Coyote Blog

A reader sent this to me:

Snow shuts down federal government, life goes on

WASHINGTON (AP) - If snow keeps 230,000 government employees home for the better part of a week, will anyone notice?

With at least another foot of snow headed for Washington, Philadelphia and New York, we're about to find out. The federal government in the nation's capital has largely been shut down since Friday afternoon, when a storm began dumping up to 3 feet of snow in some parts of the region. Offices were remaining closed at least through Wednesday.

Many states managed to grow state spending in the last decade far faster than inflation and population growth, soaking up every new dime in bubble-generated tax revenue they could.   It may seem like states were forced to make a lot of hard decisions last year, but in fact they were sheltered from really dealing with the full measure of their own fiscal problems by large influxes of Federal "stimulus" money.  As I demonstrated way back in January of 2009, most of the stimulus was actually ear-marked not for the mythical shovel read project, but for "stabilization" of state and federal budgets.  This is a couple of months old, but still applies:

A historic nosedive in state tax collections extended into the third quarter of the year, and only an infusion of federal economic stimulus money has averted widespread program cuts and worker layoffs.
Tax collections from July through September dropped an average of 8.3% from a year earlier in the eight states that release up-to-date monthly tax figures, a USA TODAY survey found. New York's tax collections fell 8.9%, despite an income tax hike earlier this year. States reporting partial third-quarter results showed a similar downward spiral in tax collections, including 13.2% drop in Arizona.

Federal stimulus money has protected states from making big cuts in the number of government workers, in aid to schools or in spending on Medicaid, the health care program for the poor. But most federal stimulus money ends in December 2010.

This is not a new trend, from Tad DeHaven of Cato:

According to the Goldwater Institute, over a third of the AZ state budget is federal money.

How can there possibly be any accountability for how this is spent, though it actually is larger than the amount raised by state taxes?  If we want the government to buy us goodies in this state, we should at least pay for them ourselves and not take money from others.  By the way, every time I raise this argument, someone says "well our state pays more federal taxes than it gets back."  First, every state says this so it can't possibly be true in every case.  Second, it's a terrible practice from the standpoint of accountability.

Related, via Matt Welch:

The biggest single national political donor in the country during the 2007-08 election cycle, according to OpenSecrets.org, was the overwhelmingly Democrat-supporting teachers union the National Education Association. What category of worker was the biggest single beneficiary of stimulus spending? Public school teachers. Who, according to Vice President Joe Biden, accounted for 325,000 of the first 640,000 jobs "created or saved." While it's true that teachers are Americans (even my brother), in the vast majority of these cases, the jobs in question weren't "created," just maintained, since it is nearly impossible to fire public school teachers.

I often respond to various articles that a group of politicians are going to create a strategic plan** for the local economy that this is similar to my trying to choreograph a ballet .  TJIC has similar words for this effort:

Governor Deval Patrick and Senate President Therese Murray plan to propose this week several ways to improve the Bay State's business climate, saying they need to be more aggressive in steering the region out of its economic malaise.

Both have lifelong careers in non-business sectors (government, academia, journalism, legal, non-profit).  TJIC responds:

Asking them to design programs to better the business climate is about like asking me to design menstrual pads "“ I don't understand the sector, I don't understand the features, I don't understand the problems, and there's no way that the effects of my work will ever come back to make an impact on me.

This is reminiscent of this great comment from Kevin Williamson  via Instapundit

The good news is that, when it comes to reshaping the U.S. mortgage market [any market for that matter "” ed.], the Obama administration's top guns are bringing to bear all of the brisk, rough-'n'-ready entrepreneurial know-how they picked up in their previous careers as university professors, nonprofit activists, and holders of political sinecures.

But we are spending more and more to get this "expertise", as documented in a depressing post at Carpe Diem on the growth of government employment and salaries.  One chart out of many:

** Footnote:  About once a month we get some group lamenting that Phoenix has no master plan to create some kind of economic focus for itself.  One of the hilarious things about this is that if you go back and look, about half of the past proposals have Phoenix focusing on some super-hot industry (e.g. semiconductor manufacturing, e-commerce) that is just about to crash.  Lately, everyone has decided that Phoenix should be the center of the solar industry, because, uh, we have a lot of sun, without any particular explanation of why having a lot of sun should be an advantage in precision manufacturing and assembly of solar components.  But we are shelling out all kinds of tax breaks and subsidies for these companies to come here.  My prediction - solar will be the next ethanol.  In ethanol, increases in government subsidies caused a lot of manufacturing capacity to be built.  But subsidies could not grow as fast as capacity, and a glut resulted in a huge shakeout.  The solar boom will occur when a technology is perfected that makes solar economic without subsidies.  When that occurs, I will be the first in line to cover my roof in the new tech.

