Tidbits Quotations on November 2, 2010
To Accompany the November 2, 2010 edition of Tidbits
Bob Jensen at Trinity University


Deficit tops $1 trillion second year in a row ($1.29 trillion before November and December) ---

Long-term problem:
There has been a lot of political hysteria expressed over the annual deficits of the past two years.

Fiscal experts note, however, that the abnormally large deficits incurred in the wake of the financial crisis are not the primary source of the country's biggest fiscal problems.

The biggest source of fiscal concern remains the so-called structural deficit, which is made up primarily of spending on the big three entitlement programs. That structural deficit will continue to balloon faster than the economy grows long after the current downturn has ended.

Indeed, the Government Accountability Office projects that by the end of this decade, the vast majority of all federal tax revenue will be swallowed up by just four things: Interest payments on the country's debt, and the payment of Medicare, Medicaid and Social Security benefits.

The president's bipartisan fiscal commission, charged with recommending ways to get U.S. debt under control, will issue a report in December.

Also see http://twitter.com/nationaldebt

This is not a forwarded politically-biased message since David Walker is leading a very bipartisan effort to save the United States from economic disaster. Former Andersen Partner David Walker was appointed U.S. Comptroller General by President Bill Clinton and retained in the same position under President Bush ---

In his government position David Walker became staggered by the pending economic doom of the United States.

At the American Accounting Association 2010 annual meetings in San Francisco in August, David Walker will be the only person inducted this year into the Accounting Hall of Fame. Since leaving government service, David became the CEO of the Peterson Foundation that is trying to aid our government in saving the United States from entitlements bankruptcy. (By the way, as I read it, the Peterson Foundation supported the latest health care legislation that, in theory, will reduce deficit spending, although I personally think it should’ve been a full-fledged national health plan).

President Obama has appointed a joint task force to find ways of preventing total economic disaster of the United States that exists not so much because of current trillion dollar deficits as the threat of unfunded future entitlements obligations, with Medicare being the biggest unfunded entitlement as baby boomers retire.

Before viewing the Town Hall video, you might want to view the following earlier video:

You can watch a 30-minute version at
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/   (Scroll Down a bit)
Note that great efforts were made to keep this a bipartisan panel along with the occasional video clips of President Obama discussing the debt crisis. The problem is a build up over spending for most of our nation’s history, It landed at the feet of President Obama, but he’s certainly not the cause nor is his the recent expansion of health care coverage the real cause.

One take home from the CNN show was that over 60% of the booked National Debt increases are funded off shore (largely in Asia and the Middle East).  

 This going to greatly constrain the global influence and economic choices of the United States.

By 2016 the interest payments on the National Debt will be the biggest single item in the Federal Budget, more than national defense or social security. And an enormous portion of this interest cash flow will be flowing to foreign nations that may begin to put all sorts of strings on their decisions  to roll over funding our National Debt.

The unbooked entitlement obligations that are not part of the National Debt are over $60 trillion and exploding exponentially. The Medicare D entitlements to retirees like me added over $8 trillion of entitlements under the Bush Presidency.

Most of the problems are solvable except for the Number 1 entitlements problem --- Medicare.
Drastic measures must be taken to keep Medicare sustainable.



Watch National Town Meetings


Video on IOUSA Bipartisan Solutions to Saving the USA

If you missed Sunday afternoon CNN’s two-hour IOUSA Solutions broadcast, you can watch a 30-minute version at
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/   (Scroll Down a bit)
Note that great efforts were made to keep this a bipartisan panel along with the occasional video clips of President Obama discussing the debt crisis. The problem is a build up over spending for most of our nation’s history, It landed at the feet of President Obama, but he’s certainly not the cause nor is his the recent expansion of health care coverage the real cause.

One take home from the CNN show was that over 60% of the booked National Debt increases are funded off shore (largely in Asia and the Middle East).
This going to greatly constrain the global influence and economic choices of the United States.

By 2016 the interest payments on the National Debt will be the biggest single item in the Federal Budget, more than national defense or social security. And an enormous portion of this interest cash flow will be flowing to foreign nations that may begin to put all sorts of strings on their decisions  to roll over funding our National Debt.

The unbooked entitlement obligations that are not part of the National Debt are over $60 trillion and exploding exponentially. The Medicare D entitlements to retirees like me added over $8 trillion of entitlements under the Bush Presidency.

Most of the problems are solvable except for the Number 1 entitlements problem --- Medicare.
Drastic measures must be taken to keep Medicare sustainable.


I thought the show was pretty balanced from a bipartisan standpoint and from the standpoint of possible solutions.

Many of the possible “solutions” are really too small to really make a dent in the problem. For example, medical costs can be reduced by one of my favorite solutions of limiting (like they do in Texas) punitive damage recoveries in malpractice lawsuits. However, the cost savings are a mere drop in the bucket. Another drop in the bucket will be the achievable increased savings from decreasing medical and disability-claim frauds. These are important solutions, but they are not solutions that will save the USA.

The big possible solutions to save the USA are as follows (you and I won’t particularly like these solutions):


 Peter G. Peterson Website on Deficit/Debt Solutions ---

Watch for the other possible solutions in the 30-minute summary video ---
(Scroll Down a bit)


Here is the original (and somewhat dated video that does not delve into solutions very much)
IOUSA (the most frightening movie in American history) ---
(see a 30-minute version of the documentary at www.iousathemovie.com )

If you missed Sunday afternoon CNN’s two-hour IOUSA Solutions broadcast, you can watch a 30-minute version at
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/   (Scroll Down a bit)
Note that great efforts were made to keep this a bipartisan panel along with the occasional video clips of President Obama discussing the debt crisis. The problem is a build up over spending for most of our nation’s history, It landed at the feet of President Obama, but he’s certainly not the cause nor is his the recent expansion of health care coverage the real cause.

Watch the World Premiere of I.O.U.S.A.: Solutions on CNN
Saturday, April 10, 1:00-3:00 p.m. EST or Sunday, April 11, 3:00-5:00 p.m. EST

Featured Panelists Include:

  • Peter G. Peterson, Founder and Chairman, Peter G. Peterson Foundation
  • David Walker, President & CEO, Peter G. Peterson Foundation
  • Sen. Bill Bradley
  • Maya MacGuineas, President of the Committee for a Responsible Federal Budget
  • Amy Holmes, political contributor for CNN
  • Joe Johns, CNN Congressional Correspondent
  • Diane Lim Rodgers, Chief Economist, Concord Coalition
  • Jeanne Sahadi, senior writer and columnist for CNNMoney.com

Watch for the other possible solutions in the 30-minute summary video ---
(Scroll Down a bit)


CBS Sixty minutes has a great video on the enormous cost of keeping dying people artificially alive:
High Cost of Dying --- http://www.cbsnews.com/video/watch/?id=5737437n&tag=mncol;lst;3
(wait for the commercials to play out)

U.S. Debt/Deficit Clock --- http://www.usdebtclock.org/

"The Looming Entitlement Fiscal Burden," by Gary Becker, The Becker-Posner Blog, April 11, 2010 ---

"The Entitlement Quandary," by Richard Posner, The Becker-Posner Blog, April 11, 2010 ---

David Walker --- http://en.wikipedia.org/wiki/David_M._Walker_(U.S._Comptroller_General)

Harvard Professor Niall Ferguson --- http://en.wikipedia.org/wiki/Niall_Ferguson

Harvard Profession Video:   Niall Ferguson: Empires on the Edge of Chaos ---

Call it the fatal arithmetic of imperial decline. Without radical fiscal reform, it could apply to America next.
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.

. . .

