and abuse. Consequently, when an agency’s internal watchdog, or Inspector General, flunks a peer review, it’s obviously beyond a matter of embarrassment. However, that’s just what the Center for Public Integrity’s iWatch News reported last Friday:

“The internal watchdog for the Commodity Futures Trading Commission (CFTC) flunked a recent review of its auditing operations, raising questions about its ability to prevent fraud, waste, and abuse within the agency that will soon police the multi-trillion-dollar derivatives market. (link or URL added)

“The embarrassing grade was disclosed by Inspector General A. Roy Lavik in his semiannual report to Congress, which included a summary of a review conducted by another federal inspector general. “OIG submitted to a peer review of our audit function, conducted by the Federal Election Commission Office of Inspector General. We failed, with a scope limitation,” Lavik’s semiannual report said.”

The iWatch News article went on  to report:

“ It is “exceptionally rare” for a federal inspector general to fail this kind of review, said Michael Smallberg, an investigator at the nonprofit Project on Government Oversight. The grade casts doubt not only on the CFTC watchdog’s effectiveness, but also on the authority and credibility of the CFTC’s own reports, said Smallberg, who monitors the world of inspectors general.

“The inspector general needs to be well equipped “especially as the CFTC takes on a larger role under the Dodd-Frank Act,” Smallberg added.

“Smallberg said he could recall only one other inspector general who received a flunking grade in the past five years — Arnold Fields, the Special Inspector General for Afghanistan Reconstruction, who resigned in January. A peer review of his office’s investigative operations, released last August, found they were “not in compliance” with applicable standards.

“The failing grade for the CFTC’s internal watchdog comes at a time when the agency is rapidly becoming a more important regulator of financial markets. Created in 1974 to oversee mostly agricultural futures and options, the CFTC’s work now includes complex financial futures and the agency is writing rules to begin policing the $600 trillion derivatives market by the end of this year.”

CFTC currently has 667 employees while its OIG has four employees, including the IG. The CFTC’s IG received a “passing grade” in a September 2007 peer review performed by the National Endowment for the Humanities’ IG. However, three of the four recommendations “had yet to be corrected.”

Since CFTC is set to take on a larger roll under the Dodd–Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama on July 21, 2010, do you think Congress was irresponsible in passing Dodd-Frank without knowing that agencies had all internal controls in-place? If so, the switchboard number on Capitol Hill is (202) 224-3121. Ask to be connected with the offices of Senator Warner, Senator Webb, or Representative Jim Moran. Call all three offices, and tell them that ACTA sent you.

June 18, 2011

‘Green Cars’ Are Virtually Free, Aren’t They?

Two years ago, Peter Glover introduced his American Thinker column about “the wishful thinking of greenie dreams” saying, “The social engineering spin of the green mindset dictates that we should buy ‘green' cars, divert food crops to fuel them, restrict air travel and ban plasma TVs and, of course, traditional light-bulbs.”

The ‘greenies’ might may want us to think that all those ‘green products’ come at little or no additional cost, but let’s take a look at the real world. In the American Thinker blog on Friday, Rick Moran points us to a “sobering piece” at National Review Online’s blog Planet Gore and to a Detroit News article.

At NRO’s Planet Gore, Henry Payne writes:

“The purpose of federal fuel-economy mandates is to keep the agenda of green pols hidden lest the public awaken to their enormous costs. Want to make cars fuel efficient? Tax gas. And commit political suicide. So instead we get the stealthy Corporate Average Fuel Economy (CAFE) laws, which forces automakers to compromise cars to government standards, not those of customers.

“But sometimes those costs still leak out.

“The Detroit News’s dogged David Shepardson has unearthed a study by one of world’s most respected automotive research firms that reveals that President Obama’s radical CAFE mandate that vehicles average — average! — 62 MPG by 2025 “could force vehicle prices up by nearly $10,000, reduce sales by 5.5 million vehicles annually, and eliminate more than 260,000 jobs.”

“Shepardson is quoting from the Michigan-based Center for Automotive Research and the 260,000 job loss figure (consistent with past job losses from CAFE rule hikes) is another dent in White House’s propaganda that Green creates jobs.

“The CAR study also reveals that Obama’s NHTSA and EPA have been gaming the figures when it comes to the cost of their new rules. The center’s study predicts it will cost between $3,744 and $9,790 per vehicle, while the agencies have low-balled the figure at $770 to $3,500 per vehicle.”

Shepardson writes in his Detroit News article:

“The two government agencies and California plan to propose fuel efficiency standards and tailpipe emissions limits for the 2017-25 model years in September. The EPA and NHTSA will finalize the new requirements by July 2012, after getting public comment.

“The agencies are considering annual increases in fuel efficiency ranging from 3-6 percent between 2017 and 2025, translating to a fleetwide average of 47-62 mpg by the end of the period.

“The fleetwide average has been set at 34.1 by 2016.

“Environmentalists who want the fleet average set at 60 mpg or more have won the backing of prominent governors and have touted polls claiming Americans support that standard.

“Automakers are running radio spots aimed at policymakers, warning of potential job losses if regulations are set too high.

“The center warned Americans' personal mobility — and the freedom to drive a car — is "under threat by extreme mandates."

"The risk connected to mandating permanent fuel economy standards in the long run is very serious," the report said."

Shepardson adds the following proviso, however:

“But some environmentalists say automakers and supporters continue a pattern of overstating the impact of federal regulations.

