Government programs & regulations, spending, deficit, and budget process

[ccp]

Perhaps this could go under the way forward for conservative, etc:

***Jewish World Review April 11, 2010

Only a brave few acknowledge an entitlement crisis

By George Will

http://www.JewishWorldReview.com | A puzzle from Philosophy 101: If a tree falls in a forest and no one hears it, does it make a sound? A puzzle from the prairie: If an earthquake occurs in Illinois and no one notices, is it really a seismic event?

Gov. Pat Quinn called it a "political earthquake" when the state's legislature recently voted — by margins of 92 to 17 in the House and 48 to 6 in the Senate — to reform pensions for state employees. There is now a cap on the amount of earnings that can be used as the basis for calculating benefits. In some states, employees game the system by "spiking" their last year's earnings by accumulating vast amounts of overtime pay.

An even more important change — a harbinger of America's future — is that most new Illinois state government employees must work until age 67 to be eligible for full retirement benefits. Those already on the state payroll can still retire at 55 with full benefits.

The 1935 Social Security Act established 65 as the age of eligibility for payouts. But welfare state politics quickly becomes a bidding war, enriching the menu of benefits, so Congress in 1956 entitled women to collect benefits at 62 and in 1961 extended the entitlement to men. Today, nearly half of Social Security recipients choose to begin getting benefits at 62. This is a grotesque perversion of a program that was never intended to subsidize retirees for a third to a half of their adult lives.

It also reflects the decadent dependence that the welfare state encourages: Because of the displacement of responsibility from the individual to government, 48 percent of workers over 55 have total savings and investments of less than $50,000.

Because most states' pension plans compute their present values — and minimize required current contributions — by assuming an unrealistic 8 percent annual return on investments, the cumulative funding gap of state pensions already may be $3 trillion and certainly is rising. For example, Wednesday's New York Times contained this attention-seizing bulletin: "An independent analysis of California's three big pension funds has found a hidden shortfall of more than half a trillion dollars, several times the amount reported by the funds and more than six times the value of the state's outstanding bonds." It is not news that California is America's home-grown Greece, but the condition of the three funds, which serve 2.6 million current and retired public employees, is going to exacerbate the state's decline by requiring significantly higher taxpayer contributions.

 A recent debate on "Fox News Sunday" illustrated the differences between the few politicians who are, and the many who are not, willing to face facts. Marco Rubio, the former speaker of Florida's House of Representatives who is challenging Gov. Charles Crist for the Republican U.S. Senate nomination, made news by stating the obvious.

Asked how the nation might address the projected $17.5 trillion in unfunded Social Security liabilities, Rubio said that we should consider two changes for people 10 or more years from retirement. One would raise the retirement age. The other would alter the calculation of benefits: Indexing them to inflation rather than wage increases would substantially reduce the system's unfunded liabilities.

Neither idea startles any serious person. But Crist, with the reflex of the unreflective, rejected both and said that he would fix Social Security by eliminating "waste" and "fraud," of which there is little. The system's problems are the result not of incompetent administration but of improvident promises made by Congress.

Synthetic indignation being the first refuge of political featherweights, Crist's campaign announced that he believes Rubio's suggestions are "cruel, unusual and unfair to seniors living on a fixed income." They are indeed unusual, because flinching from the facts of the coming entitlements crisis is the default position of all but a responsible few, such as Wisconsin's Rep. Paul Ryan, who has endorsed Rubio. What is ultimately cruel is Crist's unserious pretense that America faces only palatable choices and that improvident promises can be fully funded with money currently lost to waste and fraud.

By the time the baby boomers have retired in 2030, the median age of the American population will be close to that of today's population of Florida, the retirees' haven that is Heaven's antechamber. The 38-year-old Rubio's responsible answer to a serious question gives the nation a glimpse of a rarity — a brave approach to the welfare state's inevitable politics of gerontocracy.***

[Body-by-Guinness]

It never ceases to astound: some supposed problem with the safety of a vehicle that doesn't add up when viewed on an actuarial basis nonetheless gets ballyhooed all over the media. Yet the CAFE standards which lead to thousands of deaths and injuries each year gets a pass:

Death by CAFE Standards

By J.R. Dunn
Media discussions of the administration's new mileage rules have covered about everything except how many people they will kill.