In other words, there is no end in sight to the borrowing binge. Unless entitlements are cut or taxes are raised, there will never be another balanced budget. Let's assume I live another 30 years and follow my grandfathers to the grave at about 75. By 2039, when I shuffle off this mortal coil, the federal debt held by the public will have reached 91 percent of GDP, according to the CBO's extended baseline projections. Nothing to worry about, retort -deficit-loving economists like Paul Krugman.

. . .

Another way of doing this kind of exercise is to calculate the net present value of the unfunded liabilities of the Social Security and Medicare systems. One recent estimate puts them at about $104 trillion, 10 times the stated federal debt.

Continued in article --- http://www.newsweek.com/id/224694/page/1


Niall Ferguson is the Laurence A. Tisch professor of history at Harvard University and the author of The Ascent of Money. In late 2009 he puts forth an unbooked discounted present value liability of $104 trillion for Social Security plus Medicare. In late 2008, the former Chief Accountant of the United States Government, placed this estimate at$43 trillion. We can hardly attribute the $104-$43=$61 trillion difference to President Obama's first year in office. We must accordingly attribute the $61 trillion to margin of error and most economists would probably put a present value of unbooked (off-balance-sheet) present value of Social Security and Medicare debt to be somewhere between $43 trillion and $107 trillion To this we must add other unbooked present value of entitlement debt estimates which range from $13 trillion to $40 trillion. If Obamacare passes it will add untold trillions to trillions more because our legislators are not looking at entitlements beyond 2019.


The Meaning of "Unbooked" versus "Booked" National Debt
By "unbooked" we mean that the debt is not included in the current "booked" National Debt of $12 trillion. The booked debt is debt of the United States for which interest is now being paid daily at slightly under a million dollars a minute. Cash must be raised daily for interest payments. Cash is raised from taxes, borrowing, and/or (shudder) the current Fed approach to simply printing money. Interest is not yet being paid on the unbooked debt for which retirement and medical bills have not yet arrived in Washington DC for payment. The unbooked debt is by far the most frightening because our leaders keep adding to this debt without realizing how it may bring down the entire American Dream to say nothing of reducing the U.S. Military to almost nothing.

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

This matters more for a superpower than for a small Atlantic island for one very simple reason. As interest payments eat into the budget, something has to give—and that something is nearly always defense expenditure. According to the CBO, a significant decline in the relative share of national security in the federal budget is already baked into the cake. On the Pentagon's present plan, defense spending is set to fall from above 4 percent now to 3.2 percent of GDP in 2015 and to 2.6 percent of GDP by 2028.

Over the longer run, to my own estimated departure date of 2039, spending on health care rises from 16 percent to 33 percent of GDP (some of the money presumably is going to keep me from expiring even sooner). But spending on everything other than health, Social Security, and interest payments drops from 12 percent to 8.4 percent.

This is how empires decline. It begins with a debt explosion. It ends with an inexorable reduction in the resources available for the Army, Navy, and Air Force. Which is why voters are right to worry about America's debt crisis. According to a recent Rasmussen report, 42 percent of Americans now say that cutting the deficit in half by the end of the president's first term should be the administration's most important task—significantly more than the 24 percent who see health-care reform as the No. 1 priority. But cutting the deficit in half is simply not enough. If the United States doesn't come up soon with a credible plan to restore the federal budget to balance over the next five to 10 years, the danger is very real that a debt crisis could lead to a major weakening of American power.


I haven't left my house in days. I watch the news channels incessantly. All the news stories are about the election; all the commercials are for Viagra and Cialis. Election, erection, election, erection -- either way we're getting screwed!
Bette Midler

Blessed are the young, for they shall inherit the national debt.
Herbert Hoover --- http://www.brainyquote.com/quotes/quotes/h/herberthoo110353.html

I think political correctness can lead to some kind of paralysis where you don't address reality.
Juan William before he was fired after a distinguished career on NPR.

Landesman wasn't being asked specifically about negative feelings over the Loveland Museum Gallery in Loveland, Colo., a taxpayer-funded art space that recently featured a controversial painting with Jesus Christ receiving oral sex from a man. He's certainly not used to critical questions about just how this blasphemy-by-numbers seems like a tiresome rerun -- Jesus in urine, Jesus in chocolate, Jesus in (homo)sexual ecstasy.
Brent Boswell, Shock and Awful Art, Townhall, October 22, 2010 ---
Rocco Landesman is the chairman of the National Endowment for the Arts
Landesman does not have the guts to display a similar offensive picture of Allah

Garbage Scholarship:  Conservatives Are Inherently Evil Compared With Liberals
"Why Conservatives Love War," by Corey Robin, Chronicle of Higher Education's Chronicle Review, October 2010 ---

Jensen Comment
Faithful Conservative Christians, Jews, and Muslins especially love war because the Bible, Tora, and Qu'ran want faithful followers to love their wars

Atheist liberals are less likely to love war. Three cheers for atheist liberals.

The Chronicle of Higher Education hit an all time low in publishing this garbage.

"Obama's Next Worry: A Restive Left Flank:  Every president who lost re-election in the last half-century has first been weakened by a primary fight," by John Fund, The Wall Street Journal, November 2, 2010 ---

A disgruntled peace candidate such as former Vermont Gov. Howard Dean, Wisconsin Sen. Russ Feingold or Ohio Congressman Dennis Kucinich could find the prospect of rallying disgruntled leftists too tempting to resist. All three men forswear any interest in challenging Mr. Obama, yet it's noteworthy that Mr. Dean is stepping up his speaking schedule around the country after the election.

In the aftermath of a disappointing 2010 midterm election, some liberals may follow the path of the tea party. Tom Streeter, the co-author of "Net Effect," a book on the lessons of Mr. Dean's Internet-driven 2004 presidential campaign, says tea party supporters "share with the Deaniacs a sense of being ignored by the powers that be, and an enthusiasm and energy in the feeling that they are striking back."

Progressives are still rankled by White House Press Secretary Robert Gibbs's attack in August on "the professional left" for not supporting Mr. Obama sufficiently. David Sirota, a prominent blogger, says that liberals feel "one hundred percent" taken for granted by the White House.

Continued in article

Jensen Comment
I think progressives should worry more about a GOP newcomer in the Whitehouse who serves tea in the afternoons. The Year 2012 will not be a good year for election of any progressive candidate other than President Obama. Liberals in Congress blew their big chances in 2009-10 when they had resounding majorities in both the Senate and the House. Never was there a better chance for socialized medicine, withdrawal of U.S. troops from foreign wars, and draining the swamp of Washington DC corruption. Let's face it, Nancy Pelosi, Harry Reid, and President Obama had a first down in 2009 and less than ten yards to go for a touchdown. The GOP's goal line stand based on the pending disasters of trillion-dollar deficits and entitlements and unemployment raised the fury of voters in the stands against the progressive team. In the 2010 mid-term election the roar from the stands was deafening!

For the next decade or more both teams may play to a zero-zero tie that pleases nobody.

My What Big Earmarks They All Have:  Maybe in 2012 it Will Be Time to Really "Drain the Swamp"
"A Vote Against Dems, Not for the GOP:  Voters don't want to be governed from the left, right or center. They want Washington to recognize that Americans want to govern themselves," by Scott Rasmussen, The Wall Street Journal, November 1, 2010 ---

In the first week of January 2010, Rasmussen Reports showed Republicans with a nine-point lead on the generic congressional ballot. Scott Brown delivered a stunning upset in the Massachusetts special U.S. Senate election a couple of weeks later.

In the last week of October 2010, Rasmussen Reports again showed Republicans with a nine-point lead on the generic ballot. And tomorrow Republicans will send more Republicans to Congress than at any time in the past 80 years.

