Should We Even Be Surprised Anymore?

We have a Treasury Secretary who can't do his taxes correctly, an impeached former federal judge helping to craft rules in the House of Representatives, and the largest recipient of donations from financial interests overseeing the crafting of regulation of the financial industry.

So should we really be surprised to find out that the head of the Department of Education was helping politically-connected politicians and businesspeople get their children into the best public schools in Chicago?

I'm not. But then again, I'm a cynic. HT: Instapundit

Unintentionally Honest Symbolism

Nancy Pelosi strode into the Capitol Building bearing the gavel used in the passage of Medicare in 1965. For me, that gavel has a much different symbolism than I would guess it does for her.

For me, it reminds me that Medicare cost more than seven times what it was originally projected to, and now faces an unfunded liability of over $29 trillion (summing the NPV of excess liabilities of Medicare Part A, B, and  D from the tables on pages 50 and 51).

Nothing like reminding everyone of the budget-busting incompetence that has gone before as you sign off on yet another multi-trillion dollar entitlement.

The True Cost of Public Education

The Cato Institute has done a great job digging into the actual cost of public education. They go beyond the publicly stated per-pupil costs (a ridiculous $10,053 per year in LAUSD, given their performance). They include all costs to the taxpayer, including capital budgets and debt payments, and for the money hole that it LA Unified School District, find that actual per-pupil spending is vastly understated. Were LAUSD being honest, they would be telling the taxpayers that each student (barely 50% of which will graduate in four years) costs them $25,208 per year, over twice the estimated cost of a year at a private school in the area.

Read it, and weep: Cato: They Spend WHAT?

At some point, despite the unions' and politicians' protests to the contrary, this system will become unsustainable, unaffordable, and unacceptable to those being asked to pay for it.

Bribing Legislators With Taxpayer Money

Here is yet another reason why California is in so much trouble: Teachers union tops list of state political spenders

Five special interests were responsible for more than half of the billion dollars spent since 2000, including:

--The California Teachers Assoc., which spent $211.8 million.
--The California State Council of Service Employees, $107.4 million. 

That's right. The teacher's union and the public employees' union has spent $300 million of taxpayer-derived funds lobbying the California state government. Our tax dollars at work, folks.

Their return on investment? California teachers are now the highest paid in the nation, with a 10-year pay increase of 41.6%. Despite these pay hikes, California schools still rank consistently near the bottom in nationwide rankings. Zero layoffs have affected the current state employees, despite California's massive deficits, and the number of public employees in California has grown during the past decade of financial troubles for the state.

Pretty good, really. For them. The state, however, is pretty well screwed.

I'd Better Start Saving for Private School Now

The LA Weekly has a long article describing the ridiculous hoops that administrators at the Los Angeles Unified School District (the school district I currently reside in) have to jump through to fire incompetent teachers.

The most distressing revelations, to my mind, are that teachers in the district receive tenure after only two years on the job, and that the district has attempted to fire only seven out of more than 30,000 teachers for poor performance over the past ten years.

Is it a surprise that just over half of students in LAUSD high-schools graduate after four years? Not really. Is it an outrage? It should be.

Read the whole depressing thing, which should really be coming from the LA Times.

How's that, again?

In the State of the Union tonight, President Obama asked Congress

to pass a bill that helps to right this wrong.

referring to the recent Citizens United decision.

Now, this decision was specifically rooted in the First Amendment protection of free speech.

How, exactly is Congress going to pass "a bill" that rights this "wrong." Wouldn't that "bill" specifically have to be a Constitutional amendment that would then be ratified by the states?

Goodbye, Mr. Keynes

So Obama appears to be floating a 3 year spending freeze starting at the beginning of the next fiscal year.