Manipulating fuel efficiency standards has been a favored method of fulfilling environmental prerogatives for thirty years and more. Like most Green initiatives, it is essentially ritualistic. Rather than actually confront the problem at issue, it is instead intended to instill a sense of virtue (what economist Robert J. Samuelson calls "psychic benefits"), while at the same time acting as a punitive measure against those opposed to Green ideology. As is true of many environmentalist programs, it has the unintended side-effect of killing large numbers of unknowing individuals.

Like much else in the way of nonsense, mileage regulation was a product of the 1970s. The decade was marked by several "oil shortages," which media, government, and Green activists all attributed to resource depletion. In truth, they were triggered by Arab manipulation of oil prices in an attempt to undercut support for Israel, then amplified by U.S. government incompetence and public hysteria generated by the Greens.

Fuel standards are the longest-lived of an entirely futile array of attempts to address 1970s oil shortages. They first went into effect in the 1975 Energy Policy and Conservation Act as the Corporate Average Fuel Economy program, better known as CAFE. Under the CAFE standards, domestic and foreign automobile manufacturers had to meet a certain mileage standard in their cars and light trucks. They were allowed a very short time to carry this out before fines were levied, so they met the challenge in the easiest way possible: by designing small engines that used less fuel while lowering the size and weight of new vehicles to preserve performance.

The new standards had no success in lowering fuel consumption. Quite the contrary -- since it now cost less to fill the tank, people drove more. Within a few years, this "rebound effect" doubled average fuel usage. As a result, oil imports increased from 35% of consumption in 1975 to 52% by the year 2000.

The new regulations did accomplish one thing -- they killed drivers and passengers in large numbers. By lightening cars and removing material, auto companies were inadvertently discarding the armor that protected motorists in the event of a crash. Similarly, the compressed new models lacked space for impact forces to attenuate before causing damage and injury. Drivers in lightweight cars were as much as twelve times more likely to die in a crash. It was once said about American autos that they were "built like tanks." Many of the new models from the late '70s onward more closely resembled go-carts -- and proved to be about as sturdy.

Studies have repeatedly demonstrated the fatal results of mileage regulations, starting in 1989 with the Brookings Institution (in collaboration with the Harvard School of Public Health), followed by USA Today in 1999, the National Academy of Sciences in 2001, and at last the federal government's own National Highway Transportation and Safety Administration in 2003. This formidable lineup of organizations all came to the same conclusion: Fuel standards kill.

According to the Brookings Institution, a 500-lb weight reduction of the average car increased annual highway fatalities by 2,200-3,900 and serious injuries by 11,000 and 19,500 per year. USA Today found that 7,700 deaths occurred for every mile per gallon gained in fuel economy standards. Smaller cars accounted for up to 12,144 deaths in 1997, 37% of all vehicle fatalities for that year. The National Academy of Sciences found that smaller, lighter vehicles "probably resulted in an additional 1,300 to 2,600 traffic fatalities in 1993." The National Highway Transportation and Safety Administration study demonstrated that reducing a vehicle's weight by only one hundred pounds increased the fatality rate by as much as 5.63% for light cars, 4.70% for heavier cars, and 3.06% for light trucks. These rates translated into additional traffic fatalities of 13,608 for light cars, 10,884 for heavier cars, and 14,705 for light trucks between 1996 and 1999.

How many deaths have resulted? Depending on which study you choose, the total ranges from 41,600 to 124,800. To that figure we can add between 352,000 and 624,000 people suffering serious injuries, including being crippled for life. In the past thirty years, fuel standards have become one of the major causes of death and misery in the United States -- and one almost completely attributable to human stupidity and shortsightedness.

In 2007, the Bush administration moved to change these standards. No, not to abolish them as failed policy and a threat to public safety, but to expand and extend them exactly as if they constituted a rational solution to an actual existing problem. Rather than set a single figure, as was the case with the original CAFE standards, the Bush administration created a "sliding scale" based on a vehicle's size and weight. The typical bureaucratic solution: if something doesn't work, make it more complex and see what happens then. (To be fair to Bush, his administration had been hounded over fuel standards for several years by lawyers, activists, and the media, an effort that included two lost court cases. But this scarcely rates as an excuse.)