This isn't a wave, it's a tidal shift—and we've seen it coming for a long time. Remarkably, there have been plenty of warning signs over the past two years, but Democratic leaders ignored them. At least the captain of the Titanic tried to miss the iceberg. Congressional Democrats aimed right for it.

While most voters now believe that cutting government spending is good for the economy, congressional Democrats have convinced them that they want to increase government spending. After the president proposed a $50 billion infrastructure plan in September, for example, Rasmussen Reports polling found that 61% of voters believed cutting spending would create more jobs than the president's plan.

Central to the Democrats' electoral woes was the debate on health-care reform. From the moment in May 2009 when the Congressional Budget Office announced that the president's plan would cost a trillion dollars, most voters opposed it. Today 53% want to repeal it. Opposition was always more intense than support, and opposition was especially high among senior citizens, who vote in high numbers in midterm elections.

Rather than acknowledging the public concern by passing a smaller and more popular plan, House Speaker Nancy Pelosi, Senate Majority Leader Harry Reid and President Obama insisted on passing the proposed legislation by any means possible.

As a result, Democrats face massive losses in tomorrow's midterm election. Based upon our generic ballot polling and an analysis of individual races, we project that Nancy Pelosi's party will likely lose 55 or more seats in the House, putting the GOP firmly in the majority. Republicans will also win at least 25 of the 37 Senate elections. While the most likely outcome is that Republicans end up with 48 or 49 Senate seats, Democrats will need to win close races in West Virginia, Washington and California to protect their majority.

There will also be a lot more Republican governors in office come January. It looks like six heartland states stretching from Pennsylvania to Iowa will trade a Democratic governor for a Republican one. A common theme in all the races is that white, working-class Democrats who tended to vote for Hillary Clinton over Barack Obama in 2008 are prepared to vote for Republicans.

But none of this means that Republicans are winning. The reality is that voters in 2010 are doing the same thing they did in 2006 and 2008: They are voting against the party in power.

This is the continuation of a trend that began nearly 20 years ago. In 1992, Bill Clinton was elected president and his party had control of Congress. Before he left office, his party lost control. Then, in 2000, George W. Bush came to power, and his party controlled Congress. But like Mr. Clinton before him, Mr. Bush saw his party lose control.

That's never happened before in back-to-back administrations. The Obama administration appears poised to make it three in a row. This reflects a fundamental rejection of both political parties.

More precisely, it is a rejection of a bipartisan political elite that's lost touch with the people they are supposed to serve. Based on our polling, 51% now see Democrats as the party of big government and nearly as many see Republicans as the party of big business. That leaves no party left to represent the American people.

Voters today want hope and change every bit as much as in 2008. But most have come to recognize that if we have to rely on politicians for the change, there is no hope. At the same time, Americans instinctively understand that if we can unleash the collective wisdom and entrepreneurial spirit of the American people, there are no limits to what we can accomplish.

In this environment, it would be wise for all Republicans to remember that their team didn't win, the other team lost. Heading into 2012, voters will remain ready to vote against the party in power unless they are given a reason not to do so.

Elected politicians also should leave their ideological baggage behind because voters don't want to be governed from the left, the right, or even the center. They want someone in Washington who understands that the American people want to govern themselves.

Mr. Rasmussen is president of Rasmussen Reports and co-author of "Mad as Hell: How the Tea Party Movement is Fundamentally Remaking Our Two-Party System" (HarperCollins, 2010).

"Karzai and the Scent of U.S. Irresolution:  Our longest war is now being waged with doubt and hesitation, and our ally on the scene has gone rogue, taking the coin of our enemies and scoffing at our purposes," by Fouad Ajami, The Wall Street Journal, October 27, 2010 ---

'They do give us bags of money—yes, yes, it is done, we are grateful to the Iranians for this." This is the East, and baksheesh is the way of the world, Hamid Karzai brazenly let it be known this week. The big aid that maintains his regime, and keeps his country together, comes from the democracies. It is much cheaper for the Iranians. They are of the neighborhood, they know the ways of the bazaar.

The remarkable thing about Mr. Karzai has been his perverse honesty. This is not a Third World client who has given us sweet talk about democracy coming to the Hindu Kush. He has been brazen to the point of vulgarity. We are there, but on his and his family's terms. Bags of cash, the reports tell us, are hauled out of Kabul to Dubai; there are eight flights a day. We distrust the man. He reciprocates that distrust, and then some. Our deliberations leak, we threaten and bully him, only to give in to him. And this only increases his lack of regard for American tutelage. We are now there to cut a deal—the terms of our own departure from Afghanistan.

The idealism has drained out of this project. Say what you will about the Iraq war—and there was disappointment and heartbreak aplenty—there always ran through that war the promise of a decent outcome: deliverance for the Kurds, an Iraqi democratic example in the heart of a despotic Arab world, the promise of a decent Shiite alternative in the holy city of Najaf that would compete with the influence of Qom. No such nobility, no such illusions now attend our war in Afghanistan. By latest cruel count, more than 1,300 American service members have fallen in Afghanistan. For these sacrifices, Mr. Karzai shows little, if any, regard.

In his latest outburst, Mr. Karzai said the private security companies that guard the embassies and the development and aid organizations are killer squads, on a par with the Taliban. "The money dealing with the private security companies starts in the hallways of the U.S. government. Then they send the money for killing here," Mr Karzai said. It is fully understood that Mr. Karzai and his clan want the business of the contractors for themselves.

The brutal facts about Afghanistan are these: It is a broken country, a land of banditry, of a war of all against all, and of the need to get what can be gotten from the strangers. There is no love for the infidels who have come into the land, and no patience for their sermons.

In its wanderings through the Third World, from Korea and Vietnam to Iran and Egypt, it was America's fate to ride with all sorts of clients. We betrayed some of them, and they betrayed us in return. They passed off their phobias and privileges as lofty causes worthy of our blood and treasure. They snookered us at times, but there was always the pretense of a common purpose. The thing about Mr. Karzai is his sharp break with this history. It is the ways of the Afghan mountaineers that he wishes to teach us.

When they came to power, the Obama people insisted they would teach Mr. Karzai new rules. There was a new man at the helm in Washington, and there would be no favored treatment, no intimacy with the new steward of American power. Governance would have to improve, and skeptical policy makers would now hold him accountable (Vice President Joe Biden, Special Representative Richard Holbrooke, et al.). Mr. Karzai took their measure, and everywhere around him there were signs of American retreat, such as the spectacle of the Pax Americana eager to reach a grand bargain with the Iranian theocrats.

Mr. Karzai didn't need to be a grand strategist. He had, as is necessary in his world of treachery and betrayal, his ear to the ground, his scent for the irresolution of the Obama administration. He saw the scorn of Iran's cruel leaders for America's diplomatic approaches. He could see Iranian power extend all the way to the Mediterranean, right up to Israel's borders with Lebanon and to Gaza. The Iranians were next door and the Americans were giving away their fatigue. Why not accept the entreaties from Tehran?

A year ago, the U.S. ambassador to Kabul, Karl Eikenberry, laid out the truth about Mr. Karzai and his regime in a secret cable that of course made its way into the public domain. "President Karzai is not an adequate strategic partner," Mr. Eikenberry wrote. The Karzai regime could not bear the weight of a counterinsurgency doctrine that would win the loyalty of the populace. There were monumental problems of governance but "Karzai continues to shun responsibility for any sovereign burden, whether defense, governance, or development. He and much of his circle do not want the U.S. to leave and are only too happy to see us invest further. They assume we covet their territory for a never-ending war on terror and for military bases to use against surrounding powers." In Mr. Eikenberry's cable, Mr. Karzai is a man beyond redemption, who was unlikely to "change fundamentally this late in his life and in our relationship."