There are some caveats. This will only apply to non-defense discretionary spending, or about one-eighth of the entire budget. Obama is being rightly mocked for this across the blogosphere and in the media. Personally,  I think that enacting a budget freeze now while touting it as the administration's focus on fiscal responsibility is kind of like Tiger Woods not visiting a mistress during a tournament and claiming that it shows his deep commitment to monogamy.

I'd also note that it's conveniently set to expire right when the proposed health reforms kick in, another in a endless serious of accounting tricks.

My more serious question, however, is this: Whose economic model is the Obama administration working off of now? For over a year, we've been pummeled with Keynesian stimulus plans, with rhetoric about how government must stimulate demand, how the huge deficits are needed right now so that the government can be the consumer of last resort. Paul Krugman has been beating the drum from the very beginning about how we need even more stimulus than we already have. 

Now, apparently, the Keynesian view is out of fashion in the Obama administration. So what view is now driving their thinking?

What World Are These People Living In?

As California faces another $20 billion budget deficit this year, our bureaucrats are intentionally considering throwing this state even further into debt.

How? By implementing a $210 billion a year single payer health system. That would pretty much double the California state budget. Of course, our rulers have no idea how to raise the revenue needed, so the bill would create a committee to attempt to do so.

Yet this might be tough, considering the following:

• California has the highest sales tax in the nation.
• California has one of the highest income tax rates in the nation.
• California has the highest gas taxes in the nation.
• Property taxes are still in the top third.
• Corporate taxes are near the very top.

There is a lot of talk now about "developing economies" worldwide. I think California may be becoming a "regressing economy," especially if something like this were to pass.

About That Supreme Court Decision

I know it might be early, but I'm making the call: Keith Olbermann garners the award for The Dumbest Commentary of the Decade here.

That's right. The Citizens United decision is quite possibly worse than Dred Scott. Unbelievable.

Finally, A Step in the Right Direction

Yesterday, the Supreme Court struck down on of the most pernicious aspects of the McCain-Feingold campaign finance "reform" bill. No longer will government restrictions on corporate speech in the immediate run-up to elections be allowed.

Hilarity ensued. Most newspapers carried editorial condemning the judicial activism of the Court, and bemoaning the horrible impact on democracy this will have. I would note, however, that most of these same newspapers are  corporations as well, but they themselves got a special exemption from the McCain-Feingold rules.

I also find the notion that this decision was "judicial activism" absurd on its face. Read the text:

Congress shall make no law...abridging the freedom of speech...

The government banned political speech in the run-up to an election. That seems to be a pretty damn clear violation to me.

Quick Hit

Teddy Kennedy's seat goes to the GOP. Crazy.

And a little nugget I came across today, referred to as Wheeler's First Law: "The way to get rid of corruption in high places is to get rid of the high places."

Marginal Tax Rate Hell

The US tax system is, by pretty much all measures, a bloated, contradictory, and overly complex mass of bureaucratic insanity. There's no time that I feel worse about my country than on or around April 15, as I struggle to figure out which targeted tax break I a) qualify for, b) saves me more money, or c) thought I would qualify for, but don't, and so have to rearrange funds at the last minute. What I wouldn't give to import the Kiwi tax system here.

And most times, I have it pretty good, at least on the margin. In good times, my family makes enough that our marginal tax rate is predictable, and significantly less than 100%. Clifford Theis at the Mises Institute details the problems the working poor face in the current system. Personally, I think the CBO should be required to produce these charts yearly for various family compositions (single, married with no kids, married with one, two, and three, and for single parents), just to show how the system is fundamentally broken.

And that analysis was done before the current health care "reform" proposals took shape. Were they to pass, they'd wreak even more havoc on the poor.  The Cato Institute has posted an analysis showing that, on its own, the current health care proposals will present low income workers with marginal tax rates over 100%. Combined with other benefits, subsidies, and means tests, and it appears that the working poor would potentially face marginal rates of over 200%.

That is, to put it bluntly, insanity. Serious tax code and benefit allocation simplification is needed.