Roger Pielke, Jr. (hat tip to a reader) points to an interesting FT Lex column that should offer some interesting insights to America's progressives:

"Big" and "oil" are mentioned so often in the same breath that it is easy to lose perspective. Motorists and environmentalists never tire of berating the dominant supermajors whose petrol stations and share listings make them the public face of the industry, their favourite target being America's ExxonMobil. If market value were the sole magnet for opprobrium then Exxon's executives could breathe a bit easier because PetroChina recently overtook it as the world's most valuable listed energy company.

But there is "Big Oil" "“ last year, Royal Dutch Shell earned more than $1bn a month "“ and then there is bigger oil. No oil major is able to affect energy prices on its own and even Exxon is far smaller than the world's largest energy company. It is not even close. Saudi Aramco's estimated hydrocarbon reserves of 300,000 million barrels of oil equivalent make it 15 times Exxon's size. Exxon comes in about 17th place, with the top 10 being entirely state-owned.

US oil company executives routinely get pulled in front of Congress to defend themselves against charges they are manipulating world oil prices.   Huh? It would be as rational to accuse Grinnell College of manipulating national tuition rates.  Americans can take comfort in the fact that by limiting their ability to seek new oil in the US, we have made sure that oil markets are not controlled by evil publicly traded companies like Exxon and Shell but instead are controlled by entirely more trustworthy entities like the governments of Iran, Saudi Ariabia, Venezuela, Russia, Nigeria, and China.

This chart also supports the one good argument I think there is for peak oil -- that most of the world's oil reserves are controlled by patently incompetent institutions (e.g. governments) that have very bad incentives that make them highly unlikely to invest well.  The only reason these countries are able to produce at all is because western companies are stupid enough to keep walking into this cycle:

1.  US companies invest huge amounts of capital and know-how to build oil industry
2.  Once things are producing, local government steals it all (they call it "nationalization")
3.  Oil fields go into extended decline due to short-term focused and incompetent government management
4.  US companies invited back int to invest huge amounts of know-how and capital
5. repeat

Via Megan McArdle:

"We need to stand up to the special interests, bring Republicans and Democrats together, and pass the farm bill immediately," Barack Obama

Self-parody in action.

The reaction by the left to the Supreme Court decision yesterday overturning speech limitations on corporations seems tremendously hypocritical.  No one seems to complain on the left when certain groups/corporations (call them "assembly of individuals") get special access to the government and policy making.  Jeffrey Immelt and GE, Goldman Sachs, the SEIU, and the UAW all get special direct access to shape legislation in ways that may give special privileges to their organization -- access I and my company will never have.

Deneen Borelli wrote, in response to Keith Olberman's fevered denunciations of free speech for corporations

"It also seems as if the pot is calling the kettle black. MSNBC is currently owned by General Electric. GE Capital was bailed out by the taxpayers. GE CEO Jeff Immelt is a close advisor to President Obama, and GE would profit from Obama policies such as cap-and-trade. Olbermann has served as a cheerleader for all of this. Are Immelt and Olbermann simply afraid to allow others to possibly gain the attention and influence GE has had all along?"

Here is an example -- has the health care bill considered my company's situation, where we have 400 seasonal workers, almost all of whom are over 70 and on Medicare already?  How, in these circumstances, do we offer health care plans?  Are we relieved of the penalty for not offering a plan if they are on Medicare or a retirement health plan already?  The legislation does not address these issues (see Hayek) and I am sure numerous others, but I will never be able to cut a special deal for my workers or my industry as GE or the UAW have.

Further, corporate paid speech is alive and well in this administration, you and I just can't see it.  Lobbyists are all having record, banner, unbelievable revenues, in large part because the government is putting such a large chunk of the economy in play for forced redistribution and everyone who can afford it is paying to influence the process.

But nothing in any of the good government reforms have (rightly) ever put any kind of restrictions on this kind of speech directly to legislators.  The only speech they limit is speech to the public at large.  In effect, McCain-Feingold said that it is just fine to spend gobs of money speaking directly to us government folks, but try to go over our heads and talk directly to the unwashed masses, well, we have to make that illegal.  Far from tilting the balance of power to a few rich elite firms, the recent Supreme Court decision gives new power to the rest of us who don't have privileged access.

Update: Speaking of hypocrisy, the NY Times Corporation is outraged other corporations have been given the same rights it has had all along.  In a sense, the Times is lamenting their loss of a monopoly.

Update #2: Ilya Somin:  Corporate speech is actually an equalizer for far worse inequalities of political influence and access that already exist.

