Coyote Blog

How many articles have you read on "American's Crumbling Infrastructure"?  If you are like me, you are frequently left with the impression that deferred maintenance on infrastructure is increasing over time.  As is often the case in the media, a trend is implied but no actual trend data is presented.  Instead you will get scary single data points (e.g. 66,749 of the nation’s 607,380 bridges were structurally deficient).

It turns out, according to Chris Edwards at Cato, this is yet another implied trend that is not actually a trend.  The data is easily available, but never makes it into the article

Via the Washington Post:

President Obama urged reluctant lawmakers Saturday to quickly approve nearly $50 billion in emergency aid to state and local governments, saying the money is needed to avoid "massive layoffs of teachers, police and firefighters" and to support the still-fragile economic recovery.

In a letter to congressional leaders, Obama defended last year's huge economic stimulus package, saying it helped break the economy's free fall, but argued that more spending is urgent and unavoidable. "We must take these emergency measures," he wrote in an appeal aimed primarily at members of his own party.

Of course, in retrospect we have learned that the first stimulus was mostly about saving government jobs as well, rather than creating any private stimulus.   Government workers are among the Democrats most reliable political supporters, and the SEIU, among other organizations, have had close ties to Obama for years.  State and local governments are finally facing some accountability for spending and being forced to roll back spending increases of the last few years that have far outpaced inflation and population growth, so of course Obama wants to short-circuit this accountability process.

Think about this -- every one of these bailed out governments have certainly had local legislative deliberations and likely votes on bonds and tax increases over the last year.  If their problems still persist, its because the local taxpayers don't want to pony up any more money for their local government and the local legislators refuse to cut spending sufficiently.  So if Smallsville, California won't pony up more money for their government and won't balance their budget, why should I be on the financial hook to bail them out?

Andrew Coulson looks at one of these groups, teachers, and wonders what all the fuss is about -- its about time we laid some public school employees off after years of rapidly declining productivity:

I have been looking for a good excuse to clear my reader cache of a whole series of articles on government salaries and pensions, and this seems a really good time.

Much like the bailout of billionaires on Wall Street, the government worker bailout is targeting a group already doing much better than their peers in private industry.  (via Carpe Diem)

Related, via Carpe Diem:

"Who are America's fastest-growing class of millionaires? They are police officers, firefighters, teachers and federal bureaucrats who, unless things change drastically, will be paid something near their full salaries every year--until death--after retiring in their mid-50s. That is equivalent to a retirement sum worth millions of dollars.

Chris Edwards has a related essay, focusing on federal government pay.

Matt Welch looks at two DC-area counties and shows how their relative financial health is closely related to their hiring and pay policies.

This is lifted from an email I got from America Outdoors

A little noticed provision in the recently passed health care reform bill will require every payment to corporations over $600 to be reported on a Form 1099 to the IRS, including payments for the purchase of merchandise and services. This provision takes effect in 2012.

The current law requires a Form 1099 to be submitted to the IRS when your business pays more than $600 for rent, interest, dividends, and non-employee services if the payments are made to entities other than corporations. Currently, payments made to a corporation and payments for merchandise are not required to be reported.

To file the required 1099, a business will have to obtain and keep track of a Taxpayer Information Number (TIN) from every vendor before submitting the 1099 to that business and the IRS. Under current tax law, one copy of the form is sent to the IRS, and another copy is sent to the person to whom the business made the payments.

Rep. Dan Lungren (CA-3) introduced "The Small Business Paperwork Mandate Elimination Act" (H.R. 5141). The legislation would repeal the expanded 1099 reporting requirement.  Lungren correctly asserts that the burdens placed on small businesses by this reporting requirement would be overwhelming.

Call your U.S. Representative today and ask them to cosponsor H.R. 5141. The House switchboard number is 202-225-3121.  Ask to be connected to your Representative's office.