Continued in article



Nearly 600 ballot question that affect taxpayers in national, state, and municipal voting in 2010 ---

Bob Jensen's tax helpers are at


Forwarded by Dr. Wolff

Far be it for an American President to publicly congratulate (let alone even mention) American ingenuity and American private enterprise for the miracle rescue of the miners.

1. SCHRAMM, INC. of West Chester, PA, built the drills and equipment used to reach the trapped miners.

2. CENTER ROCK, INC, from Berlin, PA, built the drill bits used to reach the miners.

3. UPS, the US shipping company, delivered the 13-ton drilling equipment from Pennsylvania to Chile in less than 48 hours.

4. Crews from LAYNE CHRISTENSEN CO., of Wichita , KS and its subsidiary GEOTEC BOYLES BROS., worked the drills and machinery to locate and reach the miners and then enlarge the holes to ultimately rescue them.

5. Jeff Hart of Denver, CO, was called off his job drilling water wells for the U.S. Army's forward operating bases in Afghanistan to lead the drilling crew that reached the miners.

6. ATLAS COPCO CONSTRUCTION MINING CO., of Milwaukee. WI, provided consulting on how to make drilling equipment from different sources work together under differing pressure specifications.

7. ARIES CENTRAL CALIFORNIA VIDEO, of Fresno, California, designed the special cameras that were lowered nearly a mile into the ground sending back video of the miners.

8. ZEPHYR TECHNOLOGIES, of Annapolis, MD, made the remote monitors of vital signs that miners wore during their ascent.

9. NASA engineere designed the "Phoenix" capsule that the miners would be brought to the surface in, and provided medical consulting, special diets and Spandex suits to maintain miners' blood pressure, as they're brought back to the surface.

Also, Canadian based PRECISION DRILLING CORP. and South African based MURRAY & ROBERTS Co., drilled a backup rescue shaft, in case the American rig failed . . . which it didn't.


"The Overseas Profits Elephant in the Room:  There's a trillion dollars waiting to be repatriated if tax policy is right," by John Chambers and Safra Katz, The Wall Street Journal, October 20, 2010 ---

During last year's "Jobs Summit," President Obama said he was open to any good idea to get the economy moving again. Today he should be especially so, since Washington's many monetary and fiscal policy decisions have not been able to spur the robust growth or job expansion that we all would like. And yet there is a simple idea—the trillion-dollar elephant in the room—that has apparently been dismissed for no good reason.

One trillion dollars is roughly the amount of earnings that American companies have in their foreign operations—and that they could repatriate to the United States. That money, in turn, could be invested in U.S. jobs, capital assets, research and development, and more.

But for U.S companies such repatriation of earnings carries a significant penalty: a federal tax of up to 35%. This means that U.S. companies can, without significant consequence, use their foreign earnings to invest in any country in the world—except here.

The U.S. government's treatment of repatriated foreign earnings stands in marked contrast to the tax practices of almost every major developed economy, including Germany, Japan, the United Kingdom, France, Spain, Italy, Russia, Australia and Canada, to name a few. Companies headquartered in any of these countries can repatriate foreign earnings to their home countries at a tax rate of 0%-2%. That's because those countries realize that choking off foreign capital from their economies is decidedly against their national interests.

Many commentators have pointed to the large cash balances sitting on U.S. corporate books as evidence that the economy is still stalled because companies aren't spending. That analysis misses the point. Large cash balances remain on U.S. corporate books because U.S. companies can't spend their foreign-held cash in the U.S. without incurring a prohibitive tax liability.

Especially with corporate bond rates falling below 4%, it's hard to imagine any responsible corporation repatriating foreign earnings at a combined federal and state tax rate approaching 40%.

By permitting companies to repatriate foreign earnings at a low tax rate—say, 5%—Congress and the president could create a privately funded stimulus of up to a trillion dollars. They could also raise up to $50 billion in federal tax revenue. That's money the economy would not otherwise receive.

The amount of corporate cash that would come flooding into the country could be larger than the entire federal stimulus package, and it could be used for creating jobs, investing in research, building plants, purchasing equipment, and other uses. It could also provide needed stability for the equity markets because companies would expand their activity in mergers and acquisitions, and would pay dividends or buy back stock. And when markets go up, confidence increases and businesses and consumers begin to spend.

The $50 billion boost in federal tax revenue, meanwhile, could be used to help put America back to work. For example, Congress could use it to give employers—large or small—a refundable tax credit for hiring previously unemployed workers (including recent graduates). The tax credit could equal up to 50% of a worker's first-year and second-year wages, capped at $12,500 per year (or $25,000 total per new hire).

Such a program could help put more than two million Americans back to work at no cost to the government or American taxpayers. How's that for a good idea?

Mr. Chambers is chairman and chief executive officer of Cisco Systems. Ms. Catz is president of Oracle Corporation.

Jensen Comment
I've never been a fan of the idiotic loopholes in the corporate tax code that call for such things as dummy corporate headquarters in Bermuda, Ireland, the Cayman Islands, etc. I have been a fan of doing away with corporate income taxes and replacing them with a VAT tax. The VAT tax is a rather simple tax to administer and collect relative to the corporate income tax that requires corporations to spend zillions for tax consultants and zillions more for the IRS to audit. And the VAT tax is a better way to fight deflation than Bernanke's new proposal to simply print U.S. dollars rather than tax or borrow --- oops I meant to say buy back U.S. treasury securities.

Google 2.4% Rate Shows How $60 Billion Lost to Tax Loopholes:  Google Inc. cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda

The Only Fraud Involved is in Halls of Congress Where the Tax Code is Conceived
Google’s income shifting — involving strategies known to lawyers as the “Double Irish” and the “Dutch Sandwich” — helped reduce its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies by market capitalization, according to regulatory filings in six countries. Bloomberg, October 21, 2010 --- http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html

Google Inc. cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda.

Google’s income shifting -- involving strategies known to lawyers as the “Double Irish” and the “Dutch Sandwich” -- helped reduce its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies by market capitalization, according to regulatory filings in six countries.

Continued in article

"How to Privatize the Mortgage Market: Europeans manage just fine without Fannie and Freddie-type agencies," by Dwight M.  Jaffe, The Wall Street Journal, October 26, 2010 ---

Despite the Dodd-Frank financial reform enacted in July, the mortgage market remains frozen and effectively nationalized. Today 90% of the $14 trillion in outstanding residential mortgages is controlled by the Federal Housing Administration (FHA), the Department of Veterans Affairs, or Fannie Mae and Freddie Mac—with the latter two under government conservatorship.

The solution? Privatize the mortgage market.

Fannie and Freddie have shown how government guarantees lead to dangerous risk- taking in which shareholders reap the profits but taxpayers pay for the losses. Even their most powerful longtime congressional patron, Barney Frank (D., Mass.), now agrees it is time to abolish these two government-sponsored enterprises (GSEs). Unfortunately, a popular fallback position is for the government to guarantee every middle-income residential mortgage directly. While that's arguably better than guaranteeing the GSEs, the underwriting standards for government-guarantee programs will assuredly collapse under political pressure, leaving the taxpayers once again holding the mortgage losses.

Our goal today must be to allow home prices to stabilize at affordable levels and to allow mortgage rates and underwriting standards to reach safe, sustainable levels. Government interventions to lower mortgage rates or boost house prices only delay the necessary adjustment, while possibly creating the foundation for a future crash.

