ObamaCare Cost Increases in 2017

The Center for Health and Economy has released a study estimating the increased costs to taxpayers through the federal government in 2017.  ObamaCare premiums will be 22% higher in 2017, but the average monthly subsidy cost will go up by 26% from $291/month to $367/month.  The subsidy percentage increase is greater since incomes are losing ground relative to the premium increase.

The study says 11.1 million people per month are on ObamaCare in 2016 and this number is expected to increase to 11.4 million a month in 2017.  Of these 9.39 million in 2016 received tax credits and 9.65 million are expected to receive tax credits in 2017.  In 2016, 84.6% of the people on ObamaCare received a tax credit subsidy.  The study expects the same percentage in 2017. Clearly if you do not qualify for the tax credit subsidy, there is little likelihood that you will buy your health insurance through the ObamaCare exchanges.

The resulting increase in federal payouts from 2016 to 2017 is $9.8 billion.  The 2016 cost of the subsidies was $32.8 billion and the expected 2017 cost will be $42.6 billion.  The federal subsidies will therefore cost 29.9% more in 2017 than in 2016.  Those states that expanded their Medicaid rolls will also see large cost increases.

As an American, your health insurance premiums will go up, your deductible will likely go up, your co-pay will likely go up, your federal government costs will definitely go up, and in many states your state government costs will go up in 2017 thanks to ObamaCare.  Obama's transformation of America leaves those of us who are not subsidized with no hope.  Does it even provide hope to those who are subsidized as peons or serfs to the state?

Is New York State Really a Great Job Creator?

New York state government is spending its taxpayer's money advertising 10 areas near state universities into which a new company or an out-of-state company can move and pay no taxes for 10 years, provided the government likes your business and is given significant controls over your business.  Mostly New York's Democrat Socialist Party controlled government likes certain high technology companies, such as biotechnology companies.

They do not like the vast majority of businesses, at least not enough to give them any tax breaks.  Indeed, most businesses have to be taxed heavily so that the few anointed companies can be lured into the high tax trap of New York and so such advertising can be carried out in Maryland and Oklahoma and many another state.  Even more expensive is the huge welfare state apparatus of New York state.  The only way to fund that redistribution of income is to tax both businesses and better paid persons heavily.

Among the claims in the ad, New York state government claims it has created 400,000 jobs.  They neglect to say over what time period and whether these are net jobs or these are all new jobs with any lost jobs ignored.  The high tax and heavily regulated state of New York is undoubtedly very good at killing jobs, so it is perilous to ignore the jobs destroyed.  According to the Bureau of Labor Statistics, the non-farm seasonally adjusted establishment job tally of private sector jobs increased in New York state from March 2013 to March 2014 by 103,500.  So maybe the 400,000 jobs were net jobs since the depth of the never-ending Great Socialist Recession.  They were not recently created net jobs.  I have ignored any added government jobs since such jobs would only create greater burdens for any private sector company moving to New York.

New York claimed that the 400,000 jobs were the second largest number of jobs created in any state in the US.  In 2010, New York state was the third most populous state, so just to stay even on jobs, it would likely have to produce at least the third most jobs.  Actually, New York state has a population growth estimated from 1 April 2010 to 1 July 2013 of 1.4%, which lags the population growth of 2.4% of the nation as a whole.  What is more, a larger fraction of its population is over 65 years old and a smaller fraction is under 18 years old.  There seems to be no rush of people into New York state owing to good jobs, despite the huge sums of bailout money that the federal government has dumped into New York City and its financial institutions.  That bailout in the form of quantitative easing continues to this day.

Let us examine the growth in the number of non-farm private sector jobs relative to the other states:

There were 26 states in which a higher percentage private sector job increase occurred compared to the 1.45% increase in New York.  This is not such a remarkable achievement by New York as it is represented to be in its ubiquitous ad.  The New New York is not so very different.  It is North Dakota that is the jobs creation giant, albeit in percentage terms only.  Six states have had private sector job growth rates more than twice that of New York state.  In fact, we can see that in this recent period, the claim that New York created the second most jobs in number is clearly wrong.  The population of the state of Texas is greater than that of New York and its job increase of 2.99% clearly means it added many more jobs than did New York.  The population of Florida is about the same as that of New York, so its job increase of 3.49% also means more jobs were created in Florida than in New York.  So, in this time period, at least two states added more jobs than New York did.

The New York state government is running an ad which is very misleading.  There may be some convoluted manner in which it is not a literal lie, but it is surely a serious attempt to mislead the People.

The employment increases in the table above allow us to make a few interesting comments about some other states and the possible presidential prospects for their governors.  Note that Gov. Rick Perry's state of Texas is still tearing up the racetrack in creating jobs with a 2.99% increase between March 2013 and March 2014.  On the other hand, Gov. Chris Christy of New Jersey heads a state government where the private sector job increase is essentially zero at 0.07%, the next to the worst record of any state.  Gov. Scott Walker of Wisconsin has a state with a 1.24% increase, a 32nd ranking counting DC, but at least greater than the population growth in that time.  Gov. Bobby Jindal of Louisiana has a state that is not doing great in the business of job creation either at 1.08% increase and a rank of 35.  On the Democrat Socialist Party side, Gov. Martin O'Malley of Maryland earns his moniker of O'Folley with 40 straight tax increases, a job increase of only 0.52%, and a ranking of 45.  Maryland's population since April 2010 is estimated to have grown by 0.90% a year, so Maryland is not keeping up with the population growth with its meager 0.52% increase in jobs.  I marvel at the ability of some governors to seek higher office when they have not demonstrated that their states can create private sector jobs.