Along with Predator strikes, fuel standards were one of the few Bush initiatives that Barack Obama liked. (It's really too bad we can't persuade jihadi chiefs to drive around in Neons.) So much, in fact, that he decided to expand them even further. In the new standards announced -- surprise! -- on April 1, the Obama administration returned to the single standard. Mileage levels for cars and light trucks were raised to 35.5 mpg. (It goes without saying that the "light trucks" category was added to target that enemy of nature, the SUV.) In addition, the Environmental Protection Agency added a "tailpipe emissions standard" of 250 grams of CO2 per mile in order to combat global warming, should such a thing ever in fact occur.

All kinds of impressive results are being promised for this latest set of regulations. It will "save" 1.8 billion barrels of oil over an otherwise unspecified "program life." It will reduce CO2 emissions by 960 million metric tons. It will, in other words, do all the swell things that the previous standards somehow failed to do.

What we don't hear is how many motorists and passengers will be killed. The Obama mileage standards are jammed up right at the very edge of the technically feasible -- and perhaps beyond. Automobile technology has progressed substantially since the 1970s, and gas mileage can be increased by utilizing a number of technical advances including computerization, fuel injection, stop-start engines, and hybrid vehicles. But the Obama standards demand more. As in the original CAFE legislation, they demand cars that are chopped down, lightened, and diminished. They demand cars that will kill their drivers and passengers.

With these new standards, a kind of threshold has been passed. Liberal policies are killer policies. Since the early 1960s, liberal programs, whether dealing with criminal justice, health care, the environment, or any other aspect of society, have brought premature death to an increasing number of Americans. My upcoming book Death by Liberalism deals with dozens of such programs, many of them operating to this day. (It also provides a much more detailed -- and infuriating -- account of the CAFE standards.) The overall death rate may be as high as half a million. A level of mortality that would depopulate St. Louis, Cincinnati, or Tampa, brought to us on behalf of our own government.

But the mileage standards as applied by the Obama administration (not to forget the Bush administration before them) are different. They are different because everybody knows about them. No serious dissent exists concerning the fact that the CAFE standards have killed tens of thousands of Americans. If a private company were to be found responsible for even a small fraction of this level of fatalities, the sky would crack, Congress would go into twenty-four hour sessions, and John Edwards would experience a new lease on life. (Anyone doubting this should consider Toyota's recent travails. It is uncertain that anything, anything at all, is wrong with Toyota's products. Yet the media and government are tearing at the company like a pack of wolves after an injured deer.)

But in the case of fuel standards, the government itself is responsible -- and that's different. Governments get away with things that private companies can't. Even policies that enable deaths outnumbering those of all American wars of the past seventy years. Deaths that are unnecessary, deaths that can be avoided, deaths that are being encouraged in order to solve problems that can be overcome in any number of other ways. (Not to mention those problems -- such as global warming -- that can't even be demonstrated to exist.) Yet the topic doesn't even come up in debate. Did anyone involved in the health care "debate" ever mention how many people the British National Health Care system kills every year? That number is 95,000. The equivalent number for the U.S., adjusted for population, would be 450,000 a year. That's the "change" that's coming our way.

Such regulations embody the next step in the process by which the relationship between government and people begins to resemble that of a lawnmower and an anthill. We've seen the end result in other countries -- in most other countries, as a matter of fact. It could be argued that governmental irresponsibility and indifference are the ground state of civic culture, from which we have been attempting to escape for eight millennia, encountering real success only in the past two centuries. From that point of view, the fuel standards, and the mentality that justifies them, mark no advance at all, but a regression to a world that we want nothing to do with.

J.R. Dunn is consulting editor of American Thinker and will edit the forthcoming Military Thinker.

Page Printed from: http://www.americanthinker.com/2010/04/death_by_cafe_standards.html at April 13, 2010 - 09:08:45 AM CDT

[Crafty_Dog]

Tea Party's rise makes perfect sense

By Robert Herbold and Scott Powell
If our elected officials were accountable to the rules they require of the private sector to ensure honest accounting, such as the standards of Generally Accepted Accounting Practices and the business reform laws of Sarbanes-Oxley, they would not only be removed from office, but many would be in jail.
Can anyone really trust the Congressional Budget Office' assessment of health care reform, wherein 10 years of taxes "balance" six years of health care benefit expenditures? How is it different from the crime committed at WorldCom about 10 years ago, in which fraudulent accounting mismatched expenses to income over the years in which they were incurred? The new health care bureaucracy will likely drive cost overruns like every other entitlement, but obviously "ObamaCare" goes negative in Year 11 and beyond.

