Tidbits Quotations
on March 8, 2010
To Accompany the March 8, 2010 edition of Tidbits
http://www.trinity.edu/rjensen/tidbits/2010/tidbits030810.htm
Bob Jensen
at Trinity University
How
Can We Help Haiti ---
http://www.insidehighered.com/views/2010/01/15/fitzsimmons
Emergency Fund for Students From Haiti ---
http://www.iie.org//Content/NavigationMenu/Programs7/Haiti-EAS/Haiti-EAS.htm
574 Shields Against Validity Challenges in Plato's Cave
---
http://www.trinity.edu/rjensen/TheoryTAR.htm
- With a Rejoinder from the 2010 Senior Editor of The Accounting
Review (TAR), Steven J. Kachelmeier
- With Replies in Appendix 4 to Professor Kachemeier by Professors
Jagdish Gangolly and Paul Williams
- With Added Conjectures in Appendix 1 as to Why the Profession of
Accountancy Ignores TAR
- With Suggestions in Appendix 2 for Incorporating Accounting Research
into Undergraduate Accounting Courses
"The Public-Union
Ascendancy Government union members now outnumber private for the first time,"
The Wall Street Journal, February 3. 2010 ---
http://online.wsj.com/article/SB10001424052748703837004575013424060649464.html?mod=djemEditorialPage_t
Surely Dan Rather did not say that on
the the air
'Articulate' Obama Couldn't Even 'Sell Watermelons'
Newsbusters, March 8, 2010 ---
Watch the Vidoe ---
http://newsbusters.org/blogs/geoffrey-dickens/2010/03/08/dan-rather-articulate-obama-couldnt-even-sell-watermelons
HDNet's Dan
Rather stepped on one mine after another in the racial minefield that exists
when talking about the nation's first black President as the former CBS
anchor, on the syndicated Chris Matthews Show over the weekend, uttered the
following take on the President's ability to get health care passed and how
the GOP and independents would view it. [audio
available here]
Read more:
http://newsbusters.org/blogs/geoffrey-dickens/2010/03/08/dan-rather-articulate-obama-couldnt-even-sell-watermelons#ixzz0hhBs40i9
Video: Saturday Night Live Takes
on "Extremely Unpopular" Healthcare Plan ---
http://www.huffingtonpost.com/2010/03/07/snl-takes-on-deeply-unpop_n_489002.html
Mr. Bunning is
merely asking the Senate to live by the rules that President Obama said it
should when he signed an executive order requiring "pay-as-you-go" budgeting.
"Now, Congress will have to pay for what it spends, just like everybody else,"
he said, only three weeks ago. But instead of backing Mr. Bunning's stand that
new spending must be "paid for," the White House is attacking him.
"Jim Bunning's Finest Hour:
The Senator is vilified for following Obama's pay-as-you-go rules," Editors of
The Wall Street Journal, March 3, 2010 ---
http://online.wsj.com/article/SB10001424052748704548604575097632988425818.html
Great Public Sector Reform Speech ---
http://njn.net/television/webcast/ontherecord.html
At last Professor Krugman says
something I agree with 100%
I'm craving the chance to do some deep thinking, and I
haven't been doing a lot of that.
Paul Krugman, quoted in
The New Yorker, March 1 issue
Paul Krugman
Thinks Republicans Are Stupid Because They Agree Wtih, Er, Paul Krugman
---
http://ace.mu.nu/archives/299041.php
Krugman vs Krugman: The perils of punditry (The Noble Laureate is the master of
double-talk) ---
Kurt Brouwers, "Krugman vs Krugman: The perils of punditry," MarketWatch, March
8, 2010 ---
http://blogs.marketwatch.com/fundmastery/2010/03/07/krugman-vs-krugman-the-perils-of-punditry/
"Bernanke Says Deficit Action Is Key: Fed chairman says investors'
continued faith in U.S. economy could fade quickly without signs that Congress
is crafting plans to align federal expenditures and revenue," by Sudeep
Reddy, The Wall Street Journal, February 26, 2010 ---
http://online.wsj.com/article/SB20001424052748704479404575087290468927762.html#mod=todays_us_page_one
Federal Reserve Chairman Ben Bernanke faced a
barrage of questions about the risks of a rising federal deficit when he
delivered his semiannual economic report to Congress this week.
Mr. Bernanke's repeated response during a pair of
hearings was that markets haven't lost faith in the U.S. economy yet. But he
said the situation could change quickly without a credible plan from
lawmakers to bring projected government spending in line with tax revenue.
"I'm not anticipating anything in the near term,
but it is conceivable that it could lead to a loss of confidence in aspects
of the U.S. economy," Mr. Bernanke told the Senate Banking Committee on
Thursday. "It could affect interest rates. It could affect the value of the
dollar. And those things could directly or indirectly affect the state of
the economy."
With this fiscal year's deficit projected to reach
a record $1.6 trillion, lawmakers pushing for stronger action to rein in the
deficit sought to use the central-bank chief's comments to win support for
their cause.
During his appearances before Congress this week,
the first since his new term began following a tough confirmation battle,
Mr. Bernanke sought to highlight the difficulty of the necessary political
decisions while explaining the economics behind them.
"It's very easy for me to say this, because I don't
have to grapple with these difficult problems," Mr. Bernanke said at
Wednesday's session before House Financial Services Committee members.
"But it is very, very important for Congress and
the administration to come to some kind of program, some kind of plan that
will credibly show how the United States government is going to bring itself
back to a sustainable position," Mr. Bernanke added.
The Fed chairman focused his responses on the
medium-term deficit, allowing that it is acceptable for near-term deficits
to rise while the economy recovers from the deep recession. Mr. Bernanke
said deficits need to be brought down to 2.5% to 3% of the nation's gross
domestic product to be sustainable.
Investors are still buying government debt at low
interest rates, he said, suggesting they are willing to give Congress time
to craft a plan. But he also said they may react sooner without clear
signals from Congress.
If the U.S. were to emerge from its recession and
deficits weren't brought down, Sen. David Vitter (R., La.) asked, "how
quickly would that become a major problem in terms of the economy?"
"It could become a problem tomorrow if bond markets
are not persuaded that Congress is serious about bringing down the deficit
over time," Mr. Bernanke answered.
Great Public Sector Reform Speech ---
http://njn.net/television/webcast/ontherecord.html
"Andy Stern and Barack Obama: Fiscal Responsibility Fraudsters," by
Michelle Malkin, Townhall, March 3, 2010 ---
http://townhall.com/columnists/MichelleMalkin/2010/03/03/andy_stern_and_barack_obama_fiscal_responsibility_fraudsters
Everything you need to know about President Obama's
commitment to fiscal responsibility and cost containment can be summed up in
two words: Andy Stern. The profligate, corruption-coddling head of the
powerful Service Employees International Union was named to the White House
debt commission last week. If Obama thinks Stern holds the cure for our
government spending woes, you can be certain his latest health care
prescription will be fiscal hemlock.
Obama extolled Stern and his other federal debt
panel appointees as "distinguished individuals" who'll bring a "sense of
integrity" to the job. Tell that to rank-and-file SEIU members across the
country who have watched their hard-earned dues go down the tubes under
Stern's thugocracy. While fat-cat union bosses toss hundreds of millions of
dues into Democratic coffers, low-wage SEIU members' pension funds are
eroding and the organization's debt is piling up. And federal prosecutors
are reviewing requests that the union be investigated for potential illegal
lobbying activities at the White House.
More damning: As head of the 2.2 million-member
labor union, Stern directly installed a cadre of labor management stooges
embroiled in financial scandals across the country.
SEIU crony Tyrone Freeman, like Obama, began his
career as an urban community organizer. In 1994, Stern plucked Freeman from
Georgia and set his loyalist up as head of Local 6434, the sprawling
home-care workers' chapter in southern California that represents an
estimated 160,000 workers who make about $9 an hour caring for the elderly
and disabled. Stern then named him a national vice president. It was part of
Stern's grander plan to consolidate power by merging locals into statewide
chapters.
An extensive investigation by the Los Angeles Times
exposed how Stern's protege siphoned off hundreds of thousands of dollars in
dues money for his personal enrichment and pleasure. Moreover, the paper
alleged, Stern helped cover up the scandal. Freeman lived large -- piping
$600,000 in union contracts to his wife's video production and entertainment
ventures. The local also paid his mother-in-law $8,000 a month to babysit
his daughter and other union employees' children; footed a $13,000 bill for
membership at a Beverly Hills cigar club; and forked over $8,000 in union
dues to cover expenses for Freeman's Hawaiian wedding.
Stern's handpicked flunky also created a nonprofit
training shop called the "Homecare Workers Training Center" -- ostensibly to
provide educational opportunities for nurses. In practice, the nonprofit
served as a conduit to subsidize a childcare business operated by Freeman's
mother-in-law. Freeman's local also paid another $106,000 to Hollywood
talent agency William Morris for "advice and counsel."
SEIU's top officials were warned of Freeman's
plundering six years before the paper blew the whistle. After dragging its
feet and being forced to act to quell public embarrassment over the Times
investigations, SEIU finally threw Freeman under the bus. He rebounded with
a new career as a Los Angeles sports agent.
Continued in article
"Senate Introduces Unemployment and Tax Extenders Bill," by Dan Meyer,
Tick Marks Blog, March 4, 2010 --- |
http://tickmarks.blogspot.com/
Senators Harry Reid (D-NV, for now) and Max Baucus
(D-MT) have introduced the American Workers, State and Business Relief [Tax]
Act in the Senate. Former sponsor Charles Grassley (R-IA) criticized the
bill's cost and other facets. Provisions in the bill include an extension of
unemployment benefits, 65% subsidy for COBRA payments, yet ANOTHER annual
extension (see since about when this blog started in 2005) of certain tax
deductions such as sales tax deductibility and deductibility of certain
costs paid by K-12 teachers (though, to be fair, at least this time they are
not waiting until December), a provision to annul a drop in the federal
poverty level, Small Business loan and Medicaid funding to states and a
number of other provisions.
Apologies for the editorializing in the title and first paragraph. Having
said that, while most of the provisions individually are defensible and some
are even good, one wonders when Congress will EVER come to the conclusion
that the Federal spending spree is unsustainable.