The People should be paying attention to this.  I will acknowledge that some of these states were basket cases and it will take several good governors to allow private industry to turn the states around.  Their state governments have bollixed up the state economies for a very long time in many cases.  The damage done can take a long time to correct and the healing process can take time.  Yet, when good government policies are established, some great results often occur quickly.  The engine of growth is in the private sector, but governments have to stop stuffing the gas tank with sand and sugar.

Taxpayer Unapproved State and Local Government Debt: $7.3 Trillion

Steven Malanga, senior fellow at the Manhattan Institute, says that state and local governments have $7.3 trillion of hidden debt.  These debts were not approved by taxpayers, despite the fact that most state constitutions and many city charters limit borrowing and require voter approvals.

• Illinois is rolling pension debt and state officials are being sued because they failed to disclose the debt and misrepresented it.
• Chicago city employees retiree health care annual expenses will increase by a factor of 5 in ten years.
• Each and every resident of Sacremento, CA is obligated with $4200 of debt they did not approve and the debt is 5.5 times the annual city budget.
• New Jersey legislators wanted $8.6 billion for school refurbishing projects and knew voters would not approve it.  So, they set up an independent borrowing commission for the purpose.  After spending $7 billion, the commission disbanded and left the taxpayers the debt.
• 95% of New York's $63 billion debt was never given voter authorization.

Malanga recommends that governments are forced to stop providing defined benefit pension plans.  Independent borrowing authorities must be denied and debts should only be allowed with voter approval.

The total state and local debt is mentioned twice in the article.  The first time it is mistakenly given as $7.3 billion.

Failed Federal Education Ideas

I just read Edward Hudgins article Obama offers more of the same failed education ideas.  It is an easy read and a good review of the futility of federal spending on education going back to George H. W. Bush.  He points out that despite all of the federal spending on education, there is only evidence that student knowledge has not increased.

The level of student knowledge and thinking skills was poor when local and state governments were the only governments controlling the K-12 schools and there has been no change with federal controls and spending.  Government spending on education is generally popular because almost everyone agrees that education of children is very important.

But eating is also very important and most of us agree that it would be nuts to have government-controlled farms, food processing plants, food distribution, and kitchens.  It would be even more appalling if we were all required to take our meals at the government-operated and controlled kitchens, because eating is so important.  In fact, because eating is so important, we would be very unlikely to entrust it to the government.  So why do we entrust the education of our children to governments?

Americans are said to be pragmatic more than principled.  A real pragmatist is actually the most principled of people, but it takes a great deal of high level thinking to understand that, so most people see no inconsistency in the idea of being an unprincipled pragmatist.  Many would claim that there is an optimal degree of commitment to principle that each pragmatist seeks within the context of his society.  But with respect to the education of children, it appears clear that Americans are not even in that respect principled or pragmatic.

They have been conned.  The con is not very sophisticated.  The failures of government-controlled education are really, really obvious.  The damage to American children is horrific.  The lingering damage into their adulthood is all too clear.  The resulting retardation of our economy is also very obvious.  Strangely, the very fact that everyone recognizes these facts is actually used by every President to justify spending still more unproductive money on education.  The same is true at the state and local levels of government.  Hope springs eternal that more money spent on government-controlled education will improve its quality.  It will not.

What is more, government controlled education has a critical conflict of interest.  Throughout history, most men have been the servants of their rulers.  The Norse god Loki recognized this and claimed that freedom for man was an illusion.  America has historically managed to be the home of an unusually free people.  We proclaimed famously that the only legitimate purpose of government was to protect the rights of the individual and we rebelled against the most powerful military nation in the world at the time in the name of that principle.  Now we pretty much forced to send our children to government-run schools that claim that principle to be false.  If we do pay for both the public schools and a private school for our children, the curriculum is still substantially controlled by governments.

What else would one expect of government but that it would revert to the historical tyrannical ruler known so well to Loki?  We are not even ruled by a government equivalent to the government we rebelled against in 1776.  Ours is a more tyrannical government despite being a democracy.  That government is actually very happy if most of the people are dumbed-down servants willing to be ruled by the political class of Progressive Aristocrats, most of whom have never escaped government indoctrination themselves.

As I have many times, Hudgins calls for more school choice and for private education.  Only private education will ever be capable of providing the knowledge and critical thinking skills needed by a people to be free and to stay free.  With greater knowledge and better thinking skills, we will flourish as self-managing individuals and the standard of living will rise rapidly in our society.  The stagnation of the Big Government era in freedom, knowledge, and our standard of living will be ended.  The rule of a tyrant such as Obama would no longer be tolerated.

Obama's Jobs Creation Mythology

Obama gave a speech upon wrapping up the G20 Summit Meeting in Seoul, South Korea on 12 November in which he said that 1 million jobs had been created in the U.S. in the last year.  Let us check this statement out.

The year for which jobs statistics are available as of now and as of his talk was November 2009 through October 2010.  In November 2009, 139,132,000 Americans had jobs.  In October 2010, the number of Americans with jobs was 139,749,000.  This is an increase of 617,000 jobs.  These numbers are for the actual numbers of Americans working and are not seasonally adjusted.  This deep into a recession, the seasonally adjusted numbers may not be very meaningful.  They are also subject to some judgment, which makes them wobbly figures, as evidenced by their frequent adjustment in subsequent months after they are announced even though the unadjusted number remains rock steady.