"Over the past four decades, the auto industry has consistently exaggerated the cost for meeting new pollution standards by as much as 9.5 times the actual costs," Roland Hwang, the transportation program director for the Natural Resources Defense Council, said in a blog posting."

Just what we need on the road -- more higher-priced clown cars. Wrong! Something else to thank our Capitol Hill potentates for? If you agree, the Capitol Hill switchboard phone number is (202) 224-3121.

The Center for Automotive Research webpage is here.

June 17, 2011

Don’t Raise Debt Limit Without Spending Cuts

If you believe the nation’s staggering $14.4 trillion debt is nothing less than putting America on the Road to Ruin, speak out. The current debate over raising the debt limit provides a historic opportunity to focus public attention, and then public policy, on a path to a balanced budget and paying down our debt.

103 House Republicans, led by Republican Study Committee Chairman Jim Jordan, signed a letter to Speaker Boehner earlier this month that “called for a three-pronged approach of spending reductions to resolve the debt limit impasse and avoid the greater debt crisis just over the horizon,” according to this RSC press release. The three prongs are:

  • “Cut - We must make discretionary and mandatory spending reductions that would cut the deficit in half next year.
  • “Cap - We need statutory, enforceable caps to align federal spending with average revenues at 18% of Gross Domestic Product (GDP), with automatic spending reductions if the caps are breached.
  • “Balance - We must send to the states a Balanced Budget Amendment (BBA) with strong protections against federal tax increases and a Spending Limitation Amendment (SLA) that aligns spending with average revenues as described above.”

More information about “Cut, Cap, and Balance” is available at this RSC webpage, including links to the text of the letter sent to Speaker Boehner, signature list, news articles, and organizations supporting “Cut, Cap, and Balance.” The ultimate goal is to get Congress back to a point where increases in the debt limit are no longer necessary.

You can use the CutCapBalancePledge.com webpage to find contact information so you can urge Senators Mark Warner and Jim Webb and Representative Jim Moran to oppose any debt limit increase unless all three of the above conditions are met. If you do not live in Arlington County, the pledge page enables you to find the contact information for your Senators and Member of the House of Representative. At the moment, almost 6,000 people have taken the pledge. Let’s work to get that number to100,000 by the end of the weekend.

HT to radio talk show host Mark Levin for the link to CutCapBalancePledge.com

June 16, 2011

Arlington School Spending 89% Above U.S. Average

Today’s Arlington Sun Gazette reports on new data from the Census Bureau showing “Arlington Per-Student Spending 89% Higher Than U.S. Average.” The Sun Gazette’s Scott McCaffrey explains:

“Across the nation, public school systems spent an average of $10,499 per pupil that year, the most recent available, according to new figures. For the same year, Arlington spent $19,538, according to figures from the Washington Area Boards of Education (WABE) survey, released in December 2008.

“Arlington had the highest per-student spending of any jurisdiction in the D.C. suburbs that year, according to the WABE survey. Among neighboring systems, the city of Alexandria spent $19,078 per student, while Falls Church spent $18,311 and Fairfax County spent $13,340.

“Arlington school officials have long defended high per-student costs as the price that must be paid to provide an expansive menu of student services. Critics have suggested that county taxpayers could save more than $100 million a year by reducing per-student costs to Fairfax County’s levels.”

Re: Arlington school officials’ defense of the dent that high cost-per-student makes in taxpayers wallets. We growled about this on December 10, 2010 when we compared SAT scores to the number of teachers per 1,000 students in the Arlington Public Schools. We’ll repeat the comparison from that post, but note especially the numbers for APS and the Fairfax County Public Schools:

  • Arlington Public Schools -- 102.91 teachers/1,000 students. Total SAT = 1,610.
  • Fairfax County Public Schools -- 75.91 teachers/1,000 students. Total SAT = 1,664.
  • Loudoun County Public Schools -- 81.92 teachers/1,000 students. Total SAT = 1,593.
  • Prince William County Public Schools -- 60.61 teachers/1,000 students. Total SAT = 1,499.
  • Alexandria City Public Schools -- 101.26 teachers/1,000 students. Total SAT = 1,441.
  • Falls Church City Public Schools -- 96.26 teachers/1,000 students. Total SAT = 1,712.

Sounds like Arlington taxpayers need to begin questioning that “expansive menu of student services” and just which ones are effective in raising student achievement and which can be eliminated.

June 15, 2011

Regulation As Ruinous As Taxation

Pete Sepp of the National Taxpayers Union has an op-ed posted yesterday at Investor’s Business Daily in which he points out that regulation can be just as ruinous as taxation. The “case in point,” he says is “a recent Environmental Protection Agency report on the costs and benefits of the Clean Air Act.” He goes on to explain:

“While this report estimates that CAA's regulations will generate $2 trillion in benefits by 2020, EPA Administrator Lisa Jackson has in the past boasted: "For every one dollar we have spent, we get more than $40 of benefits in return." The agency's latest study claims that rate of return could range from 30-1 to 90-1 in the most optimistic case.

“Our society can and should acknowledge the importance of clean air to our well-being, but how credible are these claims? According to a new analysis from economist David Montgomery commissioned by National Taxpayers Union, more than 90% of EPA's "return on investment" figure stems from feelings rather than facts — a distinction that could be used to justify more flawed rule-making throughout government.”