The Florida sales tax auditor has been in my office for 2 days and shows no sign of leaving.  Most of the audit is as expected and I ceased long ago getting ticked off about it;  but the new focus on use tax - ie, not just did you collect and pay sales tax on your retail sales but did you pay proper sales tax on every purchase, is really annoying.  We are going to have to be pulling invoices and xeroxing for weeks.  Somehow, if as a retailer I don't collect enough sales taxes, I am liable for the shortage.  But if someone else sells me something and there is not enough sales tax collected, I am again apparently liable for the difference.  The latter makes no sense to me.    Apparently I owe taxes in this non-symmetric way based on the deep philosophic principle that he is sitting in my office, not theirs.

Update: Now he suddenly thinks that I am getting over because there is no sales tax shown on my liability insurance premiums.    AAArrrrggghhh.  Two entire days lost.

I received a sales tax audit notice for Alabama today.  I found this odd, as it is a three year audit and we have only operated in the state for 6 months.  In fact, all four of the audit sample months they chose had zero sales.  I have never even heard of anyone being audited with this little history.

So, I call the auditor, and explain all of the above, expecting an answer like "oops, no point in proceeding."  How naive I am.  He says we have to proceed with this, and listed a pile of documents he has to see which will take me about 6 hours of my time to track down and Xerox.  Included in this, in addition to all the revenue records, he wants to see every single invoice we paid in Alabama to make sure we didn't secreatly buy stuff out of state and avoid their use tax (the tax you are supposed to pay, ha ha, if you buy items out of state with no sales tax.  You guys all file your use tax reports on Amazon purchases, right?)

But here is the part that really pissed me off.  When I asked him why I was being audited after just 6 months, he said he knew the audit was senseless but his office is desperately trying to keep everyone employed during recent budget cuts so that no one would lose their job.  Also he said is was good training for him.  Great.  I have to do 6 hours of extra work so that later I can pay higher state taxes to support more government workers.  What a deal.

Consider the incentives for a bank trying to set the risk profile of its investments.  Should it go for higher returns at higher risk, or dial back the risk at a cost to near-term profits?  Now consider this decision in the context of two actions from the past year:

• Large banks that took on too much risk are bailed out and management mostly preserved
• Banks that eschewed higher profits by avoiding bad risks are now forced to pay for the bailout of those that went wild:

Obama administration officials and lawmakers are scrambling to find a way to funnel some of the financial industry's record earnings back to the taxpayers who helped rescue the industry from looming disaster.The White House is considering a fee on banks and other financial companies

as one approach, with revenues earmarked to help recoup any losses from the government's $700 billion bailout fund, a senior administration official said.

Some in Congress want to add a new tax on bonuses or assess a small fee on all stock transactions, which would hit large banking companies the hardest.

Note that there is no attempt here to only charge banks who received bailout money, but all banks will be charged equally.  To each according to his need, from each according to his ability.  This is moral hazard in spades.

In 2003, my company was in some serious financial problems.  Post 9/11 commercial insurance premiums had just risen substantially, so much so that my premiums went up more than my total annual profits.  At the same time I found out that a number of operations I had just acquired were profitable only because they were not in compliance with labor law, and my crash program to bring them into compliance was going to put me deeply in the red for that year.

I did a whole bunch of things to right the ship, but the two most important were 1)  I eliminated a whole layer of management, slashing 5 vice-presidents and having all the front line managers report directly to me; and 2)  I eliminated the smallest and worst performing business units.

Now, contrast this to what governments do in the same situation.  Their first response, of course, is to do something I could not do - compel more revenue for themselves by increasing taxes.  Those of us who make our living by the free decision making of others don't have this dictatorial option.

The second thing that governments do is cut their MOST important, MOST valuable operations.  In Seattle, it was always fire and ambulance services that would be cut.  Because the whole game was to find the cuts that would most upset the public to try to avoid the necessity of having to make cuts at all.  Its an incredibly disingenuous process.  Any staffer of a private company that made cost savings prioritization decisions like government officials would be fired in about 2 minutes.

The third thing that governments do if forced to actually, really cut costs (meaning that every other stalling tactic, taxation method, and accounting trick has been exhausted) is to cut field staff who actually do the work rather than high-paid, bloated administrative staffs.  This means teachers get cut but not vice-principals.  And it means that preventative maintenance gets cut and not transit staffers:

Having removed a mere 25 employees so far, and having just suffered its deadliest year ever, Metro officials now want to raid $10 million from the agency's preventive maintenance fund in order to cover operating expenses, including salaries and benefits. Metro managers would rather skimp on passenger safety and reliability than clear out the system's deadwood and force serious concessions by the transit union.

Moreover, even as it asks riders to sacrifice, Metro is fattening itself up, hiring two new "senior planners," one to a newly created position. According to Metro's official job description, they will be "responsible for participation in the development of an annual business plan ... identifying opportunities for future growth and development" and "defining future strategies."