Even before passage of health care reform, the public understood that Medicare and Medicaid are going bankrupt. The year-long debate didn't address that, but it helped voters see the government's accounting tricks to shift the liability of Medicare off the budget to suit politics. This deceptive accounting eventually will facilitate the bankruptcy of the United States as surely as the off-balance sheet liabilities brought down companies like Enron.

No doubt Bernard Madoff gets the Heisman Trophy for white-collar crime. But his Ponzi fraud that robbed the public of some $50 billion is dwarfed by the Social Security system that is a classic Ponzi scheme, in which present and future retiree claims cannot be met by those entering and currently paying into the system.

Fannie, Freddie and Co.

And consider the recent debt-driven meltdown that caused the worst recession since the 1930s. The legislators who opened the floodgates for the proliferation of subprime debt by pushing Fannie Mae and Freddie Mac to lower their portfolio standards were never held accountable. Fannie and Freddie required a $100 billion bailout (and counting) from taxpayers, but the lawmakers — well, they got promoted to chair the committees in charge of solving the problems they helped create.

Is it really any wonder that a "Tea Party" movement was born a year ago? What kind of government are we getting for the taxes we pay April 15? The fact that the Tea Party has gained center stage in American politics just one year from its founding reveals the breadth of lost public trust. Career Democrats and Republicans have too long been in denial of the elephant they brought into the living room — a dependency on buying votes without regard to deficits or debt. And now President Obama, the emperor who claimed to be committed to rolling back lobbyists, earmarks and profligacy with transparency and bipartisanship, has revealed for all to see that he has no clothes and that, in true Chicago style, the ends justify the means.

Incumbent politicians from both parties are now vulnerable — especially those visibly tied to the corrupting influence of big-money special interests. The obvious need to cut government spending is abrogated by these lobbyists who control funding for politicians' re-election campaigns. Each party has different entrenched constituent lobbyists. But their net effect drives ever more government spending, taxes and debt. As Federal Reserve Chairman Ben Bernanke noted in recent testimony before Congress, this burdens the private sector and edges the country ever closer to insolvency.

A quiet calamity

The watchmen to shine the light on all this abuse used to be the press. But in a media culture that embraces celebrity, sound bites and — yes — political correctness, the nation's slide toward financial ruin just didn't get the attention it most certainly deserved. Many reporters were all too happy to vilify the culprits of capitalism, as with WorldCom, Enron and the like, and to crowd the courthouses for the CEO perp walks. But they should have spent just as much energy taking to task the government players who enabled this financial catastrophe.

So what's to be done? The blatant disrespect for the will of the majority and the Constitution is setting up the November elections as a momentous turning point. Common sense truth that resonates with peoples' deepest concerns is very powerful as demonstrated in Virginia, New Jersey and Massachusetts. Voters' instincts are to protect their children and grandchildren, and nothing will get out the vote better than candidates who articulate a vision of freedom and opportunity that cuts spending, streamlines benefits and once and for all puts America's financial house in order.

Robert Herbold is a retired COO of Microsoft Corp. and managing director of the Herbold Group LLC. Scott Powell is director at AlphaQuest and RemingtonRand and a visiting fellow at the Hoover Institution.

[Crafty_Dog]

Examiner Editorial
April 14, 2010
 

Barely 15 percent of all construction-industry workers in the United States are union members, while the remaining 85 percent are nonunion, according to the U.S. Department of Labor's Bureau of Labor Statistics. So why has President Obama signed Executive Order 13502 directing federal agencies taking bids for government construction projects to accept only those from contractors who agree in advance to a project labor agreement that requires a union work force? Obama's new order applies to all federal construction projects with price tags of $25 million or more, and it means all such contracts will only be awarded to companies with unionized work forces.

Read more at the Washington Examiner: http://www.washingtonexaminer.com/opinion/Another-Obama-favor-for-unions-90776984.html#ixzz0lVrSfgDG

 

[Rarick]

Yep, pay off for the votes- the point is?  unions typically are 10% a serious about voting segment of the work force, if a politician can put them in his pocket by an Infrastructure or minimum wage bill?  That has been a tit for tat going on for years.