The NTU’s press release points out the economic analysis:

“reveals the very large net regulatory benefits touted by EPA rely on apples to orange comparisons, where the vast majority of the benefits have none of the financial reality that the costs do.

“In its Clean Air Act appraisal, EPA substitutes calculated misdirection for solid analysis” explained NTU Executive Vice President Pete Sepp. “Nearly all of EPA’s promised $2 trillion in benefits from existing regulations stem from feelings rather than fiscal improvements.

“Federal regulators arrived at their staggering figures by polling individuals on how much they’d be willing to pay to reduce risks in general, mostly using estimates from studies of occupational risks unrelated to air pollution.”

“Dr. Montgomery added “while less than 3 percent of the EPA’s purported benefits will show up as additional jobs or real output in the economy, 100 percent of the costs will do so. Even EPA’s own macroeconomic analysis shows that existing air pollution regulations are a net drag on the economy. And EPA’s tally doesn’t even take into account the costs of its pending new ozone standards and regulations on electric utilities over the next decade.” (emphases in the original)

In the conclusion of the report (requires Adobe), Dr. Montgomery writes:

“The cost-benefit analysis has been portrayed as finding benefits in excess of costs by a ratio as high as 90 to 1.  These are not tangible benefits that take the form of increased output and jobs. They are the result of problematic techniques for ascertaining a theoretical concept of how much people would be willing to pay to avoid an increased risk of death.  This concept, if applied well, may have some merit in helping guide policy makers towards spending programs that a society considers worthwhile, but the monetized estimates of such benefits are entirely conceptual and do not inject any real spending power into the economy.

“The macroeconomic study probably over-estimates beneficial effects of reduced mortality and morbidity on output of goods and services and on total employment.  Even so, EPA finds costs, not benefits, to the economy as a whole.  The macroeconomic analysis finds that in the most favorable case, net tangible benefits are only $18 billion or 1% of what the cost-benefit analysis has been used to claim.  The 90 – 1 ratio becomes more like 1 – 1.

“When the questionable effects on mortality are eliminated from the macroeconomic analysis, there are only net costs of $109 billion in 2020. This directly contradicts other claims that regulations create jobs and stimulate economic growth on their own, independently of whether they have any environmental benefit.  EPA‘s own analysis shows this is not true."

To learn more about the National Taxpayers Union, read their “About NTU” webpage.

June 14, 2011

More Improper Use of Your Federal Taxes

Talk radio station WMAL 630 AM has an Associated Press news story posted today discussing how “Social Security makes $8 billion in improper payments." The $8 billion includes $6.5 billion in overpayments and $1.5 billion in underpayments. According to the story:

“The Social Security Administration made $6.5 billion in overpayments to people not entitled to receive them in 2009, including $4 billion under a supplemental income program for the very poor, a government investigator said Tuesday.

“In all, about 10 percent of the payments made by the agency's Supplemental Security Income program were improper, said Patrick P. O'Carroll Jr., the inspector general for Social Security. The program has strict limits on income and assets, and most of the overpayments went to people who did not report all their resources, O'Carroll said.

“Error rates were much smaller for retirement, survivor and disability benefits, which make up the overwhelming majority of Social Security payments, O'Carroll told a congressional panel.

Does the bureaucratic incompetence with taxpayers’ dollars ever stop? It seemingly never does. Over the weekend, we growled on both Saturday and Sunday of how the IRS and the USDA, respectively, wasted so-called ‘stimulus’ money. Time to limit government in our view.

And what is your Congressional representative doing about it? The Congressional switchboard number on Capitol Hill is (202) 224-3121.

June 13, 2011

Quote of the Day

"The American Dream, 2011: You pay four bucks a gallon to commute between your McJob and your underwater housing to prop up a spendaholic, grabafeelic, paramilitarized bureaucracy-without-end bankrupting your future at the rate of a fifth of a billion dollars every hour.

"In a sane world, Americans would be outraged at the government waste that confronts them everywhere you turn: The abolition of the federal Education Department and the TSA is the very least they should be demanding. Instead, our elites worry about sea levels.

"The oceans will do just fine. It's America that's drowning."

     ~ Mark Steyn

HT Column at Investor's Business Daily

June 12, 2011

More ‘Stimulus’ Chicanery With Your Tax Dollars

Yesterday, we Growled that the IRS allowed “millions in erroneous car deductions to prisoners, dead people, kid,” as reported by news sources, Tax Prof Blog, and a report by the Treasury Inspector General for Tax Administration (TIGTA).

The IRS wasn’t alone in squandering stimulus money, however. According to CNS News, an audit at the U.S. Department of Agriculture found the agency “may have given out more than $4 billion in stimulus housing loans to ineligible borrowers.” CNS based the report on an AP story, which reported:

“A preliminary report from the USDA inspector general made available Friday says a sample of 100 loans out of 81,000 showed that almost a third were given to ineligible borrowers - including some with income that exceeded the program limits, others who already owned homes and borrowers who purchased homes with swimming pools. The loans were paid for by the 2009 economic stimulus.

“The inspector general's report says the loans precluded other, eligible borrowers from receiving the help. Based on the sample results, the report estimates that 27,206 loans worth about $4 billion - or more than a third of those granted - could be ineligible.”