In his regular email, Bill Leonard recounts a story told by the California governor to the legislator that may be even more apt than he intended:

The Governor told a delightful story to the Joint Session of the Legislature regarding the animals at his home.  It seems that the pet pony and the pet pot-bellied pig work together to knock the dog's food canister off the kennel then using feet, hooves and snout, they pry the lid off to get to the food.  The Governor's message: if my pony and pig can co-operate like this, then certainly the Governor and the Legislature can cooperate.

But I got to thinking about the dog.  His food was gone, taken without his permission.  So who is the dog in the Governor's analogy?  I am hoping it is not me and the millions of other taxpayers who lose our canisters of food every time the Governor and the Legislature cooperate on taxes.

I am afraid the dog is probably the rest of us, and this is exactly how politicians think - how can we all cooperate to get down to the real business of government -- taking more of the dog's food.

Not good, but not really a surprise:

The estimate by Orin Kramer will fuel investors' concerns over the deteriorating financial health of US states after the recession. "State and local governments are correctly perceived to be in serious difficulty," Mr Kramer told the Financial Times.

"If you factor in the reality of these unfunded promises, their deficits will rise exponentially."

Estimates of aggregate funding requirement of the US pension system have ranged between $400bn and $500bn, but Mr Kramer's analysis concluded that public funds would need to find more than $2,000bn to meet future pension obligations.

Kenneth Anderson asks:

Two trillion dollars?  One question about these obligations is whether taxpayers will stick around to pay them, or instead will vote with their feet.  ("Vote with their feet" is something that has been discussed in various ways at VC "” as an aspect of a federal system and states with their own laws.)  Many of these pension obligations have been incurred by municipalities and others by states, and in some cases the obligations are intertwined.  But what happens if voters-taxpayers move out?

The assumption has long been that taxpayers are stuck, on account of jobs and other circumstance.  But query whether that is necessarily true as the baby boom generation retires.  In that case, it might find itself far more mobile, in circumstances where rising taxes at every level make relocation a more valuable decision at the margin.  For that matter, if otherwise desirable locales manage to tax their businesses away, will the baby boomers' kids and grandkids have reason ever to locate in places that lack jobs?  They might have been raised there "” but would they go back?

Would people leave California? They are leaving now, true, but would they leave in the future specifically for this reason or generally on account of the tax burden, particularly as retirees?  Or New Jersey?  What about the city of Oakland?  Or even smaller cities, such as the towns in California "” not large at all, small towns, that have already declared bankruptcy over pension obligations?  It's easy to move out of those towns.

My guess is that the Feds are going to pick up a lot of these state and local obligations, making it effectively impossible for taxpayers to escape them short of leaving the country (and creating the mother of all moral hazards, by the way).  After all, if the current administration will bail out Wall Street banks with whom they have little ideological sympathy, they certainly will do so to keep SEIU-represented government employees in jobs.

Via Mises Blog:

The hidden hand behind this unsanitary calamity is the US government. The true origin of the mess was not in the hour before I arrived but back in 1994, when Congress passed the Energy Policy and Conservation Act.This act, passed during an environmentalist hysteria, mandated that all toilets sold in the United States use no more than 1.6 gallons of water per flush. This was a devastating setback in the progress of civilization. The conventional toilet in the US ranges from 3.5 gallons to 5 gallons. The new law was enforced with fines and imprisonment.

For years, there was a vibrant black market for Canadian toilet tanks and a profitable smuggling operation in effect. This seems either to have subsided or to have gone so far underground that it doesn't make the news. I've searched the web in vain for evidence of any 3.5 or 5.0 gallon toilet tanks for sale through normal channels. I wonder what one of these fetches in the black market. This possible source has no prices and an uncertain locale.

The toilet manufacturers, meanwhile, are all touting their latest patented innovations as a reason for the reduced hysteria surrounding the toilet disaster. I suspect something different. We have all gotten used to a reduced standard of living "” just as the people living in the Soviet Union became accustomed to cold apartments, long bread lines, and poor dental care. There is nothing about our standard of living that is intrinsic to our sense of how things ought to be. Let enough time pass and people forget things. So let us remember way back when:

• Toilets did not need plungers next to them, and thank goodness. Used plungers are nasty, disease carrying, and filthy. It doesn't matter how cute the manufacturer tries to make them or in how many colors you can buy them. In the old days, you would never have one exposed for guests. It was kept out in the garage for the rare occasion when someone threw a ham or something stranger down the toilet.
• Toilet paper was super thick and getting thicker. None of this one-ply nonsense.
• You never had any doubt about the capacity of the toilet to flush completely, with only one pull of the handle. The toilet stayed clean thanks to five gallons of rushing water pouring through it after each flush.

It concludes:

"Capitalism achieved something spectacular in waste disposal. Government came along and took it away from us."

I wrote the other day about restrictions in the Federal stimulus bill that substantially reduced the ability of state governments to cut spending in response to lower tax revenues.  It turns out there are a myriad of other limitations, including court cases and past consent decrees, that make it nearly impossible for states to do much if anything about their budget shortfalls (except raise taxes, of course).  Just about everyone except for taxpayers have a set of lawyers in courts full time preventing budget changes that affect their special interests.