Read more about the bill ---
http://www.webcpa.com/news/Senate-Introduces-Unemployment-Tax-Extenders-Bill-53445-1.html
Now You See Me and Now You Don't" Politics and Taxation in the
United Kingdom
Now, ahead of a Freedom of Information statement by
the Cabinet Office, Lord Ashcroft has acknowledged that he is non-domiciled in
the UK for tax purposes. That means that he pays income tax on his personal
income and gains arising in the UK, or foreign income and gains remitted to the
UK. Unlike most other citizens, the law permits him to arrange his personal
affairs in such a way that his worldwide income, subject to double taxation
relief, is not taxed in the UK. Despite this, the Conservative party secured a
life peerage for him, which therefore gave him a role as a legislator in the
Houses of Parliament. In that capacity, he can speak and vote in the House of
Lords on all legislative matters, including taxation, yet as an unelected
appointee he cannot be removed, no matter how dissatisfied people may be with
him.
Prem Sikka,"Lord Ashcroft's non-dom disclosureNo party should be comfortable
with the financial backing of a peer who uses non-domicile tax status to avoid
paying UK ta." The Guardian, March 1, 2010 ---
http://www.guardian.co.uk/commentisfree/2010/mar/01/michael-ashcroft-tax-non-dom
Great Pension Benefit Political Speech ---
http://njn.net/television/webcast/ontherecord.html
Kenneth Rogoff's Forecasting Record Makes Us Sit Up and Listen
In an interview a month before Lehman Brothers Holdings Inc. went bankrupt in
2008, Rogoff said “the worst is yet to come in the U.S.” and predicted the
collapse of “major” investment banks. His 2009 book “This Time Is Different,”
co- written with Carmen M. Reinhart , charts the history of financial crises in
66 countries.
"Harvard’s Rogoff Sees Sovereign Defaults, ‘Painful’ Austerity," by Aki
Ito and Jason Clenfield, Bloomberg, February 24, 2010 ---
http://mobile.bloomberg.com/apps/news?pid=2065100&sid=aaeViPPUVSw4
Thank you for the heads up Jim Mahar.
Ballooning debt is likely to force several
countries to default and the U.S. to cut spending, according to Harvard
University Professor Kenneth Rogoff , who in 2008 predicted the failure of
big American banks.
Following banking crises, “we usually see a bunch
of sovereign defaults, say in a few years,” Rogoff, a former chief economist
at the International Monetary Fund, said at a forum in Tokyo yesterday. “I
predict we will again.”
The U.S. is likely to tighten monetary policy
before cutting government spending, sending “shockwaves” through financial
markets, Rogoff said in an interview after the speech. Fiscal policy won’t
be curbed until soaring bond yields trigger “very painful” tax increases and
spending cuts, he said.
Global scrutiny of sovereign debt has risen after
budget shortfalls of countries including Greece swelled in the wake of the
worst global financial meltdown since the 1930s. The U.S. is facing an
unprecedented $1.6 trillion budget deficit in the year ending Sept. 30, the
government has forecast.
“Most countries have reached a point where it would
be much wiser to phase out fiscal stimulus,” said Rogoff, who co- wrote a
history of financial crises published in 2009. It would be better “to keep
monetary policy soft and start gradually tightening fiscal policy even if it
meant some inflation.”
Failed Marriage
Rogoff, 56, said he expects Greece will eventually
be bailed out by the IMF rather than the European Union. Greece will
probably announce an austerity program “in a few weeks” that will prompt the
EU to provide a bridge loan which won’t be enough to save the country in the
long run, he said.
“It’s like two people getting married and saying
therefore they’re living happily ever after,” said Rogoff. “I don’t think
Europe’s going to succeed.”
Investors will eventually demand higher interest
rates to lend to countries around the world that have accumulated debt,
including the U.S., he said. The IMF forecast in November that gross U.S.
borrowings will amount to the equivalent of 99.5 percent of annual economic
output in 2011. The U.K.’s will reach 94.1 percent and Japan’s will spiral
to 204.3 percent.
“In rich countries -- Germany, the United States
and maybe Japan -- we are going to see slow growth. They will tighten their
belts when the problem hits with interest rates,” Rogoff said at the forum,
which was hosted by CLSA Asia-Pacific Markets, a unit of Credit Agricole SA,
France’s largest retail bank. Japanese fiscal policy is “out of control,” he
said.
Euro Concerns
So far concerns about the euro zone’s ability to
withstand the deteriorating finances of its member nations have outweighed
the U.S.’s deficit woes, propping up the dollar.
“The more they suck in Greece, the lower the euro
goes, because it’s not a viable plan,” Rogoff said. “Clearly the dollar is
going to go down against the emerging markets -- there’s going to be concern
about inflation and the debt.”
The dollar has surged more than 9 percent against
the euro in the past three months. Ten-year Treasuries yielded 3.72 percent
as of 10:16 a.m. in New York.
The U.S. government will delay any efforts to
contain the deficit until Treasury yields reach around 6 percent to 7
percent, Rogoff said.
“The U.S. is in a state of paralysis in its fiscal
policy,” he said. “Monetary policy will tighten first, and I don’t think
it’s the right mix.”
Fed Exit
The Federal Reserve last week raised the discount
rate charged to banks for direct loans, and plans to end its $1.25 trillion
purchases of mortgage-backed securities in March. President Barack Obama ’s
administration is proposing a $3.8 trillion budget for fiscal 2011 to spur
the recovery.
“When they start tightening monetary policy even a
little bit, it’s going to send shockwaves through the system,” Rogoff said.
In an interview a month before Lehman Brothers
Holdings Inc. went bankrupt in 2008, Rogoff said “the worst is yet to come
in the U.S.” and predicted the collapse of “major” investment banks. His
2009 book “This Time Is Different,” co- written with Carmen M. Reinhart ,
charts the history of financial crises in 66 countries.
“We almost always have sovereign risk crises in the
wake of an international banking crisis, usually in a few years, and that’s
happening,” he said. “Greece is just the beginning.”
Greece’s debt totaled 298.5 billion euros ($405
billion) at the end of 2009, according to the Finance Ministry. That’s more
than five times more than Russia owed when it defaulted in 1998 and
Argentina when it missed payments in 2001.
The cost of protecting Greek bonds from default
surged in January, then declined this month as concern eased over the
country’s creditworthiness. Credit-default swaps on Greek sovereign debt
have fallen to 356 basis points from 428 last month, according to CMA
DataVision. That’s up from 171 at the start of December.
“Greece just highlights that one of those risks is
sovereign default,” said Naomi Fink , a strategist at Bank of
Tokyo-Mitsubishi UFJ Ltd. Still, “it doesn’t justify the situation where
we’re all in a panic and are going back to cash in the post-Lehman shock.”
"Man who broke the Bank of England, George Soros, 'at centre of hedge
funds plot to cash in on fall of the euro'," by Karl West, Daily Mail,
February 27, 2010 ---
http://www.dailymail.co.uk/news/worldnews/article-1253791/Is-man-broke-Bank-England-George-Soros-centre-hedge-funds-betting-crisis-hit-euro.html
A secretive group of Wall
Street hedge fund bosses are said to be behind a
plot to cash in on the decline of the euro.
Representatives of
George Soros's investment business were among an
all-star line up of Wall Street investors at an
'ideas dinner' at a private townhouse in
Manhattan, according to reports.
A spokesman for Soros
Fund Management said the legendary investor did
not attend the dinner on February 8, but did not
deny that his firm was represented.
At the dinner, the
speculators are said to have argued that the
euro is likely to plunge in value to parity with
the dollar.
The single currency has
been under enormous pressure because of Greece's
debt crisis, plus financial worries in Portugal,
Italy, Spain and Ireland.
But, it has also
struggled because hedge funds have been placing
huge bets on the currency's decline, which could
make the speculators hundreds of millions of
pounds.
The euro traded at
$1.51 in December, but has since fallen to
$1.34. Details of the secretive dinner emerged
days after Mr Soros, chairman of Soros
Fund Management, warned
in a newspaper article that the euro could 'fall
apart' even if the European Union can agree a
deal to shore up support for stricken Greece.
U.S. Debt/Deficit Clock ---
http://www.usdebtclock.org/
Bob Jensen's threads on looming entitlements disasters ---
http://www.trinity.edu/rjensen/entitlements.htm
David Walker ---
http://en.wikipedia.org/wiki/David_M._Walker_(U.S._Comptroller_General)
Niall Ferguson ---
http://en.wikipedia.org/wiki/Niall_Ferguson
Niall Ferguson,
"An Empire at Risk: How Great Powers Fail," Newsweek Magazine
Cover Story, November 26, 2009 ---
http://www.newsweek.com/id/224694/page/1
Please note that this is NBC’s liberal Newsweek Magazine and not Fox News
or The Wall Street Journal.
Fiscal Stimulus Packages: What are their Effects?
The Becker-Posner Blog, March 1, 2010
Fiscal Stimulus Packages: What are their Effects? Becker ---
http://uchicagolaw.typepad.com/beckerposner/2010/03/fiscal-stimulus-packages-what-are-their-effects-becker.html
Stimulus: Pluses and Minuses—Posner ---
http://uchicagolaw.typepad.com/beckerposner/2010/03/stimulus-pluses-and-minusesposner.html
Bob Jensen's threads on the economic recovery or lack thereof ---
"Bring Back the Robber Barons: There's a big difference between
entrepreneurs who make a fortune in the market, and those who do so by gaming
the government," by Daniel Henninger, The Wall Street Journal, March
4, 2010 ---
http://online.wsj.com/article/SB10001424052748703862704575099572105775414.html?mod=djemEditorialPage_t
Faced with high, painful unemployment as far as the
eye can see, the government naturally is here to help.
The Senate passed a $15 billion "jobs bill." Its
proudest piece is a tax credit for employers who hire a person out of work
at least 60 days. The employer won't have to pay the 6.2% Social Security
payroll tax for what remains of this year. If the worker stays on the job at
least a year, the government will give the employer $1,000.
As to the earlier $787 billion stimulus bill, Vice
President Joe Biden praised it in Orlando this week as an engine of job
creation, while he stood before a pile of broken concrete and asphalt. The
subject was highways.
Finally, Barack Obama's government now may force
companies to raise wages and benefits by squeezing their federal contracts
if they don't.
Maybe there's a better way.
*** Let's bring back the robber barons.
"Robber baron" became a term of derision to
generations of American students after many earnest teachers made them read
Matthew Josephson's long tome of the same name about the men whose
enterprise drove the American industrial age from 1861 to 1901.
Josephson's cast of pillaging villains was
comprehensive: Rockefeller, Carnegie, Vanderbilt, Morgan, Astor, Jay Gould,
James J. Hill. His table of contents alone shaped impressions of those
times: "Carnegie as 'business pirate'.'' "Henry Frick, baron of coke."