The USDA IG's report (requires Adobe) was prepared by the department’s Inspector General. The following text from the report expands upon CNS News’ reported, including:

“Our preliminary analysis of the 100 loans identified 28 loans where lenders had not fully complied with Federal regulations or Recovery Act directives in determining borrower eligibility.  We found borrowers with annual income that exceeded program limits, borrowers that did not meet repayment ability guidelines, borrowers who had the ability to secure credit without the need for a government loan guarantee, borrowers who obtained loan guarantees even though they already owned adequate homes within their local commuting areas,4 and borrowers who purchased homes with swimming pools. For each of these categories the agency’s guarantee precluded other eligible applicants from receiving loans.  In our judgment, the borrowers that did not meet repayment ability guidelines also have a higher risk of becoming delinquent and defaulting on their loans.  Based on the sample results, we estimate that 27,206 loans (over 33 percent of the portfolio) may be ineligible with a projected total value of $4.0 billion.

“Rural Development exhausted its appropriations for this program (both Recovery Act and existing program) during the spring of 2010 and lenders then accumulated applications for future funding.  Agency officials informed us in September 2010 that lenders had accumulated applications amounting to over $1.6 billion.  Based on our statistical projection above, we concluded that the backlog of accumulated applications could have been reduced, and maybe eliminated, if lenders had properly determined the eligibility of all applicants who received guarantees with Recovery Act funds.  In September 2010, agency officials informed us that they received additional funding to guarantee the accumulated backlog of loan applications, which they estimated at about $2.2 billion.”

As we asked in yesterday’s Growls, do you think the members of Congress who voted for the “stimulus” bill in February 2009 knew that USDA did not have adequate controls to ensure that only eligible families qualified for guaranteed loans? Would any of them have even cared? Or is it just another reason why the "stimulus" bill stimulated so little economic activity? No wonder so many critics called it Porkulus.

June 11, 2011

The IRS Helping Prisoners, Dead People, and Kids

The Tax Prof Blog reported yesterday that the IRS allowed “millions in erroneous car deductions to prisoners, dead people, kid,” citing a report by the Treasury Inspector General for Tax Administration. He provides the following background information, which comes from the TIGTA report:

“The American Recovery and Reinvestment Act (Recovery Act) provides individuals with a Qualified Motor Vehicle (QMV) deduction, which is an additional deduction for State sales tax and excise tax on the purchase of certain motor vehicles. For Tax Year 2009 only, individuals could deduct State sales tax and excise tax for qualified motor vehicle purchases after February 16, 2009, and before January 1, 2010. The expiration date for the QMV deduction was December 31, 2009.”

According to a story by Kristina Peterson of Dow Jones Newswires” posted at NASDAQ.com:

“The Internal Revenue Service stumbled in handling a tax incentive designed to promote automobile sales, handing out more than $151 million in erroneous deductions, as well as 473 credits given to people who were imprisoned, dead or underage, a Treasury Department report said Wednesday.”

Here’s how TIGTA described the the problem in the report’s highlights:

"IMPACT UPON TAXPAYERS

“The American Recovery and Reinvestment Act of 2009 (Recovery Act) provides individuals with a Qualified Motor Vehicle (QMV) deduction, which is an additional deduction for State sales tax and excise tax on the purchase of certain motor vehicles.  The Internal Revenue Service (IRS) cannot verify whether individuals claiming a QMV deduction are entitled to the deduction at the time their tax returns are processed.  Inadequate verification of the QMV deduction increases the risk that taxpayers will be allowed to claim excessive QMV deductions.”

"WHAT TIGTA FOUND

“The IRS cannot verify whether individuals claiming a QMV deduction are entitled to the deduction at the time their tax returns are processed.  The reason is that individuals do not have to provide any third-party documentation to support that they actually purchased a qualified motor vehicle and, if a qualified vehicle was purchased, the amount paid in sales and excise taxes.

“Based on our review of a statistically valid sample of 150 individuals allowed a QMV deduction of less than the amount the IRS considers excessive, it appears that some individuals may have erroneously been allowed QMV deductions for vehicles that were not purchased.

“In addition, the process to identify potentially erroneous QMV deductions is not effective.  The IRS failed to identify 4,257 individuals claiming what the IRS defines as an excessive QMV deduction during tax return processing so it could hold and prevent the possible issuance of erroneous tax refunds.  These individuals claimed a total of more than $151.1 million in QMV deductions.  TIGTA also identified 473 cases for which information that the IRS maintains identifies the individuals as ineligible to claim about $1.02 million in QMV deductions they were allowed.  These individuals were in prison, deceased, or underage.

“Finally, the processes the IRS established to verify the 3,026 QMV deductions the IRS identified as having an excessive claim are also resulting in the erroneous release of tax refunds.  Our testing identified that the IRS does not ensure Tax Examiners are taking the necessary steps to verify the QMV deductions.”

Gee, do you think the members of Congress who voted for the “stimulus” bill in February 2009 knew that “the IRS doesn't require individuals to supply independent documents proving that they bought a car that qualified for the tax deduction, leading them to permit the tax break in error at times,” as Kristina Powers described the problem in her story for Dow Jones Newswires. Would they have even cared? Or is it just another reason why the "stimulus" bill stimulated so little economic activity?

Tax Prof provides several other sources for the news story, including Accounting Today, Associated Press, The Hill, Reuters, and USA Today, which you can find at his blog.