[Crafty_Dog]

If I understand correctly the point is this: under the Davis Bacon Act, bids on government work required that contractors using non-union labor pay union scale on the work under that bid.  BO has now gone much further, and simply prevented non-union shops from bidding PERIOD, whether they pay union scale on the work or not.

[DougMacG]

"prevented non-union shops from bidding"

Didn't know hope and change included steering lucrative projects to your friends for payback.  When you exclude qualified bidders on public projects, you are stealing from the taxpayers besides steering jobs to the already powerful.

Another form of elitism as unions are the high end of labor.  He risks offending the other 85-90% if they are paying attention.  Some 40% of the union vote is Republican.  Most union members are white males, a group slipping away from Democrats.  And public employees lean hard to the Dem side whether unionized or not.

[DougMacG]

Could put this under Energy or What the ..., but this story is about a federal program to award private companies.  Scratch my back and I'll scratch yours...

Source: CNN

http://news.blogs.cnn.com/2010/04/30/in-ironic-twist-bp-finalist-for-pollution-prevention-award/

In ironic twist, BP finalist for pollution prevention award

BP, now under federal scrutiny because of its role in the deadly Gulf of Mexico explosion and oil spill, is one of three finalists for a federal award honoring offshore oil companies for "outstanding safety and pollution prevention."
-----
By the way the story reads, I suspect BP was in fact the winner to be announced.

[Crafty_Dog]

Morning Bell: Fannie and Freddie Failure Forever

Posted By Conn Carroll On May 6, 2010 @ 9:29 am In Enterprise and Free Markets | No Comments

Yesterday, Sen. Chris Dodd (D-CT) told reporters [1] about his financial regulation bill, “We’ve ended the ‘too big to fail’ debate. So no longer do I expect any argument to be made that this bill exposes the American taxpayer.” Really. Someone might want to tell Sen. Dodd that in other news yesterday, Freddie Mac announced [2] that it lost another $6.7 billion in the first quarter of 2010 and therefore needed another $10.6 billion in cash from U.S. taxpayers. Since formally nationalizing Freddie in 2008, the federal government has already spent $50.7 billion bringing the Freddie bailout total to $61.3 billion so far. Combined with Fannie Mae’s raid on the Treasury, the Congressional Budget Office estimates that the American people will spend $389 billion bailing out the two Government Sponsored Entities by 2019. So much for American taxpayers no longer being exposed to “too big to fail.”

In fact, nothing in the Dodd bill does anything to reform Fannie Mae and Freddie Mac. This despite the fact that Fannie and Freddie were key components [3] in causing the very financial crises Dodd claims his bill will forever prevent. Fannie and Freddie were both created for the specific purpose of making it easier for Americans to buy more expensive housing. Starting in 1993 [4], political forces pushed Fannie and Freddie to loosen their once strict loan purchasing requirements. By 1996, regulations required that 40% of all Fannie and Freddie-bought loans [4] must come from individuals with below median incomes. In 1995, Fannie and Freddie began buying subprime securities [5] originally bought and bundled by private firms. One of these firms was Countrywide Financial who, thanks to their status as Fannie Mae’s biggest customer [6], delivered investors a 23,000% return between 1985 and 2003. [7] By 2004, Fannie and Freddie were purchasing $175 billion worth of subprime securities per year from Countrywide and their brethren…  a 44% share of the entire market [5]. There are other factors that helped contribute to the 2008 financial crisis [3], but Fannie and Freddie’s use of their “too big to fail” status to create and grow the subprime security market was essential.

But Sen. Dodd, who received V.I.P. treatment from Countrywide CEO Angelo Mozilo [8], never saw any problem with Fannie and Freddie. On July 13, 2008, Senator Dodd said on national television [5], “To suggest somehow that [Fannie Mae and Freddie Mac] are in trouble is simply not accurate.” Less than two months later the bailouts of Fannie and Freddie began. Keep these facts in mind when Dodd says his bill solves the “too big to fail” problem.