"Terrorism in Oil." "The sack of California."
I say, bring 'em back, and the sooner the better.
What we need, a lot more than a $1,000 tax credit, are industries no one has
thought of before. We need vision, vitality and commercial moxie. This
government is draining it away.
The antidote to Josephson's book is a small classic
by Hillsdale College historian Burton W. Folsom called "The Myth of the
Robber Barons: A New Look at the Rise of Big Business in America" (Young
America's Foundation). Prof. Folsom's core insight is to divide the men of
that age into market entrepreneurs and political entrepreneurs.
Market entrepreneurs like Rockefeller, Vanderbilt
and Hill built businesses on product and price. Hill was the railroad
magnate who finished his transcontinental line without a public land grant.
Rockefeller took on and beat the world's dominant oil power at the time,
Russia. Rockefeller innovated his way to energy primacy for the U.S.
Political entrepreneurs, by contrast, made money
back then by gaming the political system. Steamship builder Robert Fulton
acquired a 30-year monopoly on Hudson River steamship traffic from, no
surprise, the New York legislature. Cornelius Vanderbilt, with the slogan
"New Jersey must be free," broke Fulton's government-granted monopoly.
If the Obama model takes hold, we will enter the
Golden Age of the Political Entrepreneur. The green jobs industry that sits
at the center of the Obama master plan for the American future depends on
public subsidies for wind and solar technologies plus taxes on carbon to
suppress it as a competitor. Politically connected entrepreneurs will spend
their energies running a mad labyrinth of bureaucracies, congressional
committees and Beltway door openers. Our best market entrepreneurs, instead
of exhausting themselves on their new ideas, will run to ground gaming
Barack Obama's ideas.
If the goal is job growth, we need to admit one
fact: Political entrepreneurs create fewer jobs than do market
entrepreneurs. We need new mass markets, really big markets of the sort
Ford, Rockefeller and Carnegie created. Great employment markets are
discoverable only by people who create opportunities or see them in the
cracks of what already exists—a Federal Express or Wal-Mart. Either you
believe that the philosopher kings of the Obama administration can figure
out this sort of thing, or you don't. I don't.
FDIC chief Sheila Bair whacked bank bonuses
Tuesday. People on the East Coast spend too much time around the finance and
insurance industries. If the price of rediscovering the American job machine
is some people across the land getting really rich, it's a small price.
One of the richest now is Larry Ellison, the 1977
founder of Oracle Corp. (49,000 employees), whose tastes run to huge boats,
bigger houses and paying Elton John to play for his friends at the Cow
Palace. Someone in our politics has to find the courage to say, So what? If
the next Ellison and Oracle ripples into American life as many new jobs and
family incomes, I'm happy to be grossed out by parties and boats. The
alternative is a nation of Pecksniffs, choking on virtue.
We live in a world of rising competitors—foreign
robber barons—who don't much care about our endless quest for health-care
justice. The U.S. on its current path to a stage-managed economy floating in
a lake of taxes will keep down the greatest population of intellectual and
managerial firepower the world has seen. The rest of the world admits that,
with the recent exception of the Chinese, who think we're ready to be taken.
We have young people impatient for the chance to do what Carnegie,
Rockefeller and Hill did. Let them.
Continued in article
"Olbermann's "Federal Debt Budget"
Blunder - the Countdown," by Larry Elder, Townhall, February 26. 2010
---
http://townhall.com/columnists/LarryElder/2010/02/25/olbermanns_federal_debt_budget_blunder_-_the_countdown
MSNBC's "Countdown" show host, Keith Olbermann, recently claimed that
today's "federal budget debt" is "far less than it was throughout the Reagan
administration." He also said it is "about the same as it was in 1970." Is
he right? Tonight's countdown:
10) What is a "federal budget debt"? No researcher, intern or night
security guard told him that there is no such thing? No one fact checked him
before he went on-air? Add this to the ever-growing catalog of Olbermann's
greatest hits kept by the indispensable NewsBusters.org.
9) There is a federal (or national) debt. There is an annual federal
budget deficit.
8) Let's assume he meant the "federal debt" -- the amount of money the
government owes. This number can be stated in dollars. It can also be stated
as a percentage of gross domestic product (total value of goods and services
we produce in a given year).
It makes more sense to talk about these numbers as a percentage of GDP.
Consider two scenarios. Suppose you make 10K per year. You also owe 10K on
your credit cards. Now suppose you make 100K per year. But, again, you owe
10K. In the second case, your debt is far less of a big deal because -- as a
percentage of your earnings -- your debt went from 100 percent to 10
percent. Our economy usually grows every year, so stating debt as a
percentage gives a better idea of its impact.
Either way -- as dollars or a percentage of GDP -- Olbermann was wrong
about the debt.
At the end of 1988, the final full year of the Reagan presidency, the
debt stood at $2.6 trillion. As a percentage of GDP, the debt stood at 52
percent.
Now examine President Barack Obama's first year in
office. It is part former President George W. Bush's and part President
Obama's. (But as senator, Obama voted for the 2009 budget, which included
the TARP bank bailout, since expanded.) In 2009, the debt was over $12
trillion. As a percentage of GDP, the debt was over 83 percent.
Obama's first-year debt, therefore, is higher than
the debt of any Reagan year by far -- both in dollars and as a percentage of
GDP. And 2010 is projected to continue this upward spiral.
7) Assume Olbermann didn't mean "federal debt," but
meant "budget deficit" -- the annual gap between what the government takes
in and what the government spends.
During the Reagan presidency, the year in which he
incurred the largest deficit in dollars was 1986. The deficit was $221
billion. That year, the deficit, as a percentage of GDP, was 5 percent.
Reagan's deficit in 1983 was less in dollars -- $207 billion -- but it was 6
percent of 1983's GDP, the highest percentage under his administration.
The 2009 deficit was $1.4 trillion -- 9.9 percent
of GDP.
Obama's first-year deficit is higher than the
deficit of any Reagan year by far -- both in dollars and as a percentage of
GDP.
6) Now examine Olbermann's mind-boggling assertion
that Obama's "federal budget debt" is "about the same as it was in 1970." In
1970, the deficit was 0.3 percent of GDP, or a total of almost $3 billion.
The debt was 37.6 percent of GDP, or $380 billion. Whether compared with
today's deficit or debt, the 1970 numbers were microscopic.
5) Olbermann asserts that "federal budget debt"
(assuming we understand what he means) is "a good thing." Case closed? If a
country runs up bills largely to fight a war to protect national security,
one could argue that it is a good thing. If a country spends primarily on
domestic programs -- Social Security, Medicare, Medicaid and/or "stimulus"
-- one could argue that a "federal budget debt" is a bad thing.
The president of the Federal Reserve Bank of Kansas
City, Thomas Hoenig, calls the current and projected deficits "stunning." He
says they run the risk of igniting inflation. He urges a reduction in
spending, along with a call to increase revenue. The slippery slope of the
housing bailout, he warns, could lead to demand to bail out other weak
sectors of our economy. Where will it end, and at what cost to our standard
of living and productivity?
4) Suppose Sarah Palin offered a wildly inaccurate
take on the "federal budget debt"?
3) Viewers, at least some of them, now falsely
believe Obama's debt and deficit are about the same as Reagan's. Since vile
"right-wingers" love Reagan, they are, goes the argument, committing
hypocrisy by complaining about today's debt and deficit. Olbermann
frequently accuses people of lying, something that requires an intention to
mislead. Was he lying? Was he just ignorant? Anyone can have a bad show. It
doesn't make him -- as he calls others -- "the worst person in the world."
2) How will Olbermann handle this blunder? A
retraction? A correction? Ignore it and hope nobody notices because almost
nobody watches?
1) Jon Stewart, at least, is funny.
And for More Laughs at the Party
Video: Jon Stewart Mocks Olbermann (hilarious) ---
http://www.thehopeforamerica.com/play.php?id=2858
Olbermann reduced to name calling
Video: Jon Stewart Mocks Olbermann (hilarious)
---
http://www.thehopeforamerica.com/play.php?id=2858
Olbermann reduced to name calling
"Corruption in Cook County: Anti-Corruption Report
Number 3." by Thomas J. Gradel Dick Simpson, and Tom Kelly. Political Science
Department, University of Illinois at Chicago, February 18, 2010
http://www.uic.edu/depts/pols/ChicagoPolitics/Anti-corruptionReportNumber3.pdf
Introduction
Cook County government has been a dark
pool of political corruption for more than 140 years. The first public
corruption scandal occurred in 1869 when a number of Cook County
Commissioners accepted bribes to approve a fraudulent contract to paint city
hall.
1
During the last several decades, Cook
County has been a center of corruption with scandals emerging in many
different units of county government. By chronicling the cases we hope to
call attention to the need for meaningful reform. When county government
such as Cook County Clerk David Orr’s office or Assessor James Houlihan’s
office do undertake meaningful reform, others sink back into the mire.
Public or political corruption occurs
when government officials use their public office for private gain or
benefit. In Cook County government this includes outright bribes as well as
campaign contributions made by individuals or corporations in exchange for
jobs, inflated contracts or political favors. It includes ghost payroll jobs
in which individuals get a paycheck but do no work. With an annual budget of
more than $3 billion—dishonest public servants find many different ways to
profit illegally.
The purpose of this report is to
summarize the many different forms of corruption and to recommend basic
reforms that need to be enacted to clean up Cook County government.
This report provides a roster of
nearly 150 convicted Cook County politicians and government officials
long with descriptions of each of their illegal schemes. It includes private
citizens and businessmen who were also convicted in connection with public
corruption scandals. There are eight individuals named who are under
investigation or have been indicted but not yet convicted.
Most of the information came through a
careful search of newspaper articles and public records since 1970.
The actual total of corrupt officials
and their cohorts may be greater than the number we have listed. We are
still working to document the many other grafters, crooks and cheats who
work for the county or receive county contracts.
Criminal convictions are just the tip
of the iceberg in Cook County. For each corrupt official who is
convicted—there may be dozens more who are involved in the same or similar
schemes but escape prosecution.
The pattern of political corruption in
county government is widespread and not confined to a single unit of
government. This report documents graft and corruption in the Cook County
Board President’s office, his Office of
Employment and Training, the Highway
Department and in the offices of the sheriff, assessor and treasurer as well
as the Clerk of the Circuit Court. It details outright theft and bribery, as
well as endemic patronage, nepotism, and cronyism.