Now, perhaps Obama was rounding off the number of jobs created to the nearest million.  Reasonable rounding practice would say that was fine if the number being rounded was quite a few million, but at 617,000, the reasonable rounding would have been to the nearest 100,000 or to 600,000 in this case.  On the other hand, we never know if he is only counting new jobs and not subtracting the jobs lost in that time-frame.  Or maybe he is still trying to convince us that his stimulus programs created many more jobs than they destroyed.  We cannot know what he had in mind.  But, we know that most people who heard him talk think he was saying that 1 million more people are working now as compared to a year ago.  That is not the case.

Worse yet, the American population is growing and we have an increase in the number of people of working age and therefore need more jobs now than we did one year ago.  To maintain a constant percentage of the population in jobs, the economy has to create many new jobs each year.  Since looking at the unemployment rate when long into a recession commonly tells us little about how many jobs are desired, I largely ignore the so-called unemployment number.  On examining the history of employment numbers, I found that few Americans were unemployed in the late 1990s and that in January 2000, at the start of the decade, the unemployment rate was 4.04% and 67.49% of the working age, non-institutionalized, population was employed or actively looking for work.  If the economy were robust and able to generate jobs that people would want as much as they did then, we should figure that 67.49% of the working age population would still want jobs today.  This allows us to calculate the number of jobs needed to satisfy those who would work if the jobs were available and reasonably enticing.

The Great Socialist Recession began in December 2007 in the United States.  It started earlier in most other areas of the world, having been kicked off by a spike in oil prices, which soon caused a financial crisis since much of the world was working on easy credit.  Our jobs problem in this decade did not start in December 2007, however.  In January 2000, we needed another 5,689,000 jobs to put everyone looking for work in a job.  That number corresponded to a 4.04% unemployment rate with some fraction of the unemployed being unemployable due to minimum wage laws and some fraction due to people changing jobs by choice.  By December 2007, the number of missing jobs had already grown to 11,023,000 jobs due to a growing population and a higher unemployment rate of 4.80%.  It also appears that the desirability of jobs had fallen somewhat by then.  I believe this was caused by the huge growth of local, state, and federal governments throughout the decade.  By December 2007, these excessive governments were already draining the private sector of much of its wealth and had dragged down its job creation powers.  The growth of government mandate expenses on businesses had grown even faster than had the governments themselves.

By December 2008, the U.S. economy was missing 15,287,000 jobs.  By December 2009, it was missing a gigantic 22,108,000 jobs.  Let us examine the number of missing jobs by month from November 2009 to the latest statistics of October 2010.

Please note that bottom of each bar for the missing jobs starts at 20 million jobs, so we can observe the variation in the number of missing jobs more readily.  Also, in November 2009, the number of missing jobs was 20,646,000 jobs and in October 2010 the number of missing jobs had increased by 589,000 jobs to a total of 21,235,000 jobs.  So, contrary to Obama's claim of creating 1 million jobs and the implication that most people would draw from that of progress in supplying the demand for jobs, we find that the problem of missing jobs has actually become worse.  617,000 more people are working but just to remain in the bad situation we had already been in during November 2009, we needed to have created 1,206,000 jobs rather than about half that number which were created.  Things are still getting worse.

Examining the graph, we see that the job situation worsened in December 2009 and again in January 2010.  It then slowly improved through July 2010.  But it got worse again in August, September, and October 2010.  Obama has nothing to crow about.  But, that does not stop him from trying to convince us that he does.

California's Coming Massive Wealth Transfer to State Retirees

Among the many states which have promised state employees more in retirement benefits than they can reasonably deliver is the very Democrat state of California.  My last post discussed this problem broadly, but it did not examine the huge scale of the problem for California specifically.  That state is piling up future obligations which will come crashing down on the heads of California taxpayers more and more forcefully over the next decade.  It will act to force many more California businesses to relocate to less burdened states, such as Texas, which has created more than half of the new jobs in the country since the Socialist Recession began.

What California government admitted as of 2008 conditions was:

• The California State Teacher's Retirement System is short $40.5 billion.
• The California Public Employee Retirement System is short $35 billion.

Stuart Buck, a Distinguished Doctoral Fellow at the University of Arkansas has found that losses in the pension funds investments since 2008 has left them an additional $44 billion in the hole.  Worse yet, the state has been assuming that their investments for the pension funds will earn 7.75% to 8% per year return.  Given that we have had a decade of virtually no return on the stock market and given the huge problems which continue to plague the economy such as:

• the continuing home foreclosure crisis
• the further cost of bailing out Fanny Mae and Freddy Mac of about $300 billion
• the many states with hugely underfunded state pension funds totaling about $700 billion
• the many union multiemployer defined benefit pension funds with unfunded liabilities of about $700 billion which will destroy many unionized companies
• the much increased costs of ObamaCare which will increase everyone's premiums, increase medical taxes, greatly increase business costs, and put a huge strain on state budgets
• the increased costs of financial transactions due to the Dodd-Franks financial "reform" bill
• the increased costs of energy use planned by the EPA under its declaration that CO2 is a pollutant
• the increased costs of energy use due to ethanol, wind power, and solar power mandates, which California eagerly pushes forward
• government moves to force more unionization onto companies
• the ever increasing costs of more and more government regulations on businesses and those who pay the higher costs for their products and services
• our corporations will have the world's highest corporate tax rates beginning in 2011 and they are going up to help fund ObamaCare

the 7.75 to 8% rates of return imagined by the California accountants is totally unreasonable.  Unless the state of California is going to invest all of its pension funds in China, their wishful rate is much too high!  So, Buck says that using the more realistic rates of return used by private pension funds, the California pension funds will be $282.2 billion short.  This should be corrected for the current market values, so the real shortage is about $326.6 billion.  It turns out that the retiree health benefits program is also underfunded, by $51.8 billion.  The total shortfall for retirees health and retirement is then $378.8 billion.   This is about half the scale of the shortfalls on liabilities that caused the Socialist Recession that has brought down the entire U.S.!  This would be a disaster if the California Gross State Product were half of the GDP of the U.S.A.  It is a large fraction for a single state, indeed the largest state fraction, but it was only 12.7% in 2008.  This would imply that California will suffer for its state pension fund shortfall about 4 times more than it is suffering from the pain of the current Socialist Recession spread over the entire U.S.

When this entire burden falls on the Democrat-dominated state of California, the People of that state will know the Grim Reaper is among them.  Actions and choices have their consequences despite a peoples' refusal to foresee those consequences.  The California perpetual Christmas for retired state employees will have the characteristic of mass destruction for the people and companies of California.  Currently, the state is spending about $180 billion in 2010.  The unfunded pension liability is the equivalent of 2.1 times the annual state budget now.  If the state of California were to try to rectify the shortfall in these pensions it has a legal obligation to pay, it would require a large increase in tax revenues, which it will be hard to come by due to growth since people and companies are fleeing the already over-taxed state now.  Further tax increases will only accelerate the rate of abandonment.  The Democrats have put the people and the companies of the state of California into a very unforgiving vise, thanks to their many vices.

Government Employees Union is Lord of Campaign Spenders and Master Thief

The ultra special interest group in elections would be that which has the most to gain from Big Government.  The Lord of all the independent election campaign spenders is the government employees union, the American Federation of State, County and Municipal Employees, or AFSCME, union.  This union now has 1.6 million members and that membership has grown by 25% in the last decade, making it a very powerful union.

In comparison, the total number of non-farm workers in the U.S. grew by 5.0% from September 2000 to September 2010 and that number includes the large increase in government workers.  The U.S. population grew by about 6.5% in the last decade.  The AFSCME union grew by leaps and bounds because state and local government spending from 2000 to 2008 soared upward by 55% and federal government spending skyrocketed by 66.7%!  AFSCME grew rich on this huge transfer of wealth from the private sector to the government sector.  This bloodsucking of the private sector resulted in a decade of little job growth and little increase in the standard of living for other Americans.

The 22 October 2010 Wall Street Journal reported that AFSCME has spent or is spending $87.5 million on the Democrats to continue the transfer of wealth from the private sector to the government sector.  In comparison, the U.S. Chamber of Commerce, the 2nd biggest spender, is spending $75 million and the American Crossroads and Crossroads GOP is spending $65 million.  The Service Employees International Union, SEIU, which spend so heavily to get Obama elected and whose members pension fund is critically underfunded, is spending $44 million.  The next biggest campaign spender is another government sector employees union, the National Education Association, which is spending $40 million to keep the government spending spigots fully open.  It is clear that the unions are expecting to be paid back for their efforts with bundles and bundles of taxpayer money.  Meanwhile, the U.S. Chamber of Commerce and American Crossroads are simply trying to reduce the damage to the American People caused by the huge confiscation of private wealth by the governments and politicians who lust for power.

In the private sector, unions have come to represent a smaller and smaller fraction of those employed, with union members being more than 30% of workers in 1965, but only about 8% now.  In comparison, about 40% of state and local government workers are union members now.  That percentage has been fairly constant since the early 1980s, though there has been a recent Socialist Recession increase.  Those government employees in unions, when compared to state or local governments with no unions, are receiving 31% more pay and 68% more in benefits.  The states with the greatest incidence of unionized government workers are states with higher pay generally, so one has to correct for that.  The result is that they are paid 10% more with that correction, but such a correction to the huge benefit packages still leaves a large windfall to the unionized government worker.  The recent increase in union workers has been most noticeable on the West Coast, where 16.7% of workers in California are now union.  This is part of the reason why the local and state governments of California are in such financial straits.  It is also contributing to the anti-business climate of California and causing many businesses to leave the state or build new facilities outside the state.

Governments controlled by the Democrats are kind and generous to the unions.  But, the Tea Party movement has the Republicans much less inclined to be so generous.  On principle, they are in favor of smaller, limited governments.  They have become very aware that the growth of government has resulted in a loss of their freedoms and deprived them of personal choices.  The Tea Party is putting the screws to those long-tenured Republican politicians who have favored the growth of government.  The Tea Party people are aware that the transfer of wealth from the private sector to the government sector is hurting the economy and putting our children and grandchildren into unbelievable debt.  AFSCME is the opposition and is spending a hefty fraction of its members $390 per year dues to counter the Tea Party and the Constitution itself, which calls for a very limited federal government.