The problems with the Dodd bill go beyond its failure to let Fannie and Freddie wither into extinction [9]. While Dodd has agreed to get rid of the $50 billion bailout fund, the underlying bailout authority still remains. Now taxpayers are expected to front the government money while firms are liquidated. But the irresponsible creditors who let those firms borrow money irresponsibly would still be eligible for taxpayer bailouts. According to The Washington Post [10], “a failing firm would be forced to pay back the government any money they received above what they would have gotten under a bankruptcy proceeding.” But how does the government know what creditors would have got if the company went into bankruptcy? Why not just strengthen the existing bankruptcy system [11] and actually allow these too big to fail firms to, ya know, fail?

But Dodd and the Obama administration would never allow that. It would defeat the whole purpose this financial regulation bill, which is to transfer as much power to the federal government as possible. Never mind that these are the same government regulators who failed to see the last crisis coming.

Quick Hits:

Protesters objecting to the cuts in government wages and pensions [12] necessary to secure $141 billion in loans for Greece from the European Union and the International Monetary Fund turned violent yesterday.
The European commission forecasts that the United Kingdom’s budget deficit is set to surpass Greece [13]’s as worst in the European Union.
Celebrating Cinco de Mayo at the White House, President Barack Obama promised to press for amnesty for illegal immigrants [14] this year.
The Federal Communications Commission announced yesterday that for the first time in its history, the federal government will try to regulate the Internet [15].
Sens. John Kerry (D-MA) and Joe Lieberman (I-CT) plan to use the BP oil spill [16] to push their energy tax bill next week.

--------------------------------------------------------------------------------

Article printed from The Foundry: Conservative Policy News.: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/05/06/morning-bell-fannie-and-freddie-failure-forever/

URLs in this post:

[1] told reporters: http://www.politico.com/news/stories/0510/36821.html

[2] announced: http://www.washingtonpost.com/wp-dyn/content/article/2010/05/05/AR2010050505227.html

[3] key components: http://www.heritage.org/Research/Reports/2009/10/Understanding-the-Great-Global-Contagion-and-Recession

[4] 1993: http://www.huduser.org/datasets/GSE/gse2001.pdf

[5] 1995, Fannie and Freddie began buying subprime securities: http://www.washingtonpost.com/wp-dyn/content/article/2008/06/09/AR2008060902626_pf.html

[6] Fannie Mae’s biggest customer: http://www.forbes.com/markets/2008/09/08/bofa-bailout-winner-markets-equity-cx_md_0908markets32.html

[7] delivered investors a 23,000% return between 1985 and 2003.: http://money.cnn.com/magazines/fortune/fortune_archive/2003/09/15/349151/index.htm

[8] who received V.I.P. treatment from Countrywide CEO Angelo Mozilo: http://blog.heritage.org/2008/06/13/the-countrywide-bailout-explained/

[9] let Fannie and Freddie wither into extinction: http://www.heritage.org/Research/Reports/2008/09/Fannie-and-Freddie-Time-to-Clean-up-the-Mess-and-Move-Forward

[10] The Washington Post: http://www.washingtonpost.com/wp-dyn/content/article/2010/05/05/AR2010050504164.html

[11] strengthen the existing bankruptcy system: http://www.heritage.org/Research/Commentary/2010/04/A-BETTER-WAY-TO-AVOID-BAILOUTS

[12] cuts in government wages and pensions: http://www.washingtonpost.com/wp-dyn/content/article/2010/05/05/AR2010050505360.html

[13] United Kingdom’s budget deficit is set to surpass Greece: http://www.guardian.co.uk/business/2010/may/05/uk-budget-deficit-worse-than-greece

[14] amnesty for illegal immigrants: http://thehill.com/blogs/blog-briefing-room/news/96311-obama-calls-for-immigration-reform-criticizes-ariz-law

[15] the federal government will try to regulate the Internet: http://www.nytimes.com/2010/05/06/technology/06broadband.html?ref=todayspaper&pagewanted=print

[16] plan to use the BP oil spill: http://www.politico.com/news/stories/0510/36837.html

[DougMacG]

Spoof of GM CEO explaining how they re-paid the loan.  Sounds about right.
[youtube]http://www.youtube.com/watch?v=1gq7J71VsDM&feature=player_embedded[/youtube]

[Rarick]

the 12 trillion debt is 400,000 for every one of the 300 million people living in this country.  If you had recieved that kind of bundle as your part of the stimulus plan, what would you do with it?  What is actually happening with that cash is that the banks and the fed are printing it up, buying off debt (very naughty bad obscene porcine type obese debt). This $ never actually circulates to stimulate the economy- prime the pump so to speak.  Instead it is coming out of the irrigation pond and being pumped into the water trough a bunch of congress critters and their litters drink out of  This pond is rapidly drying up, but the critters are thirsty..............they figure there is another watering hole (new tax) but how many such can you find before they start to remember the scam last time.