If you thought elected officials in your state were running the budget show, you might be in for a surprise.  Likely as not the federal courts are more powerful budget authorities than the state's legislature or executive.  A few consent decrees can easily cripple any attempt to pass a balanced budget requirement in a state legislature, and overturn the act itself in federal court if it does happen to pass.  Tennessee, for instance, was shacked by three consent decrees, all of which were administered by federal judges.  Before even writing budget legislation, the governor of Tennessee had to persuade two federal judges, who were the de facto managers of the state's health care system, that any changes were a good idea.

The most damaging consent decrees to state budgets tend to be related to staffing levels.  A number of state agencies settled all manner of employment and discrimination claims by entering consent decrees freezing staff levels.  Often state employee unions were among the most active consent decree wielders.  These decrees tend to lock up not only staff levels, but salaries (through "constructive termination" clauses that equate even modest pay cuts with termination and thereby trigger staffing minimum clauses) and pension benefits as well.

Explain to me again how these government officials who signed these incredibly short-sighted consent decrees just to get through their own term in office are more long-term focused than private actors?  Would any of you short-term-focused capitalists sign an open-ended agreement to never cut staff or salaries or benefits for employees no matter what the future fortunes of your company were?

The only way through this is going to be a massive string of state and local government bankruptcies.

Update: Sort of related, I got this in my email today from a reader

The City of San Francisco pays for two Police Departments and two Fire Departments, less about 5%.
Both have one active-duty department and one retired-duty department.
When a cop or firefighter retires in San Francisco, he receives a 90% pension.

Then, every year THEREAFTER, the retiree receives 50% of every raise negotiated by the active duty Memorandum of Understanding.

He seems to have it right, he links to this site, which does indeed show that the COLA on retiree pay includes 50% of all raises given to active duty employees.  I wonder how early they are vested?

Update #2: Via Nick Gillespie, update #1 is not that unusual:

Retirement incomes for the most experienced government employees top out at 88 percent of their active-duty pay. Unlike most private-sector workers, whose retirement is driven by the strength of the stock market and their 401-k plans, the pensions for government employees are guaranteed.

In addition to higher average retirement incomes, government retirees in Ohio also enjoy government-sponsored health care, can retire as young as 48 for police and firefighters, and have the opportunity to 'retire' and collect a full pension while going back to work, often at full pay for doing the same job. Such 'double-dippers' were paid more than $741 million by the State Teachers Retirement System last year and $240 million by the Public Employees Retirement System, records show.

In Toledo, even the mayor is a double-dipper.

Since starting his current term in January 2006, Toledo Mayor Carty Finkbeiner has drawn his annual salary of $136,000 in addition to a state pension for more than two decades in elected and unelected positions. He is leaving office on Monday.

And because he is already receiving a Public Employees Retirement System pension, Toledo taxpayers have paid $75,221 into an annuity as an additional retirement fund for Finkbeiner.

I missed this in the original discussion of the stimulus.  I was one of the first to point out that most of the stimulus was earmarked for maintenance of state government budgets rather than the infrastructure projects people thought they were getting  (here and here).  But I missed this part of the law, which basically made acceptance of these funds a suicide pact for many states:

Worst of all, at the behest of the public employee unions, Congress imposed "maintenance of effort" spending requirements on states. These federal laws prohibit state legislatures from cutting spending on 15 programs, from road building to welfare, if the state took even a dollar of stimulus cash for these purposes.

One provision prohibits states from cutting Medicaid benefits or eligibility below levels in effect on July 1, 2008. That date, not coincidentally, was the peak of the last economic cycle when states were awash in revenue. State spending soared at a nearly 8% annual rate from 2004-2008, far faster than inflation and population growth, and liberals want to keep funding at that level.

A study by the Evergreen Freedom Foundation in Seattle found that "because Washington state lawmakers accepted $820 million in education stimulus dollars, only 9 percent of the state's $6.8 billion K-12 budget is eligible for reductions in fiscal year 2010 or 2011." More than 85% of Washington state's Medicaid budget is exempt from cuts and nearly 75% of college funding is off the table. It's bad enough that Congress can't balance its own budget, but now it is making it nearly impossible for states to balance theirs.

These spending requirements come when state revenues are on a downward spiral. State revenues declined by more than 10% in 2009, and tax collections are expected to be flat at best in 2010. In Indiana, nominal revenues in 2011 may be lower than in 2006. Arizona's revenues are expected to be lower this year than they were in 2004. Some states don't expect to regain their 2007 revenue peak until 2012.