The evidence is strong that private markets can provide the necessary supply of credit to sustain active housing markets. Virtually every European country has well-functioning private mortgage markets without government interventions of the Fannie or Freddie sort, or direct mortgage guarantees.

Despite the world-wide financial crisis and economic downturn, moreover, private European mortgage markets today have delinquency and foreclosure rates that round to zero. European lenders, borrowers and taxpayers all recognize that high underwriting standards obviate the need for government bailouts.

We can create a sound and vigorous private mortgage market in the United States, but no private market can compete with the government-guaranteed and subsidized markets of today. So how do we get from here to there?

First, the government should set a schedule to lower the maximum amount of a mortgage loan that Fannie or Freddie can hold or securitize by a fixed amount each year—say $75,000. As its loan size limits decline, so will the GSE market share, until it reaches zero and the market is effectively privatized. With a government exit plan announced in advance, private lenders have time to expand their loans.

It's possible that this transition plan could go awry—some new economic disaster cannot be ruled out. But we already have an FHA program that insures lower-income mortgages, and a Government National Mortgage Association (GNMA) program that securitizes them. It is highly unlikely, but if the private market of lenders and investors fails to materialize for any reason, it will be simple to expand the FHA to provide temporary guarantees for middle-income mortgages and to expand GNMA to securitize them.

A broader menu of choices would be one benefit of a privatized U.S. mortgage market. European countries offer fixed and adjustable rates, with and without prepayment penalties, alternative amortization periods and so on. There's no reason we couldn't also have a wider variety of choices than at present. The 30-year, fixed-rate mortgage might well remain a favorite of U.S. lenders and borrowers, but only by competing in terms of costs and benefits on a level playing field with other mortgages.

Full disclosures and related consumer protections are crucial. Europe already has these protections, and the U.S. is well along this path, thanks to the Federal Reserve's July 2008 additions to the Truth in Lending Regulations, along with various actions taken and pending by the Department of Housing and Urban Development.

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"Public-Sector Unions Choke Taxpayers:  It's time for reform. John Stossel, Reason Magazine, October 21, 2010 ---

"I thought unions were great—until at Chrysler, the union steward started screaming at me. Working at an unhurried pace, I'd exceeded 'production' for that job."

That comment, left on my blog by a viewer who watched my show about unions, matches my experience. No one ordered me to slow down, but union rules and union culture at ABC and CBS slowed the work. Sometimes a camera crew took five minutes just to get out of the car.

Now unions conspire with politicians to rip off taxpayers.

Steve Melanga of the Manhattan Institute complains that politicians get union political support by granting government workers generous pensions and health benefits. After those politicians leave office, taxpayers are liable for trillions in unfunded promises.

"It's squeezing out all other spending," Melanga says. "Where are we going to get this $3 trillion dollars? ... When they're (government workers) allowed to retire at 58 and the rest of us are retiring at 60 and 67—and by the way we're living to 80—it's crazy. The public sector is the version of the European welfare state which, by the way, in Europe, they're actually rolling back."

John Gage, president of the biggest federal workers union, the American Federation of Government Employees, came on my Fox Business show to disagree: "This thing about unions and the public sector and bankrupting America, that's very far from the truth. Yes, we have a problem with pensions. Basically because these pension plans haven't been properly funded."

Melanga's response: "Fund public-sector pensions at a level that we can afford, (and turn) the pension system into a defined-contribution system. Public-sector employee unions and states have refused to do that."

A defined-contribution plan is like your 401(k). Your pension benefits depend on how well your investments do. State and local unions, by contrast, have "defined-benefit" plans, which simply force taxpayers to send retirees a monthly check.

Gage doesn't like Malanga's suggestion: "Can you imagine working 30, 35 years ... and (with) what just happened with the (stock) market, suddenly you're left holding nothing?"

I don't think they'd be holding "nothing." Yes, the market crashed, but the Dow is still above 11,000. Twenty-eight years ago, it was below 800. That's up more than 1,000 percent. Over time, 401(k)s provide a decent retirement.

When I said that we in the private sector have such plans, Gage responded, "Only because of the laws in this country which make it almost impossible for private-sector workers to organize and to have a union. ... (W)ithout unions, we'd have a 'race to the bottom.'"

But this makes no sense. Do all employers move to Mexico because wages are lower there?

But many viewers side with Gage:

Grover said: "Stossel's take on Unions is nothing but appalling. According to him, workers have no rights. Workers are the ones who make a company profitable, not CEOs. In Stossel's slanted view, worker's are dirt and don't deserve anything."

Jakob wrote: "Are you really this stupid? Do you really want to lower American workers' standards to that of Honduras and China, where democratic unions do not exist? Would you like for us to go back to a time in America before we had unions? When children worked in factories for 14-hour days and health and safety standards simply did not exist?"

These are popular views. But they are wrong. Factories are safer because of free markets. Companies want better workers and must compete to get them. Free markets create wealth that permits parents to send their kids to schools instead of factories. Unions once helped to advance working conditions, but now union work rules mostly retard growth and progress.

Many workers understand that, and that's why only 8 percent of private-sector workers still belong to unions. In the private sector, wage and pension demands are tempered by competition. If one company pays too much, a competitor takes his business.

But governments are monopolies. They face no competition and get their money by force. So they can conspire with public-sector unions to milk taxpayers. That explains the fix we're in today.

Something's got to give.

Hiding Government Debt is About the Worst Thing That Ever Happened in Accounting History

"The Biggest Race You Haven't Heard Of A rare chance to defuse the pension bomb," The Wall Street Journal, October 21, 2010 ---

Forget Andrew Cuomo and Carl Paladino. Let us turn instead to a race that might truly matter in terms of the nation's economic future. It's the most important 2010 election you've never heard of—for comptroller of New York State.

"Comptroller" is the second or third most boring word in the English language. Comptroller: That's the green-eyeshade guy who keeps the books. He's always adding up columns and somehow it all balances. But as everyone now knows, in the public sector the books don't balance. They balloon.

New York, like California and many other once-important states, is sitting on a public- pension debt bomb. If it blows, it will take great swaths of the productive American economy with it for years. Harry Wilson thinks he can defuse the New York bomb.

At this point the article turns political about unions so I will not quote it other than to say that NYC Mayor Bloomberg and many of our best bipartisan leaders think that if the pension bomb is not defused it will explode with immense repercussions --- far worse than anything al Qaeda can deliver.

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From The Wall Street Journal Accounting Weekly Review on July 10, 2009

Public Pensions Cook the Books
by Andrew G. Biggs
The Wall Street Journal

Jul 06, 2009
Click here to view the full article on WSJ.com

TOPICS: Advanced Financial Accounting, Financial Accounting Standards Board, Governmental Accounting, Market-Value Approach, Pension Accounting

SUMMARY: As Mr. Biggs, a resident scholar at the American Enterprise Institute, puts it, "public employee pension plans are plagued by overgenerous benefits, chronic underfunding, and now trillion dollar stock-market losses. Based on their preferred accounting methods...these plans are underfunded nationally by around $310 billion. [But] the numbers are worse using market valuation methods...which discount benefit liabilities at lower interest rates...."

CLASSROOM APPLICATION: Introducing the importance of interest rate assumptions, and the accounting itself, for pension plans can be accomplished with this article.

1. (Introductory) Summarize the accounting for pension plans, including the process for determining pension liabilities, the funded status of a pension plan, pension expense, the use of a discount rate, the use of an expected rate of return. You may base your answer on the process used by corporations rather than governmental entities.

2. (Advanced) Based on the discussion in the article, what is the difference between accounting for pension plans by U.S. corporations following FASB requirements and governmental entities following GASB guidance?