The Socialist Recession we are still staggering in for the third year, has caused a large reduction in state and local government income.  Many of these governments increased taxes on the People who were themselves staggering due to the Socialist Recession.  At least $160 billion of the $787 billion Stimulus Package was given to state and local governments so that AFSCME workers would not suffer from the recession as those of us in the private sector have.  The increased taxes and the federal Stimulus largesse allowed the states to have only a small reduction of employees, while local governments actually had a net increase in workers during the recession.  The Republicans must counter this privileged government worker nonsense as they gain strength in this election in Congress and in the states.  Republican Gov. Chris Christie has proposed that public employee unions in New Jersey be limited in the use of member dues for political purposes.  The National Right to Work Legal Defense Foundation wants to make government employee unions voluntary organizations, which is a viewpoint with which I agree and to which I have contributed.

The AFSCME union has a great desire to grow, which means it is invested in the growth of governments at the local, state, and federal levels.  It has another pressing reason to control the politicians: the defined benefits retirement plans for many state and local government employees in the union are unsound.  Illinois, Louisiana, New Jersey, Connecticut, Indiana, Oklahoma, and Hawaii have defined benefit legal contracts which they will not be able to meet by the end of the decade according to Prof. Joshua Rauh of the Kellogg School of Management at Northwestern University and Prof. Robert Novy-Marx of the University of Chicago Booth School of Business.  Illinois is in the worst shape, perhaps due to the legacy of the Chicago politicians such as Obama.  Assuming that the Illinois pension fund has an surprising 8% rate of return and the state makes the contributions planned, the pension fund runs out of money in 2018.  After that, the state must raise taxes by $14 billion a year.  The other states in the list will not last through 2020.  By 2030, 31 states may be unable to meet their defined benefit pensions requirements.  They will be going to the federal government with hat in hand to come up with the money to meet these requirements.  The resulting bailouts will match or exceed the bailouts of this Socialist Recession.

I recently discussed the defined benefit multiemployer pension failures of the private sector labor unions in a post called Union Pension Fund Swindles, Their Democrat Henchmen, and the Beknighted Taxpayer.
These private sector unions with very underfunded pension plans have been hoping to get the federal government and the Democrats to bail them out also.  Again the scale of the bailout is comparable to that of the bailouts in this Socialist Recession.

The legacy of the Democrat, and of some long-tenured Republican, politicians has been unfunded liabilities that are likely to total many times the staggering sums we recently paid in this Socialist Recession.  It is now clear that we still have huge payouts to make for Fanny Mae and Freddy Mac as well.  The payouts for their unmet obligations may be $300 billion.  The management of American government has been horribly mishandled and we will be paying the consequences with a lowered standard of living for a very long time.  It would have been so much wiser if we had lived by the principle that governments should be limited in power and that the People were capable of choosing their own individual values and managing their own lives.  The Nanny State has proven to be a thief operating on a scale to beggar us all.

CATO Grades Governors on Tax and Spending Actions

Chris Edwards of the CATO Institute has put out the 2010 report card on governors.  He grades their performance on their taxation and spending actions and policies.  These state spending results are very important because one of the major reasons for slow job growth and standard of living increases since 2000 has been the 55% increase in state and local government spending from 2000 to 2008.  State spending in 2009 and 2010 is down due to the extended recession, but local government spending was up in those years enough that combined state and local spending in 2009 equaled that in 2008 and exceeded 2008 spending levels in 2010.  State government spending increases were especially steep in the years 2005 - 2008.  Aggregate state spending in 2008 was 31.4% higher than in 2004 and 46.8% higher than in 2000.  Local government spending increases were even faster than the state increases between 2000 and 2008.  These state and local government spending increases added to the federal government increase of 52.5% between 2000 and 2007 and the increase of 66.7% between 2000 and 2008.  These combined spending increases shifted huge amounts of wealth from the private sector to the government sector and greatly weakened the American economy.

The sharp increase in oil  prices in 2007 started the worldwide recession, which brought on our mortgage and loan crisis.  The heavily funded state and local governments had spent years meddling with land use and building restrictions which had driven up the cost of housing beyond belief.  In the extreme case of California, this caused 80% of new home buyers to become sub-prime borrowers!  Such pressures on home buyers helped to fuel support for Fanny Mae, Freddy Mac, the Federal Reserve, and private lending institutions to make mortgages more readily available.  The house of cards developed by the combined effects of huge local, state, and federal spending increases, the oil price shock, and the mortgage and loan crisis created the basis for a severe recession.  Of course, Obama's socialist and anti-business response to that crisis greatly extended and delayed the recovery.

Let's return our focus to the orgy of spending by local, state, and federal government since 2000 and concentrate on state and local spending and debt.  Between 2000 and 2010, state and local government debt increased by 205%!  This debt estimate is based on official, unrealistic projections of state and local pension funds, which estimates them to be underfunded by about $1 trillion.  Better estimates see them as underfunded by about $3.2 trillion.  We have a tendency to focus more on federal spending and debt, but the problem of local and state spending and debt is also huge.  We have a general government spending and debt problem. 