An especially egregious example was
Judge Thomas J. Maloney. He was convicted in Operation Gambat of accepting
thousands of dollars in bribes to fix felony cases including murder trials.
Another outrageous example was Marie D’Amico convicted in Operation Haunted
Hall of having three no-work jobs. D’Amico is the daughter of Alderman Tony
Laurino and wife of then Deputy Commissioner of Chicago’s Department of
Streets and
Sanitation John D’Amico, who did 2
years in federal prison for his involvement in the ghost payroll scheme.
Finally, in addition to systemic
corruption, county government is infested with conflicts of interest that
often result in contracts being awarded to the friends, family and political
cronies of public officials. These are not cases involving outright bribery
but in Chicago parlance, they are evidence of the “culture of clout” and
result in hiring unqualified candidates and awarding contracts with “theft
written between the lines.”
2
It is a
pattern of pervasive corruption and a culture of deceit that must be changed
if county government is to provide honest, transparent, efficient and
effective government to taxpayers at a cost we can afford.
Continued in report
University of Illinois at Chicago Report on Massive Political Corruption in
Chicago
"Chicago Is a 'Dark Pool Of Political Corruption'," Judicial Watch,
February 22, 2010 ---
http://www.judicialwatch.org/blog/2010/feb/dark-pool-political-corruption-chicago
A major U.S. city long known as a hotbed of
pay-to-play politics infested with clout and patronage has seen nearly 150
employees, politicians and contractors get convicted of corruption in the
last five decades.
Chicago has long been distinguished for its
pandemic of public corruption, but actual cumulative figures have never been
offered like this. The astounding information is featured in a
lengthy report published by one of Illinois’s
biggest public universities.
Cook County, the nation’s second largest, has been
a
“dark pool of political corruption” for more than
a century, according to the informative study conducted by the University of
Illinois at Chicago, the city’s largest public college. The report offers a
detailed history of corruption in the Windy City beginning in 1869 when
county commissioners were imprisoned for rigging a contract to paint City
Hall.
It’s downhill from there, with a plethora of
political scandals that include 31 Chicago alderman convicted of crimes in
the last 36 years and more than 140 convicted since 1970. The scams involve
bribes, payoffs, padded contracts, ghost employees and whole sale subversion
of the judicial system, according to the report.
Elected officials at the highest levels of city,
county and state government—including prominent judges—were the perpetrators
and they worked in various government locales, including the assessor’s
office, the county sheriff, treasurer and the President’s Office of
Employment and Training. The last to fall was renowned
political bully Isaac Carothers, who just a few
weeks ago pleaded guilty to federal bribery and tax charges.
In the last few years alone several dozen officials
have been convicted and more than 30 indicted for taking bribes, shaking
down companies for political contributions and rigging hiring. Among the
convictions were fraud, violating court orders against using politics as a
basis for hiring city workers and the disappearance of 840 truckloads of
asphalt earmarked for city jobs.
A few months ago the city’s largest newspaper
revealed that Chicago aldermen keep a
secret, taxpayer-funded pot of cash (about $1.3
million) to pay family members, campaign workers and political allies for a
variety of questionable jobs. The covert account has been utilized for
decades by Chicago lawmakers but has escaped public scrutiny because it’s
kept under wraps.
Judicial Watch has extensively investigated Chicago
corruption, most recently the
conflicted ties of top White House officials to
the city, including Barack and Michelle Obama as well as top administration
officials like Chief of Staff Rahm Emanual and Senior Advisor David Axelrod.
In November Judicial Watch
sued Chicago Mayor Richard Daley's office to
obtain records related to the president’s failed bid to bring the Olympics
to the city.
Bob Jensen's threads on political
corruption are at
http://www.trinity.edu/rjensen/FraudRotten.htm#Lawmakers
Bob Jensen's Fraud Updates are at
http://www.trinity.edu/rjensen/fraudUpdates.htm
The following tidbit is politically controversial and perhaps should not be
sent out to the AECM. However, I do so in the interest of noting some history of
famous robber barons that many of us were not aware of, particularly the
reference to the following book:
Burton W. Folsom called "The Myth of the Robber Barons: A New Look at
the Rise of Big Business in America" (Young America's Foundation). Prof.
Folsom's core insight is to divide the men of that age into market
entrepreneurs and political entrepreneurs.
What might be of interest to accounting researchers is to investigate
accounting history of the robber barrons' enterprises and the study of how
accounting might ideally differ for market entrepreneurs versus political
entrepreneurs.
Daniel Henninger is one of my favorite columnists for the WST. He often
writes about modern-day accounting scandals.
"Bring Back the Robber Barons: There's a big difference between
entrepreneurs who make a fortune in the market, and those who do so by gaming
the government," by Daniel Henninger, The Wall Street Journal, March
4, 2010 ---
http://online.wsj.com/article/SB10001424052748703862704575099572105775414.html?mod=djemEditorialPage_t
Faced with high, painful unemployment as far as the
eye can see, the government naturally is here to help.
The Senate passed a $15 billion "jobs bill." Its
proudest piece is a tax credit for employers who hire a person out of work
at least 60 days. The employer won't have to pay the 6.2% Social Security
payroll tax for what remains of this year. If the worker stays on the job at
least a year, the government will give the employer $1,000.
As to the earlier $787 billion stimulus bill, Vice
President Joe Biden praised it in Orlando this week as an engine of job
creation, while he stood before a pile of broken concrete and asphalt. The
subject was highways.
Finally, Barack Obama's government now may force
companies to raise wages and benefits by squeezing their federal contracts
if they don't.
Maybe there's a better way.
*** Let's bring back the robber barons.
"Robber baron" became a term of derision to
generations of American students after many earnest teachers made them read
Matthew Josephson's long tome of the same name about the men whose
enterprise drove the American industrial age from 1861 to 1901.
Josephson's cast of pillaging villains was
comprehensive: Rockefeller, Carnegie, Vanderbilt, Morgan, Astor, Jay Gould,
James J. Hill. His table of contents alone shaped impressions of those
times: "Carnegie as 'business pirate'.'' "Henry Frick, baron of coke."
"Terrorism in Oil." "The sack of California."
I say, bring 'em back, and the sooner the better.
What we need, a lot more than a $1,000 tax credit, are industries no one has
thought of before. We need vision, vitality and commercial moxie. This
government is draining it away.
The antidote to Josephson's book is a small classic
by Hillsdale College historian Burton W. Folsom called "The Myth of the
Robber Barons: A New Look at the Rise of Big Business in America" (Young
America's Foundation). Prof. Folsom's core insight is to divide the men of
that age into market entrepreneurs and political entrepreneurs.
Market entrepreneurs like Rockefeller, Vanderbilt
and Hill built businesses on product and price. Hill was the railroad
magnate who finished his transcontinental line without a public land grant.
Rockefeller took on and beat the world's dominant oil power at the time,
Russia. Rockefeller innovated his way to energy primacy for the U.S.
Political entrepreneurs, by contrast, made money
back then by gaming the political system. Steamship builder Robert Fulton
acquired a 30-year monopoly on Hudson River steamship traffic from, no
surprise, the New York legislature. Cornelius Vanderbilt, with the slogan
"New Jersey must be free," broke Fulton's government-granted monopoly.
If the Obama model takes hold, we will enter the
Golden Age of the Political Entrepreneur. The green jobs industry that sits
at the center of the Obama master plan for the American future depends on
public subsidies for wind and solar technologies plus taxes on carbon to
suppress it as a competitor. Politically connected entrepreneurs will spend
their energies running a mad labyrinth of bureaucracies, congressional
committees and Beltway door openers. Our best market entrepreneurs, instead
of exhausting themselves on their new ideas, will run to ground gaming
Barack Obama's ideas.
If the goal is job growth, we need to admit one
fact: Political entrepreneurs create fewer jobs than do market
entrepreneurs. We need new mass markets, really big markets of the sort
Ford, Rockefeller and Carnegie created. Great employment markets are
discoverable only by people who create opportunities or see them in the
cracks of what already exists—a Federal Express or Wal-Mart. Either you
believe that the philosopher kings of the Obama administration can figure
out this sort of thing, or you don't. I don't.
FDIC chief Sheila Bair whacked bank bonuses
Tuesday. People on the East Coast spend too much time around the finance and
insurance industries. If the price of rediscovering the American job machine
is some people across the land getting really rich, it's a small price.
One of the richest now is Larry Ellison, the 1977
founder of Oracle Corp. (49,000 employees), whose tastes run to huge boats,
bigger houses and paying Elton John to play for his friends at the Cow
Palace. Someone in our politics has to find the courage to say, So what? If
the next Ellison and Oracle ripples into American life as many new jobs and
family incomes, I'm happy to be grossed out by parties and boats. The
alternative is a nation of Pecksniffs, choking on virtue.
We live in a world of rising competitors—foreign
robber barons—who don't much care about our endless quest for health-care
justice. The U.S. on its current path to a stage-managed economy floating in
a lake of taxes will keep down the greatest population of intellectual and
managerial firepower the world has seen. The rest of the world admits that,
with the recent exception of the Chinese, who think we're ready to be taken.
We have young people impatient for the chance to do what Carnegie,
Rockefeller and Hill did. Let them.
Continued in article
"Five Ways to Heal American Capitalism," by Roger Marti,
Harvard Business Review Blog, March 3, 2010 ---
http://blogs.hbr.org/cs/2010/03/healing_american_capitalism_to.html?cm_mmc=npv-_-DAILY_ALERT-_-AWEBER-_-DATE
Three things have to happen in concert to heal the
ailing American democratic capitalist system:
- Senior executives have to be
helped out of a conflicted state in which they know they are living
inauthentic business lives but are both too
scared of the capital markets and too addicted to stock-based
compensation to change by themselves.
- Boards of directors who have
drunk the Kool-Aid of stock-based compensation need to be saved from
their own delusions about its effectiveness.
- The hedge funds who have
become so emboldened that they now hunt in predatory packs, destroying
companies in order to reap arbitrage profits, need a serious smack-down.
These changes will require government intervention,
not my favorite approach, but sometimes the only way.
Let's start with senior executives. As things
stand, they're expected to predict the future, which they can't do, and are
punished by the capital markets when they are wrong. This causes most of
them to manipulate earnings to make themselves right, which is hardly
conducive to psychological health as I've argued before.
Hence
Prescription #1: Repeal the
'Safe Harbor' provision of the Private Securities Litigation Reform Act of
1995. There should be no safe harbor
whatsoever for "anticipating," "projecting," "expecting," "estimating" or
any of the other "forward-looking" weasel-words used by senior executives
when "predicting" earnings. This will encourage senior executives to break
the habit of giving guidance and, by extension, of manipulating numbers to
hit their guidance numbers. They can get back to the psychologically
rewarding business of actually creating value.