June 10, 2011

A School Report Needing Wider Attention

Thanks to Betsy at her blog Betsy’s Page, and reported in more depth by Civitas Institute, we learn:

“Data presented at a May 17th work session of the Wake County School Board showed that significant percentages of Wake County’s high performing teachers have neither an advanced degree or National Board of Professional Teaching Standards (NBPTS) certification.”

The Civitas report made several other points:

  • “For the longest time, educators have held that teachers with additional training –master’s degrees, doctoral degrees or national board teacher certification — are the best teachers and should be compensated accordingly.”
  • “Quoted in an article on the subject in the Raleigh News & Observer, Wake County Superintendent Tony Tata highlights the significance of the study’s results: “an important point is we pay extra for board certified teachers and the advance degree teachers receive extra but the high-performing teachers receive nothing.”
  • “As the state’s largest school district, the WCPSS findings are likely to reignite the debate over teacher pay.  The Wake School Board has requested additional information about the study and is expected to return to the issue again later this year.”

There seems to be a wide-range of opinion on the meaning of the data presented to the Wake County School Board. Much of the debate centers on the system used to rate the Wake County teachers, a system called Education Value-Added Assessment System, or EVAAS. For more information, you can read more about it in a two-part series at the Raleigh Public Record (Part I is here and Part II is here). The online news source began their Part I report this way:

“Last week, the Wake County Board of Education learned that the district’s most effective teachers are not teaching its lowest-performing students.

“Assistant Superintendent for Evaluation and Research David Holdzkom presented board members with several maps showing the distribution of high-performing, National Board-certified and masters degreed teachers across the county.

“The maps showed that high-performing teachers were concentrated in more affluent areas, while low-performing students clustered in less wealthy sections of the county."

WRAL TV5 in Raleigh also reported on the Wake County school system’s “drafts of student assignment plans.”

You may be wondering why this should be of interest to Arlington County taxpayers. A look at the Washington Area Boards of Education (WABE) report for FY 2011 shows that the average Arlington teacher salary is $73,742, or $4,897 higher than in Alexandria, it’s nearest rival for average salary. Looking further, you see the Arlington average is $8,742 higher than the rough average of teacher salaries in Falls Church and Fairfax County. In addition, an Arlington Public Schools teacher with a master’s degree (step 1) makes $4,502 more than a teacher with a bachelor’s degree (step 1).

With 2,035 teachers in the Arlington Public Schools during the 2010-2011 school year, if the additional salary used to pay for teachers with advance degrees or for certified teachers were used instead to pay for high performing teachers, it’s very possible that somewhere between $9.2 million and $17.8 million could be available to provide significant incentives for those high performing teachers.

Would significantly larger financial incentives encourage greater competition from high performing teachers? We think so, and it’s something that should be thoroughly discussed by the Arlington School Board, especially given the likelihood of higher student performance.

June 09, 2011

Bailing Out Greek Politicians or Bailing Out Banks

CNBC.com reported yesterday that “President Barack Obama on Tuesday urged European countries and bondholders to prevent a "disastrous" default by Greece and pledged U.S. support to help tackle the country's debt crisis.” The financial news organization then went on to report:

“After a meeting with German Chancellor Angela Merkel, he stressed the importance of German "leadership" on the issue - a hint that he expects Berlin to help - while expressing sympathy for the political difficulties European Union countries face in helping a struggling member state.

"I'm confident that Germany's leadership, along with other key actors in Europe, will help us arrive at a path for Greece to return to growth, for this debt to become more manageable," Obama said.

"But it's going to require some patience and some time. And we have pledged to cooperate fully in working through these issues, both on a bilateral basis but also through international and financial institutions like the IMF."

“A proposal for a second Greek bailout package worth 80 billion to 100 billion euros over three years was taking shape, euro zone sources said.”

At BigGovernment.com today, Dan Mitchell cites the CNBC.com article, and then provides some additional comment concerning the story, writing:

“The story doesn’t have much detail, but it appears that Obama is willing to brutalize American taxpayers directly (which is what he means by “on a bilateral basis”) and indirectly (i.e., thThe bailout is really a backdoor giveaway to the big European banks that foolishly lent money to the Greek government.

“What makes this development so unpleasant is that this new bailout (Greece already has been bailed out several times, with both direct and indirect handouts) will make things worse. Another bailout will be a case of throwing good money after bad. And it will exacerbate the economic damage by delaying the economic reforms that are needed to put Greece’s economy in better shape.

“And to make matters worse, the other insolvent European welfare states will look at what’s happening in Greece and conclude that they also can avoid necessary reforms and wait for handouts from American and German taxpayers.

Are you wondering why the “German politicians are willing to bail out Greek politicians?”  Mitchell points to this graph from the NY Times, and says, “The bailout is really a backdoor giveaway to the big European banks that foolishly lent money to the Greek government.” (emphasis added)

Ah yes, politicians helping the common man. Not!

June 08, 2011

Taxes and Spending & Facts and Myths

Veronique de Rugy, Reason magazine columnist and an economist at George Mason University's Mercatus Center, “separates economic myths from economic truths” in a recent Reason column.

For example, she discusses the myth that “(m)illionaires who are in favor of an income tax increase are fiscal heroes.” She argues, “No they’re not. Many of the rich get the majority of their income in the form of capital gains and dividends rather than ordinary income. They are essentially advocating a tax increase on those making much less money than they do.”

She provides several helpful graphs to support her arguments. In addition, she also explains much of this in a Bloomberg.tv video.