3. (Introductory) What did the administrators of the Montana Public Employees' Retirement Board and the Montana Teachers' Retirement System include in their advertisements to hire new actuaries?

4. (Advanced) What is the concern with using the "expected return" on plan assets as the rate to discount future benefits rather than using a low, risk free rate of return for this calculation? In your answer, comment on the author's statement that "future benefits are considered to be riskless" and the impact that assessment should have on the choice of a discount rate.

5. (Advanced) What is the response by public pension officers regarding differences between their plans and those of corporate entities? How do they argue this leads to differences in required accounting? Do you agree or disagree with this position? Support your assessment.

Reviewed By: Judy Beckman, University of Rhode Island


"Public Pensions Cook the Books:  Some plans want to hide the truth from taxpayers," by Andrew Biggs, The Wall Street Journal, July 6, 2009 --- http://online.wsj.com/article/SB124683573382697889.html

Here's a dilemma: You manage a public employee pension plan and your actuary tells you it is significantly underfunded. You don't want to raise contributions. Cutting benefits is out of the question. To be honest, you'd really rather not even admit there's a problem, lest taxpayers get upset.

What to do? For the administrators of two Montana pension plans, the answer is obvious: Get a new actuary. Or at least that's the essence of the managers' recent solicitations for actuarial services, which warn that actuaries who favor reporting the full market value of pension liabilities probably shouldn't bother applying.

Public employee pension plans are plagued by overgenerous benefits, chronic underfunding, and now trillion dollar stock-market losses. Based on their preferred accounting methods -- which discount future liabilities based on high but uncertain returns projected for investments -- these plans are underfunded nationally by around $310 billion.

The numbers are worse using market valuation methods (the methods private-sector plans must use), which discount benefit liabilities at lower interest rates to reflect the chance that the expected returns won't be realized. Using that method, University of Chicago economists Robert Novy-Marx and Joshua Rauh calculate that, even prior to the market collapse, public pensions were actually short by nearly $2 trillion. That's nearly $87,000 per plan participant. With employee benefits guaranteed by law and sometimes even by state constitutions, it's likely these gargantuan shortfalls will have to be borne by unsuspecting taxpayers.

Some public pension administrators have a strategy, though: Keep taxpayers unsuspecting. The Montana Public Employees' Retirement Board and the Montana Teachers' Retirement System declare in a recent solicitation for actuarial services that "If the Primary Actuary or the Actuarial Firm supports [market valuation] for public pension plans, their proposal may be disqualified from further consideration."

Scott Miller, legal counsel of the Montana Public Employees Board, was more straightforward: "The point is we aren't interested in bringing in an actuary to pressure the board to adopt market value of liabilities theory."

While corporate pension funds are required by law to use low, risk-adjusted discount rates to calculate the market value of their liabilities, public employee pensions are not. However, financial economists are united in believing that market-based techniques for valuing private sector investments should also be applied to public pensions.

Because the power of compound interest is so strong, discounting future benefit costs using a pension plan's high expected return rather than a low riskless return can significantly reduce the plan's measured funding shortfall. But it does so only by ignoring risk. The expected return implies only the "expectation" -- meaning, at least a 50% chance, not a guarantee -- that the plan's assets will be sufficient to meet its liabilities. But when future benefits are considered to be riskless by plan participants and have been ruled to be so by state courts, a 51% chance that the returns will actually be there when they are needed hardly constitutes full funding.

Public pension administrators argue that government plans fundamentally differ from private sector pensions, since the government cannot go out of business. Even so, the only true advantage public pensions have over private plans is the ability to raise taxes. But as the Congressional Budget Office has pointed out in 2004, "The government does not have a capacity to bear risk on its own" -- rather, government merely redistributes risk between taxpayers and beneficiaries, present and future.

Market valuation makes the costs of these potential tax increases explicit, while the public pension administrators' approach, which obscures the possibility that the investment returns won't achieve their goals, leaves taxpayers in the dark.

For these reasons, the Public Interest Committee of the American Academy of Actuaries recently stated, "it is in the public interest for retirement plans to disclose consistent measures of the economic value of plan assets and liabilities in order to provide the benefits promised by plan sponsors."

Nevertheless, the National Association of State Retirement Administrators, an umbrella group representing government employee pension funds, effectively wants other public plans to take the same low road that the two Montana plans want to take. It argues against reporting the market valuation of pension shortfalls. But the association's objections seem less against market valuation itself than against the fact that higher reported underfunding "could encourage public sector plan sponsors to abandon their traditional pension plans in lieu of defined contribution plans."

The Government Accounting Standards Board, which sets guidelines for public pension reporting, does not currently call for reporting the market value of public pension liabilities. The board announced last year a review of its position regarding market valuation but says the review may not be completed until 2013.

This is too long for state taxpayers to wait to find out how many trillions they owe.


"San Francisco's Public Pension Revolt: The city has cut back on almost every service: Summer schools have been shut, potholes deepen, parks close early, and services for the poor have been pared to the quick," by Michael Moritz, The Wall Street Journal, October 22, 2010 ---

The Phoenix and the Guardian, two antique fireboats moored near the San Francisco Bay Bridge, are operated by a six-person crew from the city's fire department. A few times a week, the vessels putter about to provide a visiting cruise ship with a watery salute. For this, all of the vessels' captains and engineers are paid $172,253 a year in salary and benefits and are eligible for a city-paid pension after 20 years. Regardless of whether they take a new job, the pension entitles them to 90% of their annual income, plus annual cost of living adjustments, for the rest of their lives.

And so it's little wonder that 77,000 San Franciscans signed a petition to place a measure on the Nov. 2 ballot that would do what generations of politicians haven't: bring a modicum of sanity to the pension and benefit programs of San Francisco government employees. If passed, Proposition B would require all city employees to contribute up to 10% of their income to their pension plans, and to pay half of the health-care premiums of their dependents. This will save San Francisco at least $120 million a year, at a time when its pension tab is $400 million per year, up from $175 million in 2005.

Every incumbent official in the city opposes Proposition B except its sponsor, the progressive public defender Jeff Adachi, who is as far removed from being a tea party member as Wasilla is from Washington. The Democratic Party has condemned the initiative. Democratic Mayor Gavin Newsom says that if workers' benefits are trimmed it will be impossible to find replacements and that, rather than voting through Proposition B, we should "work together" to bring about change.

But San Franciscans know that unemployment rates top 20% in parts of California, that 50 years of just "working together" is what's landed us in this pickle, and that the city's current pension and benefit programs are unfair to all private-sector workers. On average, private-sector workers earn half as much as city employees. And as their savings disappear, they have no option but to continue working until their teeth fall out.

A typical San Francisco resident with one dependent pays $953 a month for health care, while the typical city employee pays less than $10. In 2009, San Francisco's deputy police chief earned $516,000 in cash compensation and retired with a $230,000-a-year pension—a package that could cost the city $8 million over the balance of his life. Yet the only major local political figure who champions Proposition B is Willie Brown, a former mayor, who admits that decades of backroom deals have led to fiasco.

San Francisco's pension crisis is a miniature version of what now faces almost every mature economy. The debts accumulated during the economic crisis of the last few years are tiny compared to the debts that cities and states have accumulated since the beginning of the New Deal. Almost a century ago, when life expectancies were much shorter, pensions and benefits for government workers were a way to cushion the indignities of a working person's last few years of life. Now they allow people to retire at age 50 on close to full pay, with annual cost-of-living increases and complete health-care coverage—plus the choice either to take a new job or to enjoy a lifetime of Sundays.