Now boards. They think that stock-based
compensation aligns the interests of executives and shareholders. It
doesn't. It aligns the interests of senior executives with their own bank
accounts for reasons
I have detailed elsewhere.
Boards aren't going to challenge their own dogma,
especially when they are being egged on by the compensation consultants. And
like the executives with respect to guidance, boards are too scared to break
rank and shift from creating incentives to boost expectations to creating
incentives to boost real performance. Hence Prescription #2: Tax at
a rate of 80% gains from stock-based compensation that are based on stock
performance less than five years from the time of the awarding of the
stock-based compensation.
Stock-based compensation is a crummy idea. But it
gets less crummy as the period lengthens over which the performance needs to
occur. Doing the work necessary to have a chance of the stock price being
high five years from award at least gives long-term thinking a fighting
chance. Pushing realization of stock-based compensation to beyond time of
retirement is even better because retired executives can't manipulate
prices. It encourages strong succession planning because your pay-off is
dependent on your successor doing a good job. Hence Prescription #3:
Tax at a rate of 20% gains from stock-based compensation that are based on
stock performance five years or greater from the time of departure from the
company in question.
Let's turn to hedge funds and other market
operators who earn their returns by arbitraging short-term market swings.
They engage in manipulation too; if there aren't enough short-term market
swings to generate the returns they're used to, they will do whatever is
necessary, regardless of legal strictures, to manufacture short-term swings.
Here, we need to attack on two fronts.
First we have to neutralize their profit equation.
Hence Prescription #4: On stock holdings of less than one year,
increase the capital gains tax to 80% and reduce the portion of losses
allowable for tax purposes to 20%. And because these guys are as
sneaky as foxes, declare trading strategies that attempt to circumvent this
tax to be criminal tax evasion — otherwise hedge funds will swap with
non-taxable investors (like charitable foundations) to produce synthetic
holding periods of over one year. To neuter criticism that this will hurt
small investors, create a life-time $1 million exemption for short-term
capital gains and losses for individuals. Individual investors don't screw
up companies; hedge funds do.
Second, we need to dramatically reduce the source
of funds to hedge fund managers by dealing with their biggest supplier of
capital: pension funds. Pension fund managers accept the ridiculous
'2 & 20' fee structure that hedge funds charge
(2% annually of assets under management, plus 20%
of the upside) because pension fund managers love the treats that hedge fund
managers provide: junkets and "conferences" in exotic locales, and even the
payoffs from agents working for the hedge funds, as allegedly happened in
the
Quadrangle Group affair.
Pension funds are the soft underbelly of democratic
capitalism.
Peter Drucker predicted decades ago that
American workers would eventually own the means of production not through a
communist-style revolution but when their pension funds came to own the
biggest piece of American companies.
But the vast majority of US pension fund dollars
are not invested under anything approximating capitalist conditions. As a
worker in a given organization, you are typically forced to have your
pension managed by a single designated fund. And the rule with all
monopolists is that in due course they begin to serve themselves. Hence
Prescription #5: Every worker must have a choice of at least two
pension fund managers. That will give the worker choice and power
—and will discipline the behavior of pension fund managers.
If these five prescriptions were implemented —
which could be relatively straight-forward — we would give companies and
their senior executives the chance and the incentive to focus on building
great companies over the long term rather than subjugating themselves and
their companies to the traders. This would restore authenticity to the lives
of our corporate leaders.
There is a sixth prescription. It is trickier to
implement but it would build very productively on the five above. I will
leave that one for the next post...
Roger Martin
is the Dean of the Rotman School of Management at the University of
Toronto in Canada and the author of
The Design of Business: Why Design Thinking is the Next Competitive
Advantage (Harvard Business Press, 2009). His website is
rogerlmartin.com
"When CEOs Have Warren Buffett in Their Boardroom: What's it
like to have America's greatest investor as your shareholder? Buffett's
biographer talks to CEOs who know," by Alice Schroeder, Business Week,
February 25, 2010 ---
http://www.businessweek.com/print/magazine/content/10_10/b4169030631058.htm
Thank you for the heads up Denny.
Alice Schroeder is one of Denny Beresford's former students.
Bob Jensen's threads on accounting history are at
http://www.trinity.edu/rjensen/theory01.htm#AccountingHistory
"In Defense of RINOs: Childish conservatives lash out at the junior senator
from Massachusetts," by James Taranto, The Wall Street Journal,
February 24, 2010 ---
http://online.wsj.com/article/SB10001424052748704240004575085583598094438.html?mod=djemEditorialPage_t
Well, that didn't take long. "A month after being crowned
the darling of national conservatives, Republican Sen. Scott Brown of
Massachusetts is being branded 'Benedict Brown' for siding with Democrats in
favor of a jobs bill endorsed by the Obama administration," the
Associated Press reports.
Brown was one of five Republicans to vote in favor of a
motion allowing a vote on the so-called jobs bill. Sixty ayes were required;
the final tally was
62-30. Republicans Olympia Snowe and Susan Collins of Maine, George
Voinovich of Ohio and Kit Bond of Missouri joined Brown and all but two
Democrats: Ben Nelson of Nebraska, who voted "no," and Frank Lautenberg of
New Jersey, who is out sick.
Right-wing wrath is focused on Brown, not on the other
four Republicans, or for that matter on the 57 Democrats who voted the same
way. From the AP:
"We campaigned for you. We donated to your campaign. And
you turned on us like every other RINO," said one writer, using the
initials for "Republican-In-Name-Only."
The conservative-tilting Drudge Report colored a photo of
Brown on its home page in scarlet. . . .
"You've already turned out to be as big an idiot as
Obama," said one Facebook poster. "Enjoy your one term as senator."
This is stupid and childish. In saying this, we do not
mean to defend the so-called jobs bill. Although we are unfamiliar with its
details, we are prepared to stipulate that it is bad and wasteful and that
if it were put up to a plebiscite, we would vote "no."
But what did the carping conservatives expect from Scott
Brown? As an elected official, he answers to his constituents, who come from
one of the most liberal states in the country. Although it's premature to
characterize his record on the basis of a single vote, no one should be
surprised if it ends up being on the leftward side of the GOP caucus.
If Scott Brown is a RINO, any conservative with a
semblance of sanity should drop to his knees and say a prayer of thanks for
the creation of RINOs. If the species didn't exist, Sen. Martha Coakley
would be the 60th vote in favor of ObamaCare. No, scratch that. She'd be the
62nd vote for ObamaCare, the 60th and 61st coming from the Maine Democrats
who would have soundly defeated whatever "real" Republicans ran in place of
Snowe and Collins.
Incidentally, what is it that makes a lawmaker a "real"
Republican, or a RIMTON (Republican in more than only name), as opposed to a
RINO? Opposition to excessive spending? By that standard, given their record
during the Bush years, we're pretty sure the vast majority of congressional
Republicans would qualify as RINOs.
Or perhaps we're not being literal enough. Maybe RINO is
just what it sounds like--a partisan appellation rather than an ideological
one. That is, maybe a RINO is one who is willing to go along with
Democratic overspending, while a RIMTON is scrupulous about wasting tax
money only when it is a GOP initiative.
But then what good are Republicans if they oppose waste
only when they lack the power to stop it? The premise behind that question
may help explain why the ranks of congressional Republicans were so depleted
in the past two elections. If Republicans had been true to their supposed
principles when they were in the majority, conservatives probably wouldn't
be in the absurd position of complaining that the junior senator from
Massachusetts, of all places, is betraying those principles.
We're All in This Together, or Else
Roger Cohen of the New York Times--best known for his
spectacularly fatuous defenses of the regime that rules Iran--is now
turning his attention to American domestic policy. Here is his defense of
ObamaCare:
All the fear-mongering talk of "nationalizing" 17 percent
of the economy is nonsense. Government, through Medicare and Medicaid,
is already administering almost half of American health care and doing
so with less waste than the private sector. Per capita Medicare costs
for common benefits grew 4.9 percent between 1998 and 2008, against 7.1
percent for private insurers. Why not offer Medicare as a choice--a
choice--to everyone? Aren't Republicans about choice?
The public option, not dead, would amount to recognition
of shared interest in each other's health and of the need to use
America's energies and resources better. It would involve 300 million
people linking arms.
Ah yes, let's all link arms in a spirit of reconciliation!
"Senate Dems Warm to Reconciliation," reads a
Politico headline:
An idea that seemed toxic only weeks ago--using a
parliamentary tactic to ram health reform through the Senate--is gaining
acceptance among moderate Democrats who have resisted the strategy but
now say GOP opposition may force their hands.
Oh wait, sorry. Reconciliation doesn't mean 300 million
people linking arms. It means a handful of people ramming something
monstrous down all of our throats.
Which, come to think of it, also describes the way the
Iranian regime actually conducts itself.
Who's the Dummy?
We've noticed a troubling trend in American politics. This is a
Puffington Host post from October 2008:
A local station runs a disturbing story about a Ohio
resident named Mike Lunsford who has hung an effigy of Barack Obama in
his front yard. Lunsford freely admits that he is against Obama because
of his race.
Here's a
CBS News story from last October:
Randall Terry, the anti-abortion rights activist and
Operation Rescue founder, believes it's time to "start drawing from our
proud American tradition of burning people in effigy."
And he's starting with House Speaker Nancy Pelosi and
Senate Majority Leader Harry Reid.
Terry wants like-minded individuals to burn effigies of
the two Congressional Democratic leaders on Halloween to protest health
care legislation that he suggests will make Americans pay for "child
killing."
This is from
The New Yorker's profile of former Enron adviser Paul Krugman, an
economist at Princeton University:
Once Obama won the primary, Krugman supported him.
Obviously, any Democrat was better than John McCain.
"I was nervous until they finally called it on Election
Night," Krugman says. "We had an Election Night party at our house,
thirty or forty people."
"The econ department, the finance department, the Woodrow
Wilson school," Wells says. "They were all very nervous, so they were
grateful we were having the party, because they didn't want to be alone.
We had two or three TVs set up and we had a little portable outside fire
pit and we let people throw in an effigy or whatever they wanted to get
rid of for the past eight years."
"One of our Italian colleagues threw in an effigy of
Berlusconi."
Krugman is a New York Times columnist, Nobel laureate and
Ivy League professor, so you have to assume he is a leader in this movement
and the likes of Lunsford and Terry are mere followers.