So when states should be reducing outlays to match a new normal of lower revenue collections, federal stimulus rules mean many states will have little choice but to raise taxes to meet their constitutional balanced budget requirements. Thank you, Nancy Pelosi.

Apparently a couple of states (no surprise, Texas is among them) were smart enough to turn down some of the money.

The TSA may be unable to successfully seize explosives before they get on an airplane, but they are able to successfully seize the laptops of bloggers who are critical of their organization.

I have said for a while that Homeland Security is the worst possible job for any politician who actually wants to have a future political career.  The job is all downside.  I wrote a year ago:

Yeah, I know it is not a done deal, but the rumors are that our governor Janet Napolitano will be Obama's choice for Homeland Security.

On its face, this both makes a ton of sense, and simultaneously is odd.  It makes sense because Napolitano is one of those rising Democratic stars who get special love in part for not being white males.  It is odd because pulling her up to Washington would, by law, pass the governorship for the next two years to the Republicans (the Secretary of State completes the term, and she is a Republican).  It also strikes me as odd because I think Homeland Security would be an absolutely awful platform for launching a run for higher office.  That job has no upside "“ it is all downside.

But the final reason in the end that this may make sense can be seen in this table below from Paul Kedrosky on projected state budget deficits as a percentage of state revenues

Arizona is almost in as bad of shape as California, and California is a disaster area.  So the financial chickens are about to come to roost here in Arizona for the drunken spending spree the state has been on, presided over by Napolitano.  To preserve her from going to the Gray Davis Memorial Retirement Home for Failed Governors, Obama is likely to beam her up to Washington.

As I wrote before, I don't think Napolitano would normally have accepted this job had she not been desperate for a face-saving way to escape Arizona mid-term.  But after recent events, I think it is highly unlikely anyone else on an elected-official career track will take this job.  Look senior FBI or CIA types on the future.

Update: More here from Expresso Pundit.

So in the next six months--probably much sooner--Janet will move on and the President will pick an obscure, non-political, retired General who is clearly qualified and above reproach.

I am a little late to the game, but in case you have not seen the new DHS regs (apparently only in place until December 30, when they will no doubt come up with something even stupider, here they are.

Highlights:

• Physical patdowns of some but not all of a passenger's body, to exclude areas of the body actually used by the recent terrorist to secret his bomb components.
• No getting up in the last hour of the flight, for no good reason than the last threat occurred in the last hour of the flight.  Of course, the 9/11 hijackings occurred in the first hour of the flight.
• Services that are actually starting to make air flight more tolerable are banned, including midair Internet access and real-time satellite TV feeds.  And no more of that telling you where you are and how long until you land - you'll just have to wait for the landing gear to kiss the ground to know when you are landing.
• Everything that was inspected at the security point has to be reinspected at the gate
• Don't bother trying to read anything on the flight or occupy your mind in any way - personal items banned in the first and last hour.
• Only one carry-on, so plan to check your bag, paying the airline to do so, and then add an extra 45 minutes at your destination to wait for it to finally be delivered back to you.

I used to fly about 100,000 miles a year in this job.  I am now down to 25,000, despite the fact my business is even more spread out.  A bit more effort from the DHS and I will get it down to zero.

Via the Dallas Morning News:

A last-minute change in the federal health care bill ditched a proposed 5 percent tax on cosmetic medical procedures and replaced it with a 10 percent tax on indoor tanning services.

Goodbye Botox tax. Hello tan tax.

This seems really random.  Why should either of these businesses foot a special, disproportionate share of my health care bill?  Well, things that seem random to most of us make perfect sense in Congress.

The tan tax popped up in the health care bill last weekend after powerful medical lobbies "“ including the American Academy of Dermatology Association, American Medical Association, American Society of Plastic Surgeons and Botox-maker Allergan "“ persuaded Congress to remove a tax on cosmetic medical procedures and replace it with a 10 percent surcharge on indoor tanning services.

Lobbyists are very good at punching political hot-buttons.  Since they couldn't argue that botox is "for the children," and since it is generally used by rich white people they could not place the race or class card, they played the only card they had:

"Since 90 percent of cosmetic surgery patients are women, this would have been a very discriminatory tax," said White, who opposed the cosmetic surgery tax.

Technocrats want to believe, and perhaps honestly believe themselves, that care guidelines in the new Federal health care system will be science-based.  What possible basis do they have for thinking that?  We have 50 state laboratories, where states specify must-carry rules on procedures, and not a single one of these lists are science based -- they are loaded with special interest handouts.   I even show in this post how special interests give money to academia to produce studies whose entire conclusion is that certain procedures (performed by the special interest group funding the study) need to be in the minimum coverage laws.   The very first time out, when confronted with a science-based care recommendation (that women not receive breast cancer screening until after 50), the Congress specifically overrode it in the bill under a firestorm of public outcry.