We may avoid the inflation because this flow is a whirlpool on a bend in the economy, but cash is escaping from this and the world is getting concerned abouy its cash standard......... If inflation hits and the fed cannot stop spending.........

[Crafty_Dog]

If the money escapes, to where does it go?

[Rarick]

It waters the weeds- We The People?

[Crafty_Dog]

I was hoping for a more specific answer than that , , ,

[Rarick]

I suspect it goes into various pockets.  Like the bridge to nowhere pockets, or goes to fund public projects that end up underfunded some how due to milking,  I know that there were a bunch of Pizza parlors that were started up during Clinton's administration using "special economic zone" stimulus money.  They lasted for less than 2 years, but the money was a grant cost us several hundred thousand to a million at a pop.  I suspect these businesses were planned to faill to give someone a nest egg.........and no way to real prove anything without throwing good money after bad.........

Basically fraud and other sneaky handouts.

[Crafty_Dog]

Europeans Fear Crisis Threatens Liberal Benefits
By STEVEN ERLANGER
Published: May 22, 2010

 
PARIS — Across Western Europe, the “lifestyle superpower,” the assumptions and gains of a lifetime are suddenly in doubt. The deficit crisis that threatens the euro has also undermined the sustainability of the European standard of social welfare, built by left-leaning governments since the end of World War II.

Payback Time
Articles in this series are examining the consequences of, and efforts to deal with, growing public and private debts.  Europeans have boasted about their social model, with its generous vacations and early retirements, its national health care systems and extensive welfare benefits, contrasting it with the comparative harshness of American capitalism.

Europeans have benefited from low military spending, protected by NATO and the American nuclear umbrella. They have also translated higher taxes into a cradle-to-grave safety net. “The Europe that protects” is a slogan of the European Union.

But all over Europe governments with big budgets, falling tax revenues and aging populations are experiencing rising deficits, with more bad news ahead.

With low growth, low birthrates and longer life expectancies, Europe can no longer afford its comfortable lifestyle, at least not without a period of austerity and significant changes. The countries are trying to reassure investors by cutting salaries, raising legal retirement ages, increasing work hours and reducing health benefits and pensions.

“We’re now in rescue mode,” said Carl Bildt, Sweden’s foreign minister. “But we need to transition to the reform mode very soon. The ‘reform deficit’ is the real problem,” he said, pointing to the need for structural change.

The reaction so far to government efforts to cut spending has been pessimism and anger, with an understanding that the current system is unsustainable.

In Athens, Aris Iordanidis, 25, an economics graduate working in a bookstore, resents paying high taxes to finance Greece’s bloated state sector and its employees. “They sit there for years drinking coffee and chatting on the telephone and then retire at 50 with nice fat pensions,” he said. “As for us, the way things are going we’ll have to work until we’re 70.”

In Rome, Aldo Cimaglia is 52 and teaches photography, and he is deeply pessimistic about his pension. “It’s going to go belly-up because no one will be around to fill the pension coffers,” he said. “It’s not just me; this country has no future.”

Changes have now become urgent. Europe’s population is aging quickly as birthrates decline. Unemployment has risen as traditional industries have shifted to Asia. And the region lacks competitiveness in world markets.

According to the European Commission, by 2050 the percentage of Europeans older than 65 will nearly double. In the 1950s there were seven workers for every retiree in advanced economies. By 2050, the ratio in the European Union will drop to 1.3 to 1.

“The easy days are over for countries like Greece, Portugal and Spain, but for us, too,” said Laurent Cohen-Tanugi, a French lawyer who did a study of Europe in the global economy for the French government. “A lot of Europeans would not like the issue cast in these terms, but that is the storm we’re facing. We can no longer afford the old social model, and there is a real need for structural reform.”

In Paris, Malka Braniste, 88, lives on the pension of her deceased husband. “I’m worried for the next generations,” she said at lunch with her daughter-in-law, Dominique Alcan, 49. “People who don’t put money aside won’t get anything.”