My small business has over a thousand vendors.  I would have to hire someone full time for a month to do this.  And it would be to zero purpose.  The IRS would be so flooded with forms that there would be no way they could pull any useful information from the blizzard.  This is yet another example of legislators operating with absolutely no idea how commerce actually works.  We have coined a name for it within our firm -- we call it arrogant ignorance.

Chris Edwards at Cato had more on this a while back.

I'm stunned that there wasn't a broader debate before such a costly mandate was enacted. If it goes into effect, it will waste vast quantities of human effort in filling out forms, reworking computer systems, collecting and organizing data, and fighting the IRS. The struggling American economy can't afford anymore suffocating tax regulations. This mandate is a giant deadweight loss. It should be repealed.

Readers of the site know that I do not generally join in with the Conservative bashing of unions, except to the extent that they feed at the public trough (e.g. at GM) where I will bash them equally with all other similar hogs.  Unions are perfectly acceptable associations of individuals in a free society for a generally rational purpose.  What upsets this equation is when the government attempts to intervene to tilt the playing field either towards employers or unions in their negotiations -- but this is a government intervention issue, not a union issue per se.

Far more problematic is the growing influence of public employee unions.  Union advocates talk about the need to help private unions in a power imbalance with large corporations, but talk about a power imbalance!  In the public sector, we have hugely powerful unions with absolutely no one willing to take them on.  Government leaders who supposedly should be advocates of taxpayers and pushing back against union demands are typically in bed with unions.  One might say it is a similar case to unions owning the private company in which they work, but in that case there are market dynamics that mitigate against overly high pay or indifferent customer service.  No such balancing mechanisms exist in government monopoly institutions.

There have been a lot of articles on this topic of late that I have been keeping in my reader but have not linked, so to do a bit of tab-clearing, here are some good recent articles on public sector unions.

Carpe Diem shows the direct relationship between increasing public sector unionization and public sector debt.  Chris Edwards appears to be the original source.

Chris Edwards followed up to show an inverse relationship between state management quality and unionization.

Bruce McQuain discusses the $500 billion California unfunded pension liability.  And this does not include the unfunded liabilities of all the state's cities and towns and counties, which typically don't book any liability at all for their future pension and medical commitments.

Steven Malanga on how public sector unions broke California.

The camera focuses on an official of the Service Employees International Union (SEIU), California's largest public-employee union, sitting in a legislative chamber and speaking into a microphone. "We helped to get you into office, and we got a good memory," she says matter-of-factly to the elected officials outside the shot. "Come November, if you don't back our program, we'll get you out of office.'

Traditionally, public sector unions have exercised a lot of power in elections, as evidenced by this example of the success of unions in fielding winning candidates in California school board elections.   Bruce McQuain reports that the SEIU has even formed its own 3rd party in North Carolina.  Its amazing that candidates whose main platform is to shift more taxpayer resources to the pockets of government workers has success.

Finally, according to the GAO, union contracts have a lot to do with why the USPS is failing  (as labor accounts for 80% of USPS costs).  They seem to have all the labor problems GM had, except there is even less pressure to correct the problems, since after all we can't get our mail delivered by Honda or Toyota.  Here is an example:

• USPS workers participate in the federal workers' compensation program, which generally provides larger benefits than the private sector. And instead of retiring when eligible, USPS workers can stay on the "more generous" workers' compensation rolls.

• Collective bargaining agreements limit the amount of part-time and contract workers the USPS can use to fit its workload needs, and they limit managers from assigning work to employees outside of their crafts. The latter explains why you get stuck waiting in line at the post office while other postal employees seemingly oblivious to customers' needs go about doing less important tasks.

• Most postal employees are protected by "no-layoff" provisions, and the USPS must let go lower-cost part-time and temporary employees before it can lay off a full-time worker not covered by a no-layoff provision.

• The USPS covers a higher proportion of employee premiums for health care and life insurance than most other federal agencies, which is impressive because it's hard to be more generous than federal agencies.

• If the collective bargaining process reaches binding arbitration, there is no statutory requirement for the USPS's financial condition to be considered. This is like making the decision whether or not to go fishing, but not taking into consideration the fact that the boat has holes in its bottom.