Godwin for Senate!
Sen. Bernie Sanders of Vermont, an independent self-described socialist who
belongs to the Democratic caucus, "said Tuesday that people who do not take
the threat of climate change seriously remind him of those who downplayed
the growing threat of fascism and Nazism in the 1930s":
The climate change debate "reminds me in some ways of the
debate taking place in this country and around the world in the late
1930s," Sanders said during a Senate hearing on the Environmental
Protection Agency's 2011 budget, which you can watch here. (The comments
come at the 103rd minute.)
He continued: "And during that period with Nazism and
fascism growing--a real danger to the United States and Democratic
countries all over the world--there were people in this Congress, in the
British parliament saying, 'don't worry! Hitler is not real! It'll
disappear! We don't have to be prepared to take it on.' "
Wow, that's a great analogy! The only difference between
the two situations is that the Nazis were real.
We Blame Global Warming
- "11.3 Million Homeowners Underwater on
Mortgage"--headline,
Marketwatch.com, Feb. 23
- "Angry Snowmen Protest Tax Rises"--headline,
Metro.co.uk, Feb. 24
- "Richardson, Suns Snap Thunder Win Streak at
9"--headline,
Associated Press, Feb. 24
- "ESPN Suspends Kornheiser for Comments About
Storm"--headline,
Associated Press, Feb. 23
Reliable Sources
"A new classified directive to coalition forces in Afghanistan puts
restrictions on nighttime raids of Afghan homes and compounds, according to
a senior U.S. official who has seen the document," CNN reports from
Washington:
The official declined to be identified because a
declassified version of the document has not been made public.
So let's see if we have this straight: CNN is granting the
official anonymity not because the information he is revealing is
classified, but because the declassified version is private. We're sure we'd
be grateful for CNN's transparency if we could follow its explanation.
He Has the Hat to This Day
" 'Fake Medal' Man's Case Dropped"--headline, BBC Web site, Feb. 23
'Those Americans Are Disgusting, but Somehow I Agree
With Them'
"US Offensive yet to Persuade Afghans in Key Town"--headline, Associated
Press, Feb. 23
What About the 13th Amendment?
"Students Are Sold on Double-Decker Bus"--headline, St. Louis Post-Dispatch,
Feb. 24
The Lonely Life of a Farmer
"Ontario Farmers Embrace Water Buffalo"--headline, Toronto Star, Feb. 24
This Could Turn Into a Movement
"Call Out for Volunteers to Help With Bowel Syndrome Study"--headline,
Edmonton Journal, Feb. 24
'Uh, Mr. Westin, Where Are You Going With That
Knife?'
"ABC News to Cut Hundreds of Staff Members"--headline, New York Times Web
site, Feb. 23
But It Cost an Arm and a Leg
"Prof Lauded for his Work Preventing Amputation Prevention"--headline,
Arizona Daily Star (Tucson), Feb. 23
Keep Your Young Away From Bears
"Notre Dame's Young Might Interest Bears"--headline, Chicago Tribune,
Feb. 20
At That Age, They Ought to Be Retired Anyway
"100-Plus Kaneland Teachers to Get Layoff Notices"--headline, Beacon-News
(Aurora, Ill.), Feb. 23
That's What All the Blinged-Out, Floor-Wrecking
Breakdancers Say
"Blinged-Out, Floor-Wrecking Breakdancer: 'I'm Innocent' "--headline,
RentedSpaces.com, Feb. 23
Questions Nobody Is Asking
- "Should Chevy Corvette Have 2 Versions?"--headline,
Detroit Free Press, Feb. 21
- "Do Soldiers Drink Tea?"--headline,
The American Interest Web site, Feb. 21
- "Does This Spooky Image Show Ghost Boy Watching
Builders Demolish His Old School?"--headline,
Daily Mail (London), Feb. 23
- "God's Running Mate in 2012?"--headline,
CBC.ca, Feb. 23
- "Can Mao Asada's Time Have Passed if It Never
Happened?"--headline,
Chicago Tribune, Feb. 22
- "Why Won't Anyone Clean Me?"--headline,
The Wall Street Journal, Feb. 24
Answers to Questions Nobody Is Asking
- "Olbermann Responds to Dallas Tea Party's Invitation:
No Thanks"--headline,
Newsbusters.org, Feb. 24
- "11 Things You Didn't Know About Rielle
Hunter"--headline,
TheWeek.com, Feb. 23
Vultures Help Woman Rid Home of Boy Scouts--Now
That Would Be News
"Boy Scouts Help Woman Rid Home of Vultures"--headline, Associated Press,
Feb. 23
Government Isn't Tired of Voters--Now That
Would Be News
"Voters Aren't Tired of Government"--headline, NationalJournal.com, Feb. 23
Look Out Below!
- "National Health Lab Drops PE Pathologist"--headline,
Herald (Port Elizabeth, South Africa), Feb. 24
- "Chargers Drop Tomlinson"--headline,
Arizona Daily Star (Tucson), Feb. 23
It's Always in the Last Place You Look
- "New Species of Dinosaur Found in Utah
Rock"--headline,
Associated Press, Feb. 23
- "New Floating Garbage Patch Found in Atlantic
Ocean"--headline,
Daily Telegraph (London), Feb. 24
Too Much Information
- "Bill Clinton: Spec. Prosecutors 'All Got
Waxed' "--headline,
Politico.com, Feb. 23
- "Whitney Houston 'Dreadful' Down Under"--headline,
CBSNews.com, Feb. 23
Someone Set Up Us the Bomb
"University TV Show Mocking Blacks Sparks Freeze"--headline, Associated
Press, Feb. 23
Everything Seemingly Is Spinning Out of Control
- "Anti-Smoking Advert With Sexual Innuendo Shocks
French"--headline,
Daily Telegraph (London), Feb. 24
- "Girl Scouts Warn of Cookie Sale
Impostors"--headline,
CBSNews.com, Feb. 23
- "Chicken Falls in Love With a Dog"--headline,
Worthington (Minn.) Daily Globe, Feb. 24
- "50 Million Strong, Diverse Millennials Have
Arrived"--headline,
Milwaukee Journal Sentinel, Feb. 24
Breaking News From 411 B.C.
"Nationwide Strike Paralyzes Greece"--headline, The Wall Street Journal,
Feb. 24
News You Can Use
- "Researcher: Curvy Women Like a Drug to Men's
Brains"--headline,
Atlanta Journal-Constitution, Feb. 24
- "Puppet Cleavage a No-No for Colorado Bus Shelter
Ads"--headline,
Associated Press, Feb. 24
- "Racy, Racist BlackBerry Texts Can Cost You Your
Job"--headline,
von.com, Feb. 22
Bottom Stories of the Day
- "Winfrey's Best Friend Says She'll Miss Her TV
Show"--headline,
Associated Press, Feb. 24
- "Miss Beverly Hills Lauren Ashley Opposes Same Sex
Marriage"--headline,
FoxNews.com, Feb. 23
- "Charlie Sheen Checks Into Rehab"--headline,
TMZ.com, Feb. 23
- "National Labor Leaders Back AFGE in Effort to
Organize Screeners"--headline,
Government Executive, Feb. 23
- "Nigerian Politician Accused of Embezzling
$100M"--headline,
Associated Press, Feb. 23
- "New Law Won't Change Much at Apostle
Islands"--headline,
Associated Press, Feb. 22
Calling Obama a Bad President Insults Bad Presidents
Remember when Rahm Emanuel called liberal Democrats "retards" and had to
apologize--to the retarded? That joke is playing out again in a related
context, the Puffington Host reports:
In last month's issue of Foreign Policy magazine, leading
analyst and Iraq War supporter
Walter Russell Mead opined that President Obama's foreign policy
agenda was turning into a duplicate of Jimmy Carter's.
Mead's comparison prompted a lengthy and indignant letter
from--we're not kidding--Jimmy
Carter!
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archives.
You Can't Make This Stuff Up Even on Comedy Central
New legislation now being proposed in the
Massachusetts state legislature to ban circumcision of any male children,
including Jewish children, comes very close to saying, "Yes, it should be a
crime." Circumcision of infant males has been a requirement of Jewish faith and
identity since the time of Abraham.
Maggie Gallagher, "Should It Be
Illegal to Be a Jew in Massachusetts?" Townhall, March 3, 2010 ---
http://townhall.com/columnists/MaggieGallagher/2010/03/03/should_it_be_illegal_to_be_a_jew_in_massachusetts
Dream The Impossible Dream
"Double Exports in Five Years?," by Richard Posner, The Becker-Posner Blog,
February 2,, 2010 ---
http://uchicagolaw.typepad.com/beckerposner/2010/02/double-exports-in-five-years-posner.html
President Obama in his State of the Union Address
announced a program to double U.S. exports in the next five years and by
doing so create 2 million new jobs. The program mainly involves a $2 billion
increase in loan guaranties to exporters by the Export-Import Bank and
greater efforts to negotiate trade agreements with foreign countries and to
enforce U.S. laws against “unfair” international trade practices, such as
“dumping” foreign goods in United States markets, at below-cost prices.
Of all the “job programs” undertaken or
contemplated by our government, the President’s plan to double exports in
five years seems to me the most fatuous.
Total U.S. exports of good and services in 2009
were $1.553 trillion, and total imports $1.934 trillion (the net trade
balance was therefore a minus $380.7 billion). See U.S. Bureau of the
Census, Foreign Trade Statistics, www.census.gov/indicator/www/ustrade.html.
Exports were therefore about 11 percent of Gross Domestic Product. If GDP
increases by 2.5 percent a year for the next five years, and exports grow
proportionately, then by 2015 they will have grown by 13 percent. The
President wants them to grow by 100 percent. (If they would grow by 13
percent without any governmental effort, then the President’s 100 percent
program, if it succeeded, would actually have increased exports by only 83
percent—though of course the government would take credit for all 100
percent!)
How his program could accomplish this is
incomprehensible to me. The increase in loan guaranties by the Export-Import
Bank would reduce exporters’ interest costs by reducing their risk of losing
money by extending credit to a foreign purchaser, but that would be a minor
boon to exporters. Likewise, anti-dumping enforcement and other efforts to
prevent “unfair” pricing by foreign companies importing to the United States
are likely simply to provoke retaliation--limiting our exports—as happened
in our recent tiff with China over imports of tires.
That leaves the negotiation of trade agreements
with foreign countries. The problem with them, from a job-creation or
deficit-reduction standpoint, is that they increase bilateral trade—imports
as well as exports—and so have no average tendency to increase exports.