She also discusses other myths such as “(b)ig government means more redistribution to the poor” and “(t)he doomsday projections about unfunded Social Security and Medicare obligations are overstated.”

Her column is well-worth reading, and may provide you with the “intellectual firepower” to expose several of the most popular myths concerning taxes and spending.

June 07, 2011

May 2011 Has a Porker

Each month, Citizens Against Government Waste (CAGW) announces a winner of its Porker of the Month award as “a dubious honor given to lawmakers, government officials, and political candidates who have shown a blatant disregard for the interests of taxpayers”

CAGW has named “Secretary of Health and Human Services (HHS) Kathleen Sebelius its May Porker of the Month for the consistently murky process by which HHS grants or denies waivers from the Patient Protection and Affordable Care Act (PPACA).”  CAGW continues its justification this way:

“. . . Sec. Sebelius received the dubious honor in the wake of preferential treatment HHS granted to the American Association of Retired Persons (AARP), which aggressively supported the new healthcare law prior to its passage in 2010 but is seeking relief from the law now.  AARP is just one of 1,372 unions, businesses, and insurers, covering 3.1 million Americans, that have received waivers from the PPACA’s onerous regulatory burdens.

“It is disgraceful that Sec. Sebelius is arbitrarily choosing when to enforce the mandates of a bill that just one year ago she claimed would be universally embraced by the American public,” said CAGW President Tom Schatz.  “Clearly, groups like AARP do not view the bill as quite the expansion of choice or affordability in healthcare that the administration claimed it would be.”  Numerous CEOs and business owners, including at Starbucks, White Castle, IHOP, and the National Council of Chain Restaurants, have expressed deep concern about the impact of PPACA, stating that its provisions and mandates will dramatically drive up their costs, forcing them to lay off workers in order to remain solvent.

“On May 17, 2011, the White House issued a statement trying to justify its capricious waiver-granting process, saying that HHS has the power to “issue temporary waivers from the annual limit provision of the law if it would disrupt access to existing insurance arrangements or adversely affect premiums, causing people to lose coverage,” which is exactly what the new bill was supposed to prevent.  In addition, it is unclear how the annual limit provision will avoid similar problems in the future.  The White House simply explains that the waivers “will not be available beginning in 2014 when annual limits are banned and all Americans will have affordable coverage options.”

“One of the many objectionable elements of the PPACA was the unprecedented level of unchecked power that will accrue to the secretary of HHS; the unaccountable nature of this waiver frenzy is just a first taste of the new imperial bent of the secretary’s position,” added Schatz.  “On March 22, 2010, one day after the PPACA was passed in the Senate, Sec. Sebelius predicted that ‘once people understand what's in the bill … they'll be very enthusiastic about what Congress did last night.’  Instead, it has become clear that businesses are wary of what this bill will do to their bottom line, and that it will not control costs or improve healthcare outcomes.  We are still three years away from the full implementation of the PPACA and that date is looking more and more ominous as it approaches.  The time has come to give all Americans a waiver from this monstrosity by repealing the PPACA in its entirety.”

Sheesh!

June 06, 2011

Quote of the Day

"[T]he illusion that by means of progressive taxation the burden can be shifted substantially onto the shoulders of the wealthy has been the chief reason why . . . the masses have come to accept a much heavier load than they would have done otherwise."

     ~ Friedrich A. Hayek

HT Page 132, "As Certain as Death: Quotations About Taxes," 2010, compiled by Jeffrey L. Yablon, TaxAnalysts.com

June 05, 2011

Maryland’s Spending Ranks 4th, Virginia’s 21st

The weekend edition of the Washington Examiner reports that “Maryland spending growth ranks fourth-highest in nation” (an increase of 11.2% in the state’s general fund) while Virginia’s spending ranks 21st (5.6%). The article, authored by Brian Hughes, adds:

“Critics . . . say the report shows that Maryland is not doing enough to tighten its belt amid economic turmoil.”

The Examiner story identified 10 states where general fund spending will actually decrease from FY 2011 to FY 2012, going from Alabama (-0.2%), Wisconsin (-0.9%) and Massachusetts (-1.0%) to #49 Texas (-8.5%) and #50 Nevada (9.9%).

While Maryland Gov. Martin O’Malley’s office “was unable to comment on the report by Thursday evening” . . . “the Virginia governor's office said the study showcased a clear distinction between the commonwealth and other cash-strapped states in tackling budget crises,” adding:

“Virginia has cut billions of dollars out of its budget over the past several years, but was able to restore some funding during the 2011 General Assembly session when lawmakers marked up the state's two-year, $80 billion spending blueprint.

"While some states have sought to survive this economic downturn by hiking taxes on their citizens and job creators, Governor McDonnell and Virginia have taken a different approach," said spokesman Tucker Martin. "The governor and legislators have worked together over the past year and a half to reject tax hikes and responsibly reduce state spending. These fiscally conservative steps produced a budget surplus, and have positioned the commonwealth well for the years ahead."

The news release from the National Governors Association said in part:

“State budgets are recovering, but have not returned to pre-recession levels of 2008, according to the biannual report, The Fiscal Survey of States, released today by the National Governors Association (NGA) and the National Association of State Budget Officers (NASBO). As the federal government tries to get its fiscal house back in order, Washington might look to the states for lessons in good fiscal stewardship.