The Edwards report on governors scores them on

• The average annual percentage change in per capita general fund spending proposed by the governor
• The average annual percentage change in actual per capita general fund spending
• The average dollar value of proposed, enacted, and vetoed tax changes
• Changes in the top personal income tax rate
• Changes in the top corporate income tax rate
• Changes in the general sales tax
• Changes in the cigarette tax rate

The spending on the general fund is used because governors generally have more control on that spending than on other state spending.  After all, state legislatures share in the spending, tax, and debt orgy.  The scoring is based only on the time period 2008 - 2009 since the period covered by Edward's governor report in 2008.  This is important, since Maryland Governor Martin O'Folly, err..... O'Malley earned a grade of F in the 2008 report since he urged and received a $1.4 billion tax increase in 2007, yet in this report he is at the bottom of the grade B list.  There is a paragraph in the report on each governor giving more information on their actions and policies and you should look up your governor in the report.  The paragraphs are labeled alphabetically by state.

The scores and grades are [State, Governor (Party), Score, Grade]:

South Carolina, Mark Sanford (R), 74, A
Louisiana, Bobby Jindal (R), 71, A
Minnesota, Tim Pawlenty (R), 66, A
West Virginia, Joe Manchin (D), 66, A

Wyoming, Dave Feudenthal (D), 63, B
Rhode Island, Don Carcieri (D), 62, B
Oklahoma, Brad Henry (D), 62, B
Nevada, Jim Gibbons (R), 61, B
Texas, Rick Perry (R), 61, B
Alabama, Bob Riley (R), 61, B
Montana, Brian Schweitzer (D), 61, B
Georgia, Sonny Perdue (R), 60, B
Missouri, Jay Nixon (D), 59, B
Idaho, C. L. "Butch" Otter (R), 58, B
New Mexico, Bill Richardson (D), 57, B
Vermont, Jim Douglas (R), 56, B
Indiana, Mitch Daniels (R), 56, B
Maine, John Baldacci (D), 55, B
Maryland, Martin O'Malley (D), 55, B

Kentucky, Steven Beshear (D), 54, C
Michigan, Jennifer Granholm (D), 53, C
Mississippi, Haley Barbour (R), 53, C
South Dakota, Mike Rounds (R), 53, C
Tennessee, Phil Bredesen (D), 53, C
Nebraska, Dave Heineman (R), 51, C
North Dakota, John Hoeven (R), 51, C
Hawaii, Linda Lingle (R), 51, C

Florida, Charlie Crist (R), 49, D
Ohio, Ted Strickland (D), 49, D
California, Arnold Schwarzenegger (R), 47, D
Delaware, Jack Markell (D), 47, D
Arkansas, Mike Beebe (D), 47, D
Iowa, Chet Culver (D), 47, D
Massachusetts, Deval Patrick (D), 43, D
New Hampshire, John Lynch (D), 41, D
North Carolina, Beverly Perdue (D), 40, D
Arizona, Jan Brewer (R), 40, D
Pennsylvania, Edward Rendell (D), 40, D

Washington, Chris Gregoire (D), 39, F
Wisconsin, Jim Doyle (D), 35, F
Colorado, Bill Ritter (D), 35, F
Illinois, Pat Quinn (D), 30, F
Connecticut, Jodi Rell (R), 28, F
New York, David Paterson (D), 25, F
Oregon, Ted Kulongoski (D), 19, F

The average score of the 45 state governors scored was 50.  The governors of Kansas, New Jersey, Virginia, and Utah had not been in office sufficiently long to score them.  The governor of Alaska is not scored because its budget is so peculiar that it cannot be compared to that of other states.

The average score of Republicans was 55, while that for Democrats was 47.  Yet, Gov. Manchin (D) of West Virginia was tied for the 3rd best score with an A at a score of 66, while Gov. Jodi Rell (R) of Connecticut had the third worst score of only 28 with a grade of F.  Nonetheless, the Republicans in this report's time-frame and also that of the 2008 report ( R 55 - D 46) scored significantly higher than did the Democrats.

Edwards points out that some governors think businesses are simply cash cows to be milked for higher state spending.  Prime examples are Quinn of Illinois and Kulongoski of Oregon.  Others, such as Carcieri of Rhode Island, Manchin of West Virginia, and Pawlenty of Minnesota understand that lower state taxes on businesses help state businesses to compete with those in other states and with those in other countries.  Edwards advises that corporation income taxes be abolished because they decrease jobs, create huge compliance burdens, and raise relatively little revenue.

In the last two years, nine states increased their top income tax rates:  California, Connecticut, Delaware, Hawaii, New Jersey, New York, North Carolina, Oregon, and Wisconsin.  Three states have cut their top income tax rate:  North Dakota, Rhode Island, and Vermont.  Governor Carcieri of Rhode Island was outstanding in cutting the state's top income tax rate from 9.90% to 5.99%.

We need to pay attention to the assault on our liberties due to the growth of local and state governments as well as that from our voracious federal government.  This list also gives us a scorecard for the several governors who are running for the Senate in this election or who are being discussed as potential presidential candidates in 2012.  You might note that Charlie Crist of Florida has only a grade of D.  Among governors talked about as potential presidential candidates, Bobby Jindal had an A, Tim Pawlenty had an A, Rick Perry had a B, Mitch Daniels had a B, and Haley Barbour has a C.

Solar Power Increased Cost for German Electricity

Both the federal government and many of the state governments are mandating much increased use of so-called renewable power such as solar and wind generated electricity.  We should be very aware of the costs of doing this.  Germany has gone far down this road.  What are the results in Germany?