Moreover, they are difficult to negotiate because of opposition by producers
and workers, in both countries (if it is a bilateral agreement), to allowing
increased imports; the opposition to increased imports is based on the fact
that they can result in reduced domestic production and employment. At the
same time, increased imports benefit consumers and some producers (imports
are often inputs into domestically manufactured goods), but generally these
effects are more diffuse than the losses of sales and employment caused by
imports, and so do not have as much political weight. A Democratic
Administration is apt to be particularly sensitive to union opposition to
free-trade agreements.
Increasing exports is a standard and perfectly
sensible response to an economic downturn. Exports are by definition
domestically produced goods or services, so an increase in exports increases
production and hence employment. But the usual way of stimulating exports is
by devaluation, which increases the amount of a nation’s goods and services
that foreigners can obtain with their foreign currency. Moreover,
devaluation increases the domestic price of imports, which in turn
stimulates domestic production to replace some of these now more expensive
imported goods.
Our government has been trying to create a modest
inflation, primarily in order to reduce debt burdens, reduce real wages (in
order to reduce layoffs), and reduce hoarding (since inflation has the
effect of a tax on cash balances) and thus stimulate consumption. Inflation
increases the price of exports, but, especially if it is modest, is likely
to be offset by a fall in the value of the dollar relative to foreign
currencies. A high rate of inflation, however, which is a looming
possibility because of the Federal Reserve’s "easy money" monetary policy,
would probably have a significant negative effect on exports.
We have large trade deficits with China and other
Asian countries that pursue protectionist policies, but there doesn’t seem
to be anything we can do about that. We have no leverage with those
countries. They accumulate large dollar reserves as a result of running
large trade surpluses with us by virtue of their policies—and we borrow the
dollars, becoming these countries’ debtors. The indirect effect of our
foreign debt on our exports is an illustration of the gravity of our fiscal
situation, to which the government seems at last to be paying some
heed—though not in its job programs.
An improvement in our trade balance would be a good
thing because it would reduce the federal deficit as well as making us less
dependent on the goodwill of foreign countries, but increased exports offset
by increased imports would not affect the balance.
Finally and most questionably, the proposal to
double our exports assumes that foreign export-oriented countries like
Germany and China would stand idly by while we “stole” their export markets.
Obviously they would respond—with their own export-stimulus programs, which
would be likely to negate ours.
"Should the Government try to Stimulate US
Exports?" by Gary Becker, The Becker-Posner Blog, February 2,, 2010 ---
http://uchicagolaw.typepad.com/beckerposner/2010/02/should-the-government-try-to-stimulate-us-exports-becker.html
Posner shows, among other things, the basic
impossibility of doubling US exports during the next five years. I consider
whether such a policy makes sense, even if it could be achieved. My short
answer is that it does not.
In economies that have full employment except
during recessions, which describes the American economy, increased exports
do not create jobs, any more than building football stadiums creates jobs,
although many commentators and businessmen continue to lament the jobs lost
to China. What increased exports do under full employment conditions is
transfer jobs from producing for domestic consumption and domestic
investment to producing for export. The share of American GDP devoted to
exports has about doubled during the past 50 years without having any
noticeable impact on either the employment or unemployment rates. Part of
the reason for this little impact is that imports increased even more
rapidly than exports did, but the main answer is that some workers and
capital shifted from producing for domestic uses to producing for foreign
uses.
Many countries want to increase their exports in
good part because of the continuing influence of the old mercantilist
tradition that countries should try to accumulate more assets, such as gold.
In earlier times, increase in gold reserves equaled the difference between
the values of exports and imports. In present times, there is considerable
envy of China’s accumulation of over $2 trillion worth of reserves because
China exports many more goods and services than it imports. The US and other
countries that import much more from China than they export to China have
been pressuring China to appreciate its currency in order to encourage
Chinese consumers and businesses to import more from other countries, and to
reduce imports by other countries of Chinese goods.
I have argued earlier (see my post on our old
website for Nov. 23, 2009) that China has been accumulating more reserves
that the optimal amount that would promote its own interests. Since China
has far more than enough reserves to manage even large fluctuations in its
trade balance, the Chinese people would have greater real wealth if its
government allows the Yuan to appreciation. An appreciation of its currency
would reduce China’s exports and raise its imports.
While China has been hurt by its mercantilist
policies, I believe that the US and other developed countries have gained
rather than lost from China’s policy of undervaluing its currency. China has
exchanged goods produced by hard-working labor, and costly raw materials and
capital for paper, like US Treasury bills and bonds, that yield low interest
rates. The financial assets that China is accumulating is not yielding much
more in the way of income than the mercantilist goal of accumulating zero
interest bearing gold in exchange for goods produced by labor, materials,
and capital.
A common response to the analysis I just gave is
that it is too “economic”. It is claimed that from a geo-political view,
China has the United States at its mercy due to its large accumulation of US
debt. According to this argument, China could threaten to sell these assets,
thereby raising interest rates on American debt, and creating chaos in the
market for American debt. The truth is just the opposite, for, if anything,
the US has China over the barrel. For the US could threaten to inflate away
much of the burden of its debt, and thereby greatly reduce the real value of
China’s assets. The US could also use the Fed to maintain relatively low
interest rates, even though this would likely increase inflation as well.
In fact, while China has very large holdings of US
debt, it does not have much leverage on the market for this debt. For one
thing, there is little debt of other governments that China would consider
good substitutes for its US Treasury bills and bonds. Particularly now, with
the major fiscal problems of the PIIGS (Portugal, Ireland, Italy, Greece,
and Spain), EU debt does not seem like an attractive alternative. Moreover,
China in fact has little monopoly power in the market for US government
debt. Despite its vast holdings, China has no more than about 10% of the US
debt held by the American public or foreign governments. A 10% share of the
market for an asset does not provide much control over interest rates on
that asset, especially when the asset is part of a much larger worldwide
market for governments, private bonds, and equities. China may be willing to
take some losses in order to pressure the US in its military relations to
Taiwan, and other geo-political areas of conflict. But its threats in the
government bond market have little credibility since China would suffer much
more than the US would.
I am not claiming that the American government and
American consumers have been saving enough. Since the US’ deficit between
imports and exports is the mirror image of its deficit on capital accounts
with other countries, fiscal deficits have affected the trade balance. for
this reason and others, the huge federal deficits during the past couple of
years, and also earlier in this decade, are very worrisome, especially if
the American debt/GDP ratio continues to rise rapidly during the next few
years. However, the basic problem is not US exports, but it is getting the
federal government to cut its spending, and to implement policies that
increase the rate of growth of the US economy.
"Keep Your Laws Off My Body," by
John Stossel, Townhall, March 3, 2010 ---
http://townhall.com/columnists/JohnStossel/2010/03/03/keep_your_laws_off_my_body
"It's a free country."
That's a popular saying -- and true in many ways.
But for a free country, America does ban a lot of things that are perfectly
peaceful and consensual. Why is that?
Here are some things you can't do in most states of
the union: rent your body to someone for sex, sell your kidney, take
recreational drugs. The list goes on. I'll discuss American prohibitions
tomorrow night at 8 and 11 p.m. Eastern time (and again on Friday at 10) on
my Fox Business program.
The prohibitionists say their rules are necessary
for either the public's or the particular individual's own good. I'm
skeptical. I think of what Albert Camus said: "The welfare of humanity is
always the alibi of tyrants." Prohibition is force. I prefer persuasion.
Government force has nasty unintended consequences.
I would think that our experience with alcohol
prohibition would have taught America a lesson. Nearly everyone agrees it
was a disaster. It didn't stop people from drinking, but it created new and
vicious strains of organized crime. Drug prohibition does that now.
The prohibitionists claim that today's drugs are
far more dangerous than alcohol.
But is that true? Or is much of what you think you
know ... wrong?
I believed the Drug Enforcement Administration's
claim that drugs like crack and meth routinely addict people on first use.
But Jacob Sullum, who wrote "Saying
Yes", says, "If you look at the government's own
data about patterns of drug use, it clearly is not true."
The data is remarkable: 8.5 million Americans have
tried crack, but there are only 359,000 regular users. (The government
defines "regular use" as using a drug at least once in the past 30 days.)
More than 12 million tried meth, but only 314,000 still take it. The story
is similar for heroin. Most people who try these "instantly additive drugs"
do not get "hopelessly addicted." They give them up on their own.
As Sullum puts it: "The vast majority of people who
use illegal drugs do not become heavy users, do not become addicts; it does
not disrupt their lives. In fact, I would argue it enhances their lives. How
do we know that? Because they use it."
But on the news, we constantly see people whose
lives have been destroyed by drugs. Sullum says: "When you have prohibition,
the most visible users are the ones who are most antisocial, most screwed
up. They're the ones who come to the attention of the police. ... People who
present themselves as experts on drug use because they come into contact
with all these addicts have a very skewed perspective because they are
seeing a biased sample. The people who are well adjusted, responsible users
are invisible."
My prohibition show will also touch on
prostitution. I want ratings -- I admit it. Former prosecutor Wendy Murphy
says prostitution is "sexual slavery."
I think calling it slavery is an insult to those
who've suffered real slavery. Slavery is force. Prostitution is consensual.
On my show, I'll let a former "sex worker" and the prosecutor fight it out.
The prohibitionists also ban the sale of human
organs. You aren't allowed to sell a kidney to someone who will die without
one. Sally Satel, a physician who is the recipient of a kidney and the
author of "When
Altruism Isn't Enough", says, "Altruism ... is a
beautiful virtue, but tomorrow at this time 13 people will be dead because
they didn't get a kidney."
In a free country, we consenting adults should be
able to do whatever we want with our bodies as long as we don't hurt anyone
else. People who don't like what we do have every right to complain about
our behavior, to boycott, to picket, to embarrass us. Bless the critics.
They make us better people by getting us to think about what's moral. Let
them mock and shame. But shaming is one thing -- government force is
another. Prohibition means we empower the state to send out people with guns
to force people to do what the majority says is moral. That's not right.
And it doesn't even work.
The Price
of Perfection: That Straw That Saved the 10 Millionth Camel's Back
Contemplate the
flip side of my argument. A 100 percent safe car is impossible to build. As a
manufacturer approaches 100 percent safety, the manufacturing costs increase
exponentially. The real question is what is the customer (or society) willing to
pay for safety as it approaches 100 percent safe. Most consumers would be
willing to pay $20,000 for a car that is 99.8 percent safe but not $100,000 for
a car that is 99.9 percent safe. Are the customers wrong? How would they react
to Washington bureaucrats telling them they had to pay an additional $80,000 for
an incremental 1/10 of 1 percent of safety?