[ . . . ]

“General Fund revenues rose 5.9 percent in fiscal 2011, but 2012 revenues are still below 2008 levels. Recommended budgets for fiscal 2012 forecast a 3.9 percent increase in total tax revenue. Sales taxes increased by a scant 0.3%. Total General Fund revenues remain 3.6 percent below their pre-recession highs despite tax increases in several states.”

While NGA whines that “spending will still be below where it was in 2008,” it makes one wonder if any of that spending was really necessary. With Virginia’s spending increasing at double  the national average, one has to wonder if Virginia is merely returning to its pre-2008 profligate ways not withstanding the protestations of Gov. McDonnell. Contact information for your representatives in Richmond:

  • For members of Virginia's General Assembly, visit their webpage here.

p.s. Here is the link to the Spring 2011 Fiscal Survey of the States.

June 04, 2011

The ‘Fine Print’ in Arlington County’s CAFR

Beginning on page 200 of Arlington County’s FY 2010 Comprehensive Annual Financial Report (CAFR) is the “Independent Auditor’s Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133.”

The report by Clifton Gunderson LLP begins with over two pages of text describing Compliance, Internal Control Over Compliance, and Schedule of Expenditures of Federal Awards.” Most of the text is self-explanatory, and I won’t include any of it here. That text is followed by a six-page “schedule of expenditures of federal awards.” For example, Arlington County spent $10.3 million of money from 36 separate Department of Health and Human Services program, including 18 social services programs, 9 aging programs, and 7 mental health and mental retardation programs.

Finally, there is the “Summary of Independent Auditor’s Results,” which includes both the “Financial Statement Findings” and “Federal Award Findings and Questioned Costs.” There are no financial statement findings, but there are two “current year” federal award findings and three “prior year” federal award findings:

  • Finding No. 2010-01, Internal control over compliance. Specifically, the auditors reported, “The County’s procedures for supervisory review of child care and adoption case folders were not consistently performed.” According to the auditors, “8 out of 40 child care files and 31 out of 40 Adoption case files did not have evidence of supervisory review of participant’s eligibility determination.” There were no questioned costs. County management responded: “Procedures will be created to ensure supervisory or designee signature on  the service application . . . .”
  • Finding No. 2010-02, “The County’s suspension and debarment verification procedures were not performed for subrecipients” of the Community Development Block Grant (CDBG). Specifically, the auditors reported: “Suspension and debarment verification was not performed for subrecipients participating in the CDBG program.” Why didn’t the county do the verification? Apparently, “The County was not aware that the suspension and debarment requirement was applicable to subrecipients.” The auditors did not question any costs.
  • There were also three “prior year findings,” two of which were resolved. One involved provision of Title I services to ineligible APS students and the second involved the County’s failure to consistently determine participant eligibility for Adoption Services. A third prior year finding could not be resolved, and the auditors repeated it as a current year finding,  i.e, 2010-01.

OK, so current and prior year findings may only excite accounting geeks. However, unless County staff routinely comply with basic internal control requirements, sloppiness soon intrudes, and wasteful spending becomes ever more problematic.

June 03, 2011

European Union Exports Left-Wing Propaganda to America?

At Andrew Breitbart’s Big Government today, Publius quotes from the UK’s Daily Mail, which reports the European Union “is pouring nearly £20million a year from its human rights budget on lecturing the Americans on left-wing causes.” The Daily Mail continues:

“The EU Human Rights Fund is intended to help promote Western values in the developing world. But a shock report has found at least £17million of cash – around £2million from British taxpayers’ – has been ploughed into promoting the pet causes of Eurocrats in the U.S.

“It is being spent on promoting abolition of the death penalty, discussion of climate change, green energy, and the International Criminal Court – all controversial subjects in the U.S.”

The Daily Mail bases its story on a report by senior policy analyst Sally McNamara of the Heritage Foundation (Special Report 92, May 16, 2011), which they described as a “center-right think tank.” The special report’s introduction describes the issue this way:

“From 2007 through 2009, the European Union spent $1.23 billion in the United States. A large part of this money funded projects in other foreign nations that were administered by the U.S.-based World Bank and United Nations. However, according to the European Union’s financial records posted online, large amounts of European taxpayer money were spent directly inside the United States and served to give the European Union greater influence, and advance the EU’s favored political causes, in America. Some of America’s wealthiest academic institutions have received millions of dollars in research grants and other contracts to promote a positive view of European integration. U.S. non-governmental groups received large sums of money from the EU’s human rights budget to advance a social agenda that many Americans would consider radical. A number of multimillion-dollar confidential payments were also made inside the U.S. to unidentified “natural persons” (individuals, not corporations) from an array of EU budget lines, including the Common Foreign and Security Policy (CFSP).

“The United States and most European countries have much in common politically and culturally, and EU public diplomacy expenditures inside the U.S. should be minimal compared to spending in countries that do not share the core Euro–Atlantic values of democratic governance, the rule of law, and human rights.

“How any foreign entity is spending money inside the U.S. should be of concern to Americans and their elected representatives on Capitol Hill. Congress has a duty to ensure that U.S. laws, sovereignty, and interests are not being undermined from within. Congressional oversight is needed to identify exactly how and where the EU is intervening inside the U.S.

“Governments of EU member states and European parliamentarians should also thoroughly investigate EU spending in the United States and determine its appropriateness. The EU’s spending inside the U.S. comes after the EU Court of Auditors refused to sign off on the accounts of the European Union for the 16th consecutive year.