As the city's debt has started to bite, San Francisco has cut back on almost every service: Summer schools have been shut, potholes deepen, parks close early, and services that help the poor and vulnerable have been pared to the quick. This month the Board of Supervisors decided to plant another 1,300 parking meters in another effort to get the city's 800,000 citizens to pay the benefits and pensions of the city's 28,665 employees and 26,000 retirees. Only 2% of San Francisco voters are city employees.

If Proposition B is approved, it will be the beginning, not the end, of public-sector benefits reform. Proposition B doesn't raise the retirement age. It doesn't change the way pensions are calculated (based on employees' income in their final year or two of work, which is subject to all sorts of perfidious gaming known as "spiking"). The proposition doesn't increase the length of time a city employee needs to work before becoming eligible for a pension. It doesn't cap the annual cost-of-living adjustments taped onto pension plans. And it doesn't forbid a retired city pensioner from being rehired.

But Proposition B does provide a ray of hope. If pension reform—which, along with education and health care, is one of the three crumbling pillars of Western economies—can start in famously liberal San Francisco, then it can happen anywhere.


Bob Jensen's threads about fraud in government are at

The Sad State of Government Accounting and Accountability ---

Pensions and Post-retirement Benefits: Schemes for Hiding Debt ---



Aside from the war in Iraq, why do progressives hate George W. Bush?
He withheld his veto pen from almost everything that House Speaker Pelosi and the Democratic-Party Controlled House Wanted
Bush had the fewest vetoes (12) of any modern U.S. President
The tea party did something the Republican establishment was incapable of doing: It got the party out from under George W. Bush. The tea party rejected his administration's spending, overreach and immigration proposals, among other items, and has become only too willing to say so. In doing this, the tea party allowed the Republican establishment itself to get out from under Mr. Bush: "We had to, boss, it was a political necessity!" They released the GOP establishment from its shame cringe.
Peggy Noonan, "Tea Party to the Rescue How the GOP was saved from Bush and the establishment.," The Wall Street Journal, October 22, 2010 ---

"ObamaCare's Incentive to Drop Insurance:  My state of Tennessee could reduce costs by over $146 million using the legislated mechanics of health reform to transfer coverage to the federal government," by Philip Bredesen, The Wall Street Journal, October 21, 2010 ---

One of the principles of game theory is that you should view the game through your opponent's eyes, not just your own.

This past spring, the Patient Protection and Affordable Care Act (President Obama's health reform) created a system of extensive federal subsidies for the purchase of health insurance through new organizations called "exchanges." The details of these subsidies were painstakingly worked out by members of my own political party to reflect their values: They decided who was to benefit from the subsidies and what was to be purchased with them. They paid a lot of attention to their own strategies, but what I believe they failed to consider properly were the possible strategies of others.

Our federal deficit is already at unsustainable levels, and most Americans understand that we can ill afford another entitlement program that adds substantially to it. But our recent health reform has created a situation where there are strong economic incentives for employers to drop health coverage altogether. The consequence will be to drive many more people than projected—and with them, much greater cost—into the reform's federally subsidized system. This will happen because the subsidies that become available to people purchasing insurance through exchanges are extraordinarily attractive.

In 2014, when these exchanges come into operation, a typical family of four with an annual income of $90,000 and a 45-year-old policy holder qualifies for a federal subsidy of 40% of their health-insurance cost. For that same family with an income of $50,000 (close to the median family income in America), the subsidy is 76% of the cost.

One implication of the magnitude of these subsidies seems clear: For a person starting a business in 2014, it will be logical and responsible simply to plan from the outset never to offer health benefits. Employees, thanks to the exchanges, can easily purchase excellent, fairly priced insurance, without pre-existing condition limitations, through the exchanges. As it grows, the business can avoid a great deal of cost because the federal government will now pay much of what the business would have incurred for its share of health insurance. The small business tax credits included in health reform are limited and short-term, and the eventual penalty for not providing coverage, of $2,000 per employee, is still far less than the cost of insurance it replaces.

For an entrepreneur wanting a lean, employee-oriented company, it's a natural position to take: "We don't provide company housing, we don't provide company cars, we don't provide company insurance. Our approach is to put your compensation in your paycheck and let you decide how to spend it."

But while health reform may alter the landscape for small business in unexpected ways, it also opens the door to what is a potentially far larger effect on the Treasury.

The authors of health reform primarily targeted the uninsured and those now buying expensive individual policies. But there's a very large third group that can also enter and that may have been grossly underestimated: the 170 million Americans who currently have employer-sponsored group insurance. Because of the magnitude of the new subsidies created by Congress, the economics become compelling for many employers to simply drop coverage and help their employees obtain replacement coverage through an exchange.

Let's do a thought experiment. We'll use my own state of Tennessee and our state employees for our data. The year is 2014 and the Affordable Care Act is now in full operation. We're a large employer, with about 40,000 direct employees who participate in our health plan. In our thought experiment, let's exit the health-benefits business this year and help our employees use an exchange to purchase their own.

First of all, we need to keep our employees financially whole. With our current plan, they contribute 20% of the total cost of their health insurance, and that contribution in 2014 will total about $86 million. If all these employees now buy their insurance through an exchange, that personal share will increase by another $38 million. We'll adjust our employees' compensation in some rough fashion so that no employee is paying more for insurance as a result of our action. Taking into account the new taxes that would be incurred, the change in employee eligibility for subsidies, and allowing for inefficiency in how we distribute this new compensation, we'll triple our budget for this to $114 million.

Now that we've protected our employees, we'll also have to pay a federal penalty of $2,000 for each employee because we no longer offer health insurance; that's another $86 million. The total state cost is now about $200 million.

But if we keep our existing insurance plan, our cost will be $346 million. We can reduce our annual costs by over $146 million using the legislated mechanics of health reform to transfer them to the federal government.

That's just for our core employees. We also have 30,000 retirees under the age of 65, 128,000 employees in our local school systems, and 110,000 employees in local government, all of which presents strategies even more economically attractive than the thought experiment we just performed. Local governments will find eliminating all coverage particularly attractive, as many of them are small and will thus incur minor or no penalties; many have health plans that will not meet the minimum benefit threshold, and so they'll see a substantial and unavoidable increase in cost if they continue providing benefits under the new federal rules.

Our thought experiment shows how the economics of dropping existing coverage is about to become very attractive to many employers, both public and private. By 2014, there will be a mini-industry of consultants knocking on employers' doors to explain the new opportunity. And in the years after 2014, the economics just keep getting better.

The consequence of these generous subsidies will be that America's health reform may well drive many more people than projected out of employer-sponsored insurance and into the heavily subsidized federal system. Perhaps this is a miscalculation by the Congress, perhaps not. One principle of game theory is to think like your opponent; another is that there's always a larger game.

Mr. Bredesen, a Democrat, is the governor of Tennessee and the author of "Fresh Medicine: How to Fix Reform and Build a Sustainable Health Care System," just out by Atlantic Monthly Press.

Sometimes President Obama is Not Given Enough Credit for Shrewdness in Cooperating With the Enemy
"Honeywell Takes the Lead in Political Giving," The Wall Street Journal, October 13, 2010 ---

Amid this year's heated debate over corporate campaign cash, the top donor to House and Senate campaigns is a company that was an also-ran in political Washington just a few years ago: Honeywell International Inc.

Honeywell, a diversified manufacturer with a big presence in aerospace and defense contracting, has used its political-action committee to dole out $3 million of federal campaign contributions for next month's elections, according to the nonpartisan Center for Responsive Politics. The PAC's donations through Aug. 31 have already exceeded the $2.5 million the PAC distributed to candidates during the entire 2008 presidential election, the Center says.