Germany makes Germans pay high levies on their electricity bills to pay people to invest in offshore wind turbines and roof-mounted solar panels.  These levies are guaranteed for 20 years.  Offshore wind turbine generated electricity is supported with a levy of $0.21 per kilowatt-hour and roof-mounted solar panels are given $0.46 per kilowatt-hour!  As a result, Germans have rushed to put solar panels on their roofs and the levies paid for wind, solar, and hydro power will be $11.3 billion this year, which is a 55% increase from last year.  About 8 gigawatts of new solar panel installations are projected for this year.  This is the electricity output of 4 large nuclear power plants, or would be if the sun always shone brightly in Germany 24 hours a day.  Those installing solar panels after this summer, will be paid 16% less for the electricity they produce.

The result is that on a German's electric bill, taxes and levies are now 41% of the bill and that percentage has been climbing rapidly.  VZBV, the German consumer association, says the solar panels installed in 2010 alone will cause additional electricity charges of $36 billion over the next 20 years.  Similar mandated renewable energy is constantly being advocated by Democrats, our version of socialists, in the U.S.  Our costs, especially if you live in California, have been cranked up as a result also.  Texas and Colorado are other states where the cost of electricity has been cranked upward significantly.  Read more about this here.

Incurring these increased energy costs is pointless.  Political central planners are frightening people around the world with stories of almost immediate failures of our energy supplies and catastrophic man-made global warming which require us to turn to incredibly expensive renewable energy.  The renewal they are talking about is apparently the renewed poverty of people around the world, who have often been improving their standards of living recently.  Their improved standard of living is offensive to Democrats and will be greatly impeded by nonsensical requirements to drive energy costs sky-high in accordance with the otherworldly dreams of Obama, Pelosi, Waxman, Markey, and others of the lunatic fringe of American socialist politics.

Howard Rich: Kicking the Can Right Off the Cliff

Howard Rich wrote an editorial at the Investor's Business Daily which rather long-windedly bemoans the spendthrift ways of politicians.  Most of us can appreciate his reasons for being upset, but we are fully capable of doing our own moaning and trashing about in pain.  But buried deep into his piece was this nice summary of some very foreboding financial figures:

According to a January 2009 paper from the National Center for Policy Analysis, the average European Union nation needs to place more than four times its current gross domestic product in the bank (earning interest) just to fund current obligations. In fact, the NCPA report found that by 2020, the average EU nation will have to raise its tax rate from 40% to 55% of the national income just to cover existing benefits.

In Japan — which has the world's highest percentage of debt to GDP — fiscal policy is "out of control," according to Harvard economist Kenneth Rogoff, who predicted the 2008 U.S. bank failures. According to the latest estimates from the International Monetary Fund, total Japanese borrowings will soar to 204.3% of the nation's economic output in 2011.

Meanwhile in America, total public debt will exceed GDP for the first time since the World War II era, part of a massive borrowing spree that has seen the nation more than double its debt over the last six years. "The U.S. is in a state of paralysis in its fiscal policy," Rogoff said last month. "When they start tightening monetary policy even a little bit, it's going to send shock waves through the system."

In addition to this brewing global and national crisis, U.S. states and municipalities are facing similar ticking time bombs. A March 2010 Northwestern University report discovered that the total unfunded liability of state government pension funds was $3.2 trillion — or more than $2.2 trillion higher than government officials estimated.

Note that last paragraph:  Government officials are claiming that state government pension fund liabilities are only 31% of what they really are.  To be that wrong, they have to be lying to the taxpayers.  That cannot be a mistake.  Of course, by now, one has to be really, really obtuse not to have come to understand that most of our politicians and bureaucrats have made it a standard practice to lie to us all of the time.  Clinton seemed to raise the commitment  to the lie to a new standard, but Obama has readily surpassed him in his commitment to lying.  Given the pitiful state of the planned economies and socialist states of Europe that Obama so much wants to transform the United States of America into, well .... you really must lie.  There is no truthful way to make those European Big Brother states palatable.

Some Objectivists tend to think that discussing mere matters of the amount of debt is not very important because it is not a matter rich in ethical content.  I disagree.  The Preamble of the Constitution noted our responsibility to our Posterity which was to be recognized by the very limited government of the Constitution. George Washington also reminded Americans that they had no right to saddle their posterity with debt.  He was very right and very wise.  Passing the debts of our governments today on to our children and our grandchildren is a heinous thing to do.  We have essentially been doing just this since the Social Security Act was passed in 1935.   The Medicare program has raised this practice to new heights.  Then came Medicaid, ObamaCare, and bailouts in TARP and now forever into the future with the Financial Industry Bailout and Consumer Spying Act which is said to likely be passed by Congress later today, and incredible subsidies to alternative energy firms who environmentalists will never allow to build any power plants.  There is no fun in spending money you actually have to earn, so the national governments prefer usually to just run the printing presses as long as need be.  Of course this drives down the value of everything the private sector does as productive work, but hardly anyone ever noticed as long as they were bribed with some goodies.  But, the number of necessary goodies kept escalating and now there is not more room for further escalating them.  The ever more meager productive private sector is now just too small in Europe, Japan, and the U.S. to support the Leviathan governments with all their redistributed goodies.

Speaking of which, Glenn Beck's 26 May 2010 show dwelt on the same Big Brother watching over the peasants bank accounts, credit card transactions, and ATM transactions that I discussed in the early morning hours of the 26th.