But maybe the dermatologist guys are really looking after us?  After all:

The American Academy of Dermatology warns of significant health risks caused by indoor tanning.

But, as it turns out, it only sees health risks in the use of ultra-violet light by practitioners who are not members of their trade group.  I have bolded the key passage that gives away the game.

Indoor tanning industry groups note that dermatologists use tanning equipment in their offices for cosmetic skin conditions, such as eczema and psoriasis, in phototherapy treatments that cost up to $100 per visit billed to health insurance companies. In contrast, indoor tanning salons cost as little as $6 to $20 per session.

The tan tax would exempt phototherapy services performed by a licensed medical professional.

"This is like Coke being allowed to lobby the government to tax Pepsi, but that Coke be allowed to sell the same product and not be taxed for it," International Smart Tan Network Vice President Joseph Levy said in a statement. "It's unbelievable."

Is there any difference between Hugo Chavez and Barack Obama in terms of how they approach the auto industry?  "Make the kind of cars I thing you should, or the government will take you over."

Mr. Chavez said his socialist government is going to apply strict quotas regarding the number and types of vehicles auto makers can produce. The president also ordered his trade minister, Eduardo Saman, to inspect the Toyota plant, saying it may not be making enough "rustic vehicles," a style of all-terrain vehicle that is much-needed in Venezuela's countryside, where they are often converted into minibuses.

"They'll have to fulfill [the quotas], and if not, they can get out," Mr. Chavez said during a televised address. "We'll bring in another company."

He said if the inspection shows Toyota isn't producing what he thinks it should and isn't transferring technology, the government may consider taking over its plant and have a Chinese company operate it. "We'll take it, we'll expropriate it, we'll pay them what it's worth and immediately call on the Chinese," Mr. Chavez said. Chinese companies, he said, are willing to make vehicles made for the countryside.

It seems like Venezuelan workers want the same deal Obama gave the UAW:

Venezuela's auto sector is in tatters amid recurring labor problems that have led to a lack of productivity. Analysts say many auto workers hope their company is nationalized so they can become de facto government workers and enjoy the extra job security that comes with that status.

By the way, this seems like a suckers play -- please put more valuable stuff in your store window so when we break in there is more to steal:

Mr. Chavez said late Wednesday the Japanese auto maker needs to transfer more new technologies and manufacturing methods from headquarters to its local unit in Venezuela.

While Mr. Chavez directed most of his criticism at Toyota, he said other auto assemblers, including Fiat SpA and General Motors, are also guilty of not sharing technology from abroad with their Venezuelan units.

The left often seems to imply that the US government is too eager to shed blood to protect American industry overseas, but in point of fact American industry has had to live with the reality for decades that foreign governments often steal billions of dollars in American-owned assets with barely a peep being heard from the US government.  For example, there is really no such thing as a Saudi or Libyan or Venezuelan or even Mexican oil industry - those are just assets paid for and built by private Western concerns and then stolen by local governments.

July 16, 2009

It is totally clear to me that Obama and Pelosi will spend any amount of money to pass their key legislative initiatives.  In the case of Waxman-Markey, the marginal price per vote turned out to be about $3.5 billion.  But they didn't even blink at paying this.  That is why I fear that some horrible form of health care "reform" may actually pass.  If it does, the marginal cost per vote may be higher, but I don't think our leaders care.

Instapundit, December 21, 2009

CASH FOR CLOTURE: "You can't even dignify this squalid racket as bribery: If I try to buy a cop, I have to use my own money. But, when Harry Reid buys a senator, he uses my money, too. It doesn't "˜border on immoral': it drives straight through the frontier post and heads for the dark heartland of immoral."

Plus, Oh, Nebraska. So what exactly was different about what Rod Blagojevich did?

Plus, keeping track of the bribes.

Great article in the SF Weekly on San Francisco:  The Worst Run Big City in the US.  The article is lengthy and packed full of government fail.  Just one example:

You can't get San Francisco running efficiently, because that would require large numbers of unionized city workers to willingly admit their redundancy and wastefulness. Inefficiency pays their salaries. "It's been going on for decades," Peskin says.

This problem comes up almost every time the city negotiates labor contracts, which is part of the reason San Francisco is constantly on the brink of fiscal ruin. Politically powerful unions "” the progressives are beholden to the service unions; moderates cater to police, firefighters, and building trades; and Republicans ... what's a Republican? "” negotiate contracts the city knows it can't afford. Politicians approve them, despite needing to balance the budget every year, because the budget impact of proposed contracts is examined by the Board of Supervisors only for the following year, no matter how long contracts run. According to former city controller Ed Harrington, it has become common practice not to schedule any raises for the first year of a contract, but to provide extensive raises in later years.

The result is a contract that looks affordable one year out, then blows up in the city's face. City employees receive up to 90 percent of their already generous salaries in pensions and many also receive lifetime health care "” meaning that as they retire, labor costs soar.