Via Chris Edwards at Cato, from recent government data:

Chris Edwards of Cato has the numbers:

I always laughed at Democrats that tried to woo me to their party.  Now I laugh at Republicans too.  MoveOn may get mileage out of attacking Bush, but he has done more for the left/liberal cause than Clinton.  Clinton had NAFTA, welfare reform, and (moderated by an aggresive Republican Congress) fiscal sanity.  While he too had an Iraq-like war in Kosovo, he never got sucked into the sweeping nation-building Bush has taken on.

Bush II is also leading this poll for the modern inductee to the free market hall of shame.

Like most of the Democratic presidential candidates, Obama has proposed a real mess in the place of coherent tax policy.   Chris Edwards has a first look.  No real surprises - more taxes on the productive, more handouts to key Democratic voting blocks.

I have long suspected that there are substantial problems in the income data that folks on the sky-is-falling side of the inequality and risk debate are using.  One point I have made several times is that rising entrepreneurship tends to void many of the conclusions made by these folks who are commenting from an "everyone is an office or factory worker" paradigm.  In particular:

• Entrepreneurs have much riskier income profiles.  To a statistician mining tax returns, I look like I have fallen from a good upper middle-class job into, well, poverty for the first two years of my new company.  I haven't, but my data point is being used by Jacob Hacker and others to say that somehow there is a great risk-shift that is being foisted on the middle class against their will.  In fact, I and the growing number of people who run their own small businesses choose this life.
• The introduction of the "S-corporation" means that an increasing amount of entrepeneurial income is showing up on 1040's.  With C corporations, the incentive was to delay taking any income from the company for as long as possible to avoid double taxation, preferably taking it at time of the company's sale.  With S-Corporations, there is no double taxation problem so corporate income flows through to the individual 1040.  Business owners are suddenly reporting more income not because they are making more, but because they are recognizing it in a different way in a different tax form.  Much of the rich getting richer is actually just the rich recognizing their corporate income in small businesses in a different way.

Much more here from Chris Edwards at Cato, reporting on an interesting report coming soon from Alan Reynolds.

There is nothing I think is dumber than the standard post-election plea for bipartisanship you see in newspapers after every election.  This election is no exception.  Get over it.  The Democrats won, they have been out of power for a while, and have a backlog of stuff they want to do.  I won't agree with a lot of it, which will put me in the same place I was with the Republican Congress.  I'm going to be pissed when the Democrats try to increase the minimum wage, roll back NAFTA, impose oil windfall profits taxes and raise income taxes.  Just as I was pissed when the Republicans passed McCain-Feingold, the prescription drug boondoggle, steel tariffs, and gave up on social security reform and any meaningful ethics and earmark reform.

Chris Edwards at Cato agrees:

That's nonsense. In a closely divided legislature, partisanship and
attacks on the other team are the logical course for both parties.
Because both parties know that either House or Senate could easily
switch back over in 2008, they will do their best to deny the other
side any legislative victories. The GOP's strategy now will be to show
that the Dems can't get anything done, so they block, filibuster, and
veto. They are the opposition in the House, so their job is to oppose.

The Dems will use their chairmanships and control of the House floor
to schedule partisan hearings and votes to try and make the Republicans
look bad any way that they can. The most important thing for Nancy
Pelosi will be to hold onto the majority and line up some divisive
issues to hammer on to help the party's 2008 presidential nominee. Note
that she won't be scheduling votes on tax hikes anytime soon, because
that would immediately revive the GOP and jeopardize 2008.

I do think the two parties are going to have to figure out how to get some judgeships filled, but I am not holding my breath.  My real wish is that Pelosi would pursue impeachment, not because I think it is justified but because it would tie Congress up into a magnificently entertaining gridlock.  Unfortunately, she has pledged she would not do so.

Postscript:  McCain-Feingold limits expired yesterday, so you have your free speech back.  You may criticize politicians again.