Chris Edwards - Public-Sector Unions

Labor unions in the private sector have long had a decreasing membership, especially as a percentage of the private sector workforce, which in 2009 was 7%.  Public sector unions have retained a high and nearly constant percentage of the public sector workforce, presently at 39%.  Since this workforce is growing and since government workers have an out-sized political influence and power, this 5.6 times greater presence in the government workforce is a troubling circumstance.  It is causing a great deal of income produced by the productive private sector to be transferred into the parasitical public sector, where workers are paid much better and have much, much better benefits.  The workforce percentages are plotted below.

Chris Edwards, Director of Tax Policy Studies at the Cato Institute has written a good article on Public-Sector Unions and their growth in the Cato Institute Tax & Budget Bulletin, No. 61, March 2010.  Important points in the historical background and the present situation are:

• Before 1960, unions represented less than 15% of state and local government workers.
• The courts generally did not allow public-sector employees the collective bargaining allowed private-sector workers by the 1935 Wagner Act.
• In the 1960s and 1970s, states passed laws that required or encouraged collective bargaining by state and local government workers.  Many states passed laws to require union-represented government workers to pay union dues and fees.
• 26 states have collective bargaining for nearly all state and local government workers today.
• 12 states have it for some local and state workers now.
• 12 states do not allow collective bargaining for government workers.
• The states that require collective bargaining all have half or more of government workers unionized.
• States with no collective bargaining average 17% union membership.
• 28 states have agency shop rules, which require workers to join the union or to pay it fees.
• 22 states are right-to-work states where workers cannot be forced to join a union or pay union fees.
• Some states allow some government workers to strike and some require arbitration, which usually favors the unions.

Union representation increases the cost of government greatly.  Union members are paid 31% more in wages and have an incredible 68% greater benefits.  Since states with higher wages generally are also more unionized at the state and local government levels, the wage advantage corrected for that is about 10%.  But unions promote inefficient government by protecting poor performing workers, emphasizing rules rather than getting the job done, push for excessive staffing, and they discourage volunteer work.  They also go on strikes, such as the recent Philadelphia transit worker strike which for six days wrecked havoc on the 800,000 city residents who used the transit system.  Government unions, unlike private-sector unions, do not need to worry that excessive employee pay increases will put the employer out of business.

The 22 states with 40% or more of government workers unionized are almost uniformly in serious trouble with huge future taxpayer liabilities for these pampered government union workers.  My state of Maryland, with 41% government worker unionization, for instance, has very serious future liability problems.  We hear more frequently about the problems of state and local employees and their benefits and high pay in California with a 58% government worker unionization rate and New York with a 73% union rate.  In Rhode Island, with the second highest government employee unionization rate of 71%, the government unions have long been dominated by organized crime.  The same is true of the Cleveland city workers unions, where I used to have a neighbor whose father was an important city union leader who used to come over periodically and shout at his son that even he had to go to work sometimes for the sake of appearances.  His son was a ghost worker.

The largest public-sector labor unions are the National Education Association (NEA), the American Federation of Teachers (AFT), the American Federation of State, County, and Municipal Employees (AFSCME), and the Service Employees International Union (SEIU).  We hear a lot about the SEIU lately due to its close ties with Obama and the many special interest joint activities of the two.  The NEA and the AFT collect about $2 billion a year in membership dues and fees, mostly from states with agency shop rules, so they have deep pockets.  In the last two decades, AFSCME was the second-largest contributor to election campaigns in the U.S.  The NEA was the 7th largest contributor, the SEIU was the 10th largest, and the AFT was the 15th largest.  The SEIU pulled out all the stops in its effort to get Obama elected.  Public service workers also vote in higher percentages than most Americans.  These unions strongly favor increased government spending and higher taxes, they hate school choice and privatization efforts, and generally oppose any efforts to improve government efficiency.

Edwards points out that collective bargaining is inconsistent with our Constitutional right to freedom of association.  He advises that states should follow the examples of Virginia and North Carolina, who do not allow collective bargaining by government workers.  This avoids such problems as Governor Chris Christie is having in New Jersey, with a 66% government worker unionization rate, with the state budget and government worker wages and benefits.

I believe that the legitimate functions of government are so vital that they should not be entrusted to workers who may strike or go on work slowdowns.  Their workers should not have other allegiances than to the citizens they serve.  Many of them, certainly including teachers, should be professionals who should shun labor unions.  Labor unions are for unskilled and semi-skilled workers, not professionals.  When people who are supposed to be professionals join labor unions, they quickly lose their professional work ethic.  This is one of the key reasons why American education has become so deficient.  Of course, governments have greatly exceeded their legitimate functions and this seems to undermine the argument against government worker unionization.  This is just another reason why it is critical to force governments to limit their powers to those which are legitimately protecting and preserving the sovereign rights of the individual to life, liberty, and the pursuit of happiness.

Maryland State Employee Benefits

According to the Maryland Public Policy Institute, the average state employee salary is $47,313, while the average private sector salary in Maryland is $46,031. While this is probably an unjustified salary level, the real benefit of being a Maryland state employee is the 55% greater benefit package. The state employee receives $13,387 worth of benefits, while the private sector Marylander receives benefits with an average worth of $8,604 per year. Only West Virginia offers its employees better benefits in the region. Maryland benefits rank only 24th in the nation, however, so the situation in many other states is comparable.

In 2006, the state pension liability was $7.6 billion. In January of 2008, the unfunded pension liabilities had increased to $11 billion. Other post-employment benefits, such as health care, have a liability of $14.5 billion. Someday, the state will be under considerable tax strain to pay out these obligations. These benefits should be reduced now!