Sounds like the health care bill in Congress, no?  The bit near the beginning on the problem in the parks department - overstaffing, no one showing up for work, lost money, poor controls, no process - particularly resonate with me.  My business is the privatization of public parks.  I can't tell you how many public parks agencies I know to be providing terrible service (service levels that I would be ashamed of) with grossly inflated budgets tell me face-to-face that they can't privatize because that would jeopardize the quality of the parks.  Well, that and the fact that the public employees unions would not allow it.

I always laugh when folks tell me that government intervention is needed because private industry is too short term oriented.  But no one is more short term oriented than politicians looking to the next election or closing this year's budget hole.  In particular, capital maintenance is always ignored until infrastructure is literally falling apart.   We see it in parks, transit systems, roads, schools, etc.  It is the same phenomenon that causes third world state-run oil companies to have their production fall off - instead of reinvesting their profits into upgrades and maintenace of their fields and infrastructure (as those short-term focused American oil companies do) they transfer the money into social giveaways that cement their political power.  Here is a great example from San Francisco:

In 2002, the San Francisco Chronicle revealed that the city had, for decades, been siphoning nearly $700 million from its Hetch Hetchy water system into the San Francisco General Fund instead of maintaining the aging aqueduct. Several mayors and boards of supervisors used that money to fund pet causes, and the Public Utilities Commission didn't say no. Unfortunately, spending maintenance money elsewhere doesn't diminish the need for maintenance. By 2002, the water system was in such desperate condition that voters were asked to pass a $3.6 billion bond measure to make overdue fixes. Obligingly, they did "” who doesn't like water? Since then, the projected costs have swelled by $1 billion. So far.

My favorite line:

"San Francisco is Disneyland for adults, or a place people go until they grow up."

Every one of these members of the House Subcommittee on Commerce, Trade, and Consumer Protection voted to pass this absurd law out of committee except Rep. John Barrow, D-Ga.

Bobby L. Rush, Illinois, Chairman

Jan Schakowsky, IL, Vice Chair	George Radanovich, CA, Ranking Member
John P. Sarbanes, MD	Cliff Stearns, FL
Betty Sutton, OH	Ed Whitfield, KY
Frank Pallone, Jr., NJ	Joseph R. Pitts, PA
Bart Gordon, TN	Mary Bono Mack, CA
Bart Stupak, MI	Lee Terry, NE
Gene Green, TX	Sue Wilkins Myrick, NC
Charles A. Gonzalez, TX	John Sullivan, OK
Anthony D. Weiner, NY	Tim Murphy, PA
Jim Matheson, UT	Phil Gingrey, GA
G. K. Butterfield, NC	Steve Scalise, LA
John Barrow, GA (voted NO!)
Doris O. Matsui, CA
Kathy Castor, FL
Zachary T. Space, OH
Bruce L. Braley, IA
Diana DeGette, CO

Hat tip: Don Boudreaux

Via Valley Fever:

Republican senators submitted a report to Congress yesterday outlining billions of dollars of useless or stupid spending in the Obama stimulus plan.

What do we mean by useless or stupid? How about $100,000 for a puppet show in Minnesota or a $2 million replica railroad in Nevada....

The wasteful spending isn't isolated to Minnesota and Nevada, some of it is right here in Arizona.

According to the report, Arizona State University and the University of Arizona were given nearly a million dollars to study the work habits of ants.

"I had no idea that so much expertise concerning ants resided in the major universities of my state," McCain says. "I say that with an element of pride, but I'm not sure its deserving of these taxpayers' dollars."

Here are some I wish I had won grants for, at least in my youth:

Some of the other gems outlined in McCain's catalog of stupid spending are a $400,000 grant awarded to the University of Buffalo for a study on kids who smoke weed and drink malt liquor, a dinner cruise boat in Chicago that got $1 million to fight terrorism, and a $219,000 grant to the National Institute of Health to determine whether college chicks are more likely to "hook up" after drinking.

In other words, the federal government spent $219,000 to study beer goggles.

Taxpayers in Maricopa County (which includes Phoenix) are paying millions of dollars for officials within the county government to sue each other:

Lawsuits between county agencies including the Sheriff's Office, the County Attorney's Office and the Treasurer's Office against county administration have cost more than $2.5 million in legal fees according to the county's records through early November.

The Sheriff's Office has used attorneys from Ogletree, Deakins, Nash, Smoak and Stewart to wage legal battles with the county on issues including control of a law-enforcement computer system and the need to release surveillance footage of sheriff's deputies arresting Supervisor Don Stapley

in a county parking garage.

Next year, the Sheriff's office has asked for $7 million for this purpose.  Wow.  Given that I despise Sheriff Arpaio, I would love to lay this all at his door step but my sense is that the dysfunctionality goes broader and deeper.