Honeywell, which had $31 billion of revenue last year, is giving more than larger rivals Boeing Co. and Lockheed Martin Corp., two of the aerospace industry's leading all-time campaign contributors, so far this year. It is also ahead of General Electric Co., which had made PAC donations of $1.2 million through the end of August.

Before the 2008 race, Honeywell was a relatively small player in the political money game. In 2006, the company's PAC gave $797,343 to federal candidates. Chief Executive Officer David Cote, who took over the company in 2002, has overseen the escalation of Honeywell's political giving and steadily expanded his own presence in Washington.

Like many other companies, Honeywell has begun steering a greater share of its PAC donations to Republicans this year. It has given 49% of its donations to Republicans so far in 2010, up from 41% in 2009.

According to the data, the Morris Township, N.J., company has emerged as the No. 2 source of corporate PAC donations for this year's crop of Republicans, trailing only AT&T Inc.'s PAC. Honeywell is also the No. 1 corporate PAC donor to Democrats and, overall, the No. 10 donor, behind eight labor unions and a group of trial lawyers.

A company spokesman said, "Honeywell contributes to those who support policies that benefit our company and our business." Employees give to Honeywell's PAC, he added in a prepared statement, to back candidates "that support policies that will help drive U.S. economic growth."

Honeywell has also been a contributor to both the Republican and Democratic Governors Associations in this cycle, according to federal records. (News Corp., which owns The Wall Street Journal, has contributed $1 million to the Republican Governors Association.)

Most of the heat over corporate contributions during this election cycle has been generated not by PACs but by corporate donations to outside organizations that are trying to influence federal elections, but which aren't required to disclose their sources of funds.

Honeywell's engagement with politics goes beyond money. Mr. Cote has become one of President Barack Obama's go-to CEOs, as the president has been criticized as unresponsive to business concerns. Mr. Cote attended a number of White House lunches and dinners organized as part of a campaign to woo business support for environmental and jobs legislation. The president appointed Mr. Cote to the National Commission on Fiscal Responsibility, which is deliberating on how to tackle widening U.S. budget deficits.

Mr. Obama also named him to co-head the India-U.S. CEO Forum, a high-level business-development group that in June recommended setting up a $10 billion fund to help India develop its infrastructure, launch clean-energy projects, improve education and enhance biotechnology efforts. Mr. Obama is scheduled to visit India next month.

Honeywell has major initiatives under way to snare more business in India, as well as in China and other emerging markets. It has expanded its engineering offices in India and elsewhere.

The U.S. government has long been a big Honeywell customer. The company makes engines for military tanks and helicopters and aviation-electronics systems for fighter jets. Mr. Cote has outlined ambitions to secure additional government and commercial contracts in other market segments.

Mr. Cote is a longtime advocate of modernizing the Federal Aviation Administration's air-traffic control system, and has told industry officials heexpects to play an important role in devising ways to help airlines finance improvements. He has tried to increase Honeywell's influence in this arena by having the company participate in European planning efforts.

Honeywell has steadily increased its campaign donations over the last few years, but the heightened prominence of the company and its chief executive today contrasts sharply with earlier times. Former CEO Lawrence Bossidy, who generally shunned the capital's political circuit, sometimes expressed outright disdain for politicians and the entire system of political giving.

By contrast, according to industry officials, Mr. Cote usually enjoys dealing with the White House and lawmakers and prides himself on advancing Honeywell's goals through such exchanges.

In 2004, two years after leaving Honeywell, Mr. Bossidy told CNBC host Jim Cramer that campaign contributions by plaintiff's attorneys created "one of the biggest impediments" to business growth. "It's got to change," Mr. Bossidy said in the interview.


"Not Dodging Health Care Law," by Terry W. Hartle and Steven M. Bloom, Inside Higher Ed, November 1, 2010 ---

Six months after passage of the Affordable Care Act (ACA), health care reform has finally moved off the front pages of America’s newspapers and is no longer the lead story on the nightly news. But below the surface, the controversy and political fights over the issue continue to roil.

Evidence of that came when higher education was recently drawn into the fight. On August 12, the American Council on Education and several other higher education associations wrote to the Department of Health and Human Services and the White House Office of Health Reform to ask for guidance regarding key ACA provisions to ensure colleges and universities could continue to offer students affordable, high-quality health care plans.

The response by the news media, spurred by interest groups following the issue, was almost immediate, and in the last few months organizations ranging from The Wall Street Journal to the College Parents of America have mischaracterized our effort as an attempt to carve out an “exemption” or “waiver” from ACA requirements. Some groups have suggested that we actually oppose efforts to enhance the quality of student health plans, while others say we’re only in it for the money.

They couldn’t be more wrong. Read the letter for yourself.

First, colleges are not seeking either an exemption or a waiver from the law. Historically, student health plans have operated under federal law as so-called “limited duration plans” because they provide coverage for a specific time period and are neither employer-based group plans nor plans offered on the individual market. These programs are tailored to meet the primary care needs of students as well as additional services such as mental health coverage.

Each is priced according to the eligible campus population and provide coverage to all eligible students and their dependents, do not vary premiums based on an individual student’s health status, and typically do not impose pre-existing condition exclusions. They are particularly important for international and graduate students. In short, these plans provide coverage that is responsive to the unique needs of the student population.

While the law specifically states that institutions may continue to offer student health plans, ACA is silent on how the law’s new requirements affect these unique plans. Federal agencies will need to write numerous regulations to implement ACA. Our letter seeks to include among them regulations that clarify how student health plans can continue operating as “limited duration plans” under a structure that incorporates reforms in the ACA -- and not, as some claim, to elude those reforms.

Specifically, we have asked HHS to provide rules of the road on two key topics:

We seek answers to these questions now because although many of the reforms in ACA don’t take effect until 2014, a number of institutions will soon be negotiating with insurers for new long-term contracts that will define the benefit coverage of their student health plans through 2014.

Are we opposing efforts to enhance the quality of student health plans? Absolutely not. In fact, we are following the lead of the American College Health Association, which has a longstanding set of standards to guide colleges and universities in structuring high quality coverage for student health plans. We also believe ACA will inevitably lead to improvements in the quality of student health plans, which is important because while the majority of institutions offer health plans of high quality — some continue to lag behind and must be improved. The key for us is ensuring that the changes brought about by ACA will result in plans that are both high-quality and affordable.

It is also wrong to characterize our efforts as an attempt to shield a major higher education profit center. The money made off these plans by colleges are modest, and revenue — if any — is returned to campus health centers or used to help maintain stability in the premiums paid by students.

In short, student plans respond to the unique health insurance needs of undergraduate and graduate students. They provide coverage over a limited time period for students under the age of 26 whose parents are uninsured and nontraditional students who are too old to access their parents’ plans. In some instances, student plans offer better coverage than students can get under parental plans, especially if they’re going to college hundreds or thousands of miles away from their parents’ networks or parental coverage does not adequately cover out-of-network care, making it prohibitively expensive.

Colleges and universities recognize the importance of ACA’s reforms and want high-quality health insurance options for their students. We are confident we can work with the administration on a constructive solution to ensure students have access to affordable, high-quality health coverage that is consistent with the reforms in ACA.

Terry W. Hartle is the senior vice president and Steven M. Bloom is the assistant director of federal relations for the American Council on Education.

Bob Jensen's threads on health care are at


    Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

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    Shielding Against Validity Challenges in Plato's Cave ---

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    What went wrong in accounting/accountics research?  ---

    The Sad State of Accountancy Doctoral Programs That Do Not Appeal to Most Accountants ---


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    Systemic problems of accountancy (especially the vegetable nutrition paradox) that probably will never be solved ---

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