“The EU budget was increased by 2.9 percent in 2011, during a time of severe austerity cuts in many EU countries, including cuts to education budgets. The European Commission has requested a budget increase of 4.9 percent for 2012. Governments and parliamentarians should ensure that the European Commission’s existing expenditures are both necessary and prudent before contemplating any increases for 2012."

Several examples of EU spending that Heritage says “merits scrutiny by Congress” include the following:

  • Promoting the International Criminal Court (ICC): €970,783 ($1.41 Million).
  • Funding Anti-Death-Penalty Groups in the U.S.: €2.1 Million ($3.1 Million).
  • Promoting the EU’s Views on Climate Change: Total Expenditures Unknown.
  • Promoting Alternative Energy Projects in the United States: €300,868 ($437,522).
  • Other Grants to U.S. Non-Profit Organizations: €769,066 ($1.12 Million), especially U.S. think tanks.

Heritage concludes the special study by saying:

“The scale of EU money pouring into the United States is enormous. It is important that Congress ascertain whether these expenditures are in compliance with U.S. laws, and to ensure that American interests are protected. Congressional leaders should demand answers from Brussels about its secret multimillion-dollar payments to “natural persons” inside the United States. Members of Congress should raise important questions over Brussels’ interference in U.S. political and social debates, such as climate change, the death penalty, and the International Criminal Court. It is impossible to justify EU human rights budgets being spent in one of the world’s freest nations.

“The EU budget has become synonymous with profligacy, waste, fraud, and mismanagement. It is beyond time for EU member state governments and European parliamentarians to take action.

“The EU’s lavish expenditures in the United States comport badly with the sacrifices that millions of ordinary Europeans are being asked to make. EU member states who are making deep cuts to their education budgets will further question the vast grants that are being contracted to many of America’s wealthiest academic institutions on a regular basis. Member states and European parliamentarians should lay out the appropriate role for the EU, and determine where it is simply over-reaching its competencies to absurd degrees.

Thank you, Heritage Foundation, for this extremely informative 25-page report, Take a few minutes to read it in its entirety. It’s bad enough to be lectured by America’s Left, but much worse to know it’s being paid for by the European Union.

Arlington County taxpayers concerned about the issues raised in the Heritage Foundation report should contact their Capitol Hill eminences. Better yet, write to them at the links below:

  • Senator Jim Webb (D) -- write to him or call (202) 224-4024.
  • Senator Mark Warner (D) -  write to him or call (202) 224-2023.
  • Representative Jim Moran (D) -- write to him or call (202) 225-4376.

June 02, 2011

Joining the 'Once-Mighty?'?

The Wall Street Journal reported today that “Moody's Investors Service warned Thursday that it might review the government's Aaa debt rating for a possible downgrade as early as next month if there is no progress toward a deal in Washington to increase the $14.294 trillion federal borrowing limit and cut deficits.” And why would Moody’s take that action? The WSJ article went on to say:

"A short time after that announcement, a meeting at the White House illustrated why reaching a debt agreement has proven so difficult. House Democrats pressed President Barack Obama to insist that tax increases—something Republicans say they won't agree to—be part of any budget agreement that requires deep spending cuts."

Dr. Walter E. Williams raised a similar issue in his column this week at Investor's Business Daily, asking “Is U.S. on verge of joining the ‘once-mighty?”  Dr. Williams begins by noting “The latest Social Security Trustees Report tells us that the program will be insolvent by the year 2037.” He then goes on to write of how Congress describes “its spending is corrupt beyond redemption,” asking readers to consider “the term entitlement.” He explains:

“If one American is entitled to something he didn't earn, where in the world does Congress get the money? It's not Santa or the Tooth Fairy. The only way Congress can give one American a dollar is to first take it from another American. Therefore, an entitlement is a congressionally given right for one American to live at the expense of another.

“In other words, Congress forcibly uses one American to serve the purposes of another American. As such, it differs in degree, but not kind, from that uglier part of our history where black people were forcibly used to serve the purposes of their slave masters.”

Dr. Williams then continues with a bit of history, writing:

“People ask what can be done to save our nation from decline. To ask that represents a misunderstanding of history and possibly a bit of arrogance. After all, how different are Americans from the Romans, Spaniards, French and English?

“These were once mighty nations standing at the top of civilization. At the height of these nations' prosperity, no one would have predicted that they'd become third-rate nations, especially England. If during Queen Victoria's Jubilee in 1887 had a person suggested that England would become a third-rate nation and later challenged on the high seas by a sixth-rate nation (Argentina), he would have been declared insane.

“One chief causal factor for the decline of these former great nations is what has been described as "bread and circuses," where government spends money for the shallow and immediate wants of the population, and civic virtue all but disappears.

“For the past half-century, our nation has been doing precisely what brought down other great nations. We may have now reached the point of no return. If so, do we deserve it?”

Nothing less than thought-provoking. Certainly makes you want to read his column every week.

June 01, 2011

Quote of the Day

"Nothing is more calculated to make a demagogue popular than a constantly reiterated demand for heavy taxes  on the rich. Capital levies and high income taxes on the larger incomes are extraordinarily popular with the masses, who do not have to pay them."

     ~ Ludwig von Mises

HT: Page 129, "As Certain as Death: Quotations About Taxes," 2010, TaxAnalysts,Inc.