Armstrong Williams, "Toyota’s Deadly Secret." Townhall, March 2, 2010 ---
http://townhall.com/columnists/ArmstrongWilliams/2010/03/02/toyota%e2%80%99s_deadly_secret
Jensen Comment
I purchased a new Subaru last year in the Cash for Clunkers Program. I traded in
my father's 1989 Cadillac that looked and ran like the day it was new. It
accumulated 70,000 miles of absolutely trouble free driving. Now the Subaru cost
me $19,700 plus some extras for heated seats and the extended warranty.
Subaru is rated the
most safe car in its class, but would I have done this deal if the trade-in
price had been $87,000 for some added safety protection currently not available
on new vehicles? Probably not, even though the old Cad I traded in did not even
have air bags or various other safety features that are standard on a 2010
Subaru. Of course, up here we call it a rush hour traffic if we see two other
vehicles on I-93 at 8:00 a.m. or 6:00 p.m.
This begs the question of how much we
should be forced to pay for epsilon improvements in safety? Of course I'm not
talking about unsafe cars that lurch ahead uncontrollably or have defective
braking systems. But my old Cad was extremely tried and true with respect to not
having such severe safety hazards. In fact, the sheer complexity of my new
Subaru with all its computerized controls of almost everything make it more of a
risk in some ways as I drive to the village for milk and bread or a hair cut.
This also applies to costs of production
of goods and services. Some medical procedures now cost ten times more than in
1990 for safety benefits that may only save one life out of ten million people.
It certainly seems worth it if you're life is the one saved, but in the grand
scheme of things is this added protection really a luxury that society can no
longer afford? The same question might be raised about many of the current OSHA
requirements for working Americans. How many wannabe workers cannot find jobs
because of more stringent OSHA requirements?
Up here in the mountains, a small
construction company that does a lot of building repair work laid off all of its
full-time workers because of the cost of Workmen's Compensation Insurance. The
former workers became "independent contractors" who now negotiate their own fees
and no longer have benefits like employer-paid health insurance. Outsourced
workers are paid by the job rather than the hour such that they, in turn,
sometimes take more safety risks in their rush to finish jobs quickly.
Bob Jensen's threads on managerial
accounting are at
http://www.trinity.edu/rjensen/theory01.htm#ManagementAccounting
From The Wall Street Journal Accounting Weekly Review on February 26,
2010
States Sink in Benefits Hole
by: Amy
Merrick
Feb 18, 2010
Click here to view the full article on WSJ.com
TOPICS: Governmental
Accounting
SUMMARY: The
Pew Center on the states has issued a report on the status of pension,
health-care and other retirement benefits offered to public employees,
finding sever funding shortfalls stemming both from market losses and
deferring funding even during healthy economic times. "Illinois has the
largest pension-funding gap, with only 54% of the necessary contributions
made to pay promised benefits to current and future retirees." Researchers
obtained the data for their analysis from Comprehensive annual financial
reports (CAFR) for fiscal year end 2008, generally falling on June 30 for
most states.
CLASSROOM APPLICATION: The
article is a good one for governmental accounting courses in covering the
CAFR.
QUESTIONS:
1. (Introductory)
Who has issued this report on the status of funding of state retirement and
other post-employment benefits? What is their objective in doing so?
2. (Introductory)
Summarize the findings as reported in this WSJ article. From where did
analysts obtain the information for this report?
3. (Advanced)
How do states, or any employers, establish amounts that should be set aside
to cover defined-benefit pension plans and promises of other post-employment
benefits?
4. (Advanced)
Is the funded status of states' pension and other post-employment benefit
plans shown on the face of the Statement of Net Assets or on the Balance
Sheet for governmental entities? Explain your answer with reasoning based on
GASB and other authoritative requirements.
5. (Advanced)
States have found revenues "consistently lagging behind forecasts." How does
this problem in a state government result in cutting spending, likely
including spending to fund employees; retirement benefits?
Reviewed By: Judy Beckman, University of Rhode Island
"States Sink in Benefits Hole," by: Amy Merrick, The Wall Street
Journal, February 18, 2010 ---
http://online.wsj.com/article/SB10001424052748704398804575071873547372514.html?mod=djem_jiewr_AC_domainid
State governments face a trillion-dollar gap
between the pension, health-care and other retirement benefits promised to
public employees and the money set aside to pay for them, according to a new
report from the Pew Center on the States.
States promised current and retired workers a total
of $3.35 trillion in benefits through June 30, 2008, said the report from
the nonprofit research group, a division of Pew Charitable Trusts. But state
governments had contributed only $2.35 trillion to their benefit plans to
pay current and future bills, the report said.
The Pew report said its estimate of the funding gap
would likely prove conservative, because it didn't account for the massive
investment losses pension funds suffered during the second half of 2008.
Although there was a slight rebound last year, it wasn't nearly enough to
cover the previous losses, Pew said.
Researchers compiled the data by reviewing each
state's comprehensive annual financial report for fiscal year 2008, which
for most states ended June 30, 2008. They also looked at pension-plan annual
reports.
The pension problems started well before the
recession. Even in good times, states were skipping pension payments,
leaving larger holes to fill in future years. State legislatures also
increased benefit levels without setting aside extra money to pay for them.
As a result, annual pension costs for states and
participating local governments more than doubled, to more than $64 billion,
from fiscal 2000 to fiscal 2008, said Susan Urahn, the research group's
managing director.
"We have a significant problem now, but it's a
problem that can be solved," Ms. Urahn said. "If states wait, eventually
they will have an unmanageable crisis on their hands."
Investment returns won't be enough to make up the
shortfall, she said.
Illinois has the largest pension-funding gap, with
only 54% of the necessary contributions made to pay promised benefits to
current and future retirees, the Pew report said. Kansas, Oklahoma, Rhode
Island and Connecticut are close behind, with less than 65% of their pension
benefits currently funded.
Experts recommend that states set aside each year
at least 80% of what actuaries say will be necessary to cover benefit
payments. In 2008, only four states—Florida, New York, Washington and
Wisconsin—had fully funded pension systems, the Pew report said.
In addition, states generally have little set aside
to cover retiree health-care and other nonpension benefits. The Pew report
found states, on average, have funded only 7.1% of these expected costs, and
20 states have no money in reserve for the bills.
The report suggested that states consider lowering
benefit levels and increasing the retirement age for new employees. In the
past two years, 10 states increased required employee contributions to their
benefit plans, the report said.
State budgets are so troubled that most don't have
extra money to make up for missed pension contributions. With revenue
consistently lagging behind forecasts, state governments are cutting
spending, increasing taxes and imposing new fees to eliminate deficits.
The National Conference of State Legislatures says
it doesn't expect state finances to improve for at least two years.
Thirty-five states are projecting a combined budget gap of $55.5 billion for
fiscal year 2011, which begins July 1, 2010 for most states, said Corina
Eckl, the group's director of fiscal programs.
Raising taxes to fill pension coffers would be a
difficult sell to taxpayers, Ms. Urahn said.
Public-sector employees in California and other
states are facing a growing backlash from residents who are having their own
benefits stripped by employers.
My Unfinished Essay on the Pending Collapse of the United States ---
http://www.trinity.edu/rjensen/entitlements.htm
Bob
Jensen's universal health care messaging ---
http://www.trinity.edu/rjensen/Health.htm
Return to
the Tidbits Archives ---
http://www.trinity.edu/rjensen/tidbitsdirectory.htm
Shielding Against Validity Challenges in Plato's Cave ---
http://www.trinity.edu/rjensen/TheoryTAR.htm
-
With a Rejoinder from the 2010 Senior Editor of The Accounting Review
(TAR), Steven J. Kachelmeier
- With Replies in Appendix 4 to Professor Kachemeier by Professors
Jagdish Gangolly and Paul Williams
- With Added Conjectures in Appendix 1 as to Why the Profession of
Accountancy Ignores TAR
- With Suggestions in Appendix 2 for Incorporating Accounting Research
into Undergraduate Accounting Courses
Shielding Against Validity Challenges in Plato's Cave
---
http://www.trinity.edu/rjensen/TheoryTAR.htm
By Bob Jensen
Table of Contents
- Tom Lehrer on Mathematical Models and Statistics
- TAR versus AMR
- Introduction to Replication Commentaries
- TAR Versus JEC
- Accounting Research Versus Social Science Research
- Mathematical Analytics in Plato's Cave TAR Researchers Playing by
Themselves in an Isolated Dark Cave That the Sunlight Cannot Reach
- High Hopes Dashed for a Change in Policy of TAR Regarding Commentaries
on Previously Published Research
- Rejoinder from the Current Senior Editor of TAR, Steven J. Kachelmeier
- Conclusion and Recommendation for a Journal Named Supplemental
Commentaries and Replication Abstracts
- Appendix 1: Business Firms and Business School Teachers Largely Ignore
TAR Research Articles
- Appendix 2: Integrating Academic Research Into Undergraduate Accounting
Courses
- Appendix 3: Audit Pricing in the Real World
- Appendix 4: Replies from Jagdish Gangolly and Paul Williams
What went wrong in accounting/accountics research?
---
http://www.trinity.edu/rjensen/theory01.htm#WhatWentWrong
The Sad State of Accountancy Doctoral
Programs That Do Not Appeal to Most Accountants ---
http://www.trinity.edu/rjensen/theory01.htm#DoctoralPrograms
AN ANALYSIS OF THE EVOLUTION OF RESEARCH
CONTRIBUTIONS BY THE ACCOUNTING REVIEW: 1926-2005 ---
http://www.trinity.edu/rjensen/395wpTAR/Web/TAR395wp.htm#_msocom_1
Bob Jensen's threads on accounting theory
---
http://www.trinity.edu/rjensen/theory01.htm
Tom Lehrer on Mathematical Models and
Statistics ---
http://www.youtube.com/watch?v=gfZWyUXn3So
Systemic problems of accountancy (especially the
vegetable nutrition paradox) that probably will never be solved ---
http://www.trinity.edu/rjensen/FraudConclusion.htm#BadNews
Bob
Jensen's economic crisis messaging
http://www.trinity.edu/rjensen/2008Bailout.htm
Bob
Jensen's threads ---
http://www.trinity.edu/rjensen/threads.htm
Bob
Jensen's Home Page ---
http://www.trinity.edu/rjensen/