Deficit Update

The Treasury released their monthly statement today. Not good. The deficit is running 17% higher than last year's was at this point in the fiscal year. Tax revenues are even lower than they were last year, and outlays are nearly unchanged.

Combine this with the jobs report that came out last week (and which contained some truly gruesome numbers relating to the labor force participation), and I'm wondering where all the supposed "green shoots" have gone.

2 Months Old & Deeper in Debt

My wife had our first child in mid-October. Thanks to the brilliant leadership of our political class since World War II, she was introduced to this world already on the hook for $38,606.24 in debt. The major offenders responsible for this? In order of declining culpability, they are Congressional Democrats, Ronald Reagan, and George W. Bush, Congressional Republicans.

Why do I order them as I do?

While Reagan significantly ramped up defense spending, he also cut taxes in an attempt to "starve the beast." However, he didn't have the political will to actually take on the Congressional Democrats who held a large majority in the House of Representatives (a 277-158 split in 1980) on the domestic spending front. So began a long series of large deficits, averaging about 4% of GDP over his two terms and peaking at 5.88% in 1983, with a tax increase thrown in for good measure along the way. I was too young to notice them at the time (though I have a vague recollection of a "Unemployment hits 10%" TV news story from the early 1980s).

I'm fairly certain that these deficits combined with the healthy economic growth the USA experienced under Reagan convinced politicians on both sides of the aisle that, in the immortal words of Dick Cheney, "deficits don't matter." And so, under George W. Bush, we had Congressional Republicans again cutting taxes while significantly ramping up both domestic and military spending. Deficits under Bush II averaged a bit over 2% of GDP. I thought these deficits were terrible and unnecessary, but I also thought the rhetoric from Democrats regarding them was a bit overheated.

And perhaps those deficits didn't actually matter. After all, the USA is currently able to sell its Treasuries at ridiculously low rates (the 10-Yr bond is yielding about 3.8% as of today). If the country grows faster than the deficits do, things will probably hold together, assuming tax revenues as a percentage of the economy hold steady (which, for the most part in the USA, they seem to). And the further we get from those deficits, the more that inflation erodes their actual value. After all, $38,000 will be worth a lot less when my daughter is actually contributing to the tax revenues (in theory, if inflation is at historical trends).

So what spurred this post? The prospects for future deficits is very frightening. The Obama administration projects deficits of over $9 Trillion for the next decade. This would represent deficits of a bit over 6% of GDP for the next decade, far worse than Reagan's. It would add an additional $29,344 to my daughter's total burden, nearly doubling the amount of debt she is responsible for, even with Obama's optimistic assumptions about economic growth over that span. Scariest of all, even with the strong growth Obama forecasts, after a decade, his administration does not project us to be close to closing the deficit, a major sin in the neo-Keynesian economic view his administration purports to be working from. His projections show a deficit of 4% of GDP in 2004, about Reagan's average, which is frightening. Unsurprisingly, the Democratic establishment does not seem to care about the deficits, a major change of heart from the previous 8 years. In fact, many Democrats are calling for even larger deficits, or more "stimulus."

Already, since birth, Obama's deficits have added $1308.99 to what she owes. And yes, I attribute current deficits to Obama, as he supported most of Bush's financial rescue machinations, as well as supported the terribly-crafted Democrat-interest-group-rewarding "stimulus" bill.

I wonder how much longer the United States can roll over its debt at such low interest rates. I also wonder where the free cash to finance them will come from. Does the world have the appetite to stomach an additional $9 trillion in debt over the next decade? I am skeptical, and I am nearly certain that the answer is no at current interest rates.

Given the long term budget issues with Social Security (check the pathetic performance of the trust fund over the past year here) and Medicare (the latter of which is not remotely addressed by the current health care "reform" bill), I am very pessimistic about the long-term prospects for the health of the US economy.

Debt at birth: $38,606.24
Debt at 1.5 months: $39,915.23