Ms. Alcan expects to have to work longer as a traveling saleswoman. “But I’m afraid I’ll never reach the same level of comfort,” she said. “I won’t be able to do my job at 63; being a saleswoman requires a lot of energy.”

Gustave Brun d’Arre, 18, is still in high school. “The only thing we’re told is that we will have to pay for the others,” he said, sipping a beer at a cafe. The waiter interrupted, discussing plans to alter the French pension system. “It will be a mess,” the waiter said. “We’ll have to work harder and longer in our jobs.”

Figures show the severity of the problem. Gross public social expenditures in the European Union increased from 16 percent of gross domestic product in 1980 to 21 percent in 2005, compared with 15.9 percent in the United States. In France, the figure now is 31 percent, the highest in Europe, with state pensions making up more than 44 percent of the total and health care, 30 percent.

The challenge is particularly daunting in France, which has done less to reduce the state’s obligations than some of its neighbors. In Sweden and Switzerland, 7 of 10 people work past 50. In France, only half do. The legal retirement age in France is 60, while Germany recently raised it to 67 for those born after 1963.

With the retirement of the baby boomers, the number of pensioners will rise 47 percent in France between now and 2050, while the number under 60 will remain stagnant. The French call it “du baby boom au papy boom,” and the costs, if unchanged, are unsustainable. The French state pension system today is running a deficit of 11 billion euros, or about $13.8 billion; by 2050, it will be 103 billion euros, or $129.5 billion, about 2.6 percent of projected economic output.

===========

(Page 2 of 2)



President Nicolas Sarkozy has vowed to pass major pension reform this year. There have been two contentious overhauls, in 2003 and 2008; the government, afraid to lower pensions, wants to increase taxes on high salaries and increase the years of work.

Payback Time


But the unions are unhappy, and the Socialist Party opposes raising the retirement age. Polls show that while most French see a pension overhaul as necessary, up to 60 percent say working past 60 is not the answer.

Jean-François Copé, the parliamentary leader for Mr. Sarkozy’s center-right party, says that change is painful, but necessary. “The point is to preserve our model and keep it,” he said. “We need to get rid of bad habits. The Germans did it, and we can do the same.”

More broadly, many across Europe say the Continent will have to adapt to fiscal and demographic change, because social peace depends on it. “Europe won’t work without that,” said Joschka Fischer, the former German foreign minister, referring to the state’s protective role. “In Europe we have nationalism and racism in a politicized manner, and those parties would have exploited grievances if not for our welfare state,” he said. “It’s a matter of national security, of our democracy.”

France will ultimately have to follow Sweden and Germany in raising the pension age, he argues. “This will have to be harmonized, Europeanized, or it won’t work — you can’t have a pension at 67 here and 55 in Greece,” Mr. Fischer said.

The problems are even more acute in the “new democracies” of the euro zone — Greece, Portugal and Spain — that embraced European democratic ideals and that Europe embraced for political reasons in the postwar era, perhaps before their economies were ready. They have built lavish state systems on the back of the euro, but now must change.

Under threat of default, Greece has frozen pensions for three years and drafted a bill to raise the legal retirement age to 65. Greece froze public-sector pay and trimmed benefits for state employees, including a bonus two months of salary. Portugal has cut 5 percent from the salaries of senior public employees and politicians and increased taxes, while canceling big projects; Spain is cutting civil service salaries by 5 percent and freezing pay in 2011 while also chopping public projects.

But all three need to do more to bolster their competitiveness and growth, mostly by changing deeply inflexible employment rules, which can make it prohibitively expensive to hire or fire staff members, keeping unemployment high.

Jean-Claude Meunier is 68, a retired French Navy official and headhunter, who plays bridge to “train my memory and avoid Alzheimer’s.” His main worry is pension. “For years, our political leaders acted with very little courage,” he said. “Pensions represent the failure of the leaders and the failure of the system.”

In Athens, Mr. Iordanidis, the graduate who makes 800 euros a month in a bookstore, said he saw one possible upside. “It could be a chance to overhaul the whole rancid system,” he said, “and create a state that actually works.”

[prentice crawford]

Woof,
 Here's your chance to make some cuts in spending.

 http://republicanwhip.house.gov/YouCut/

                        P.C.

[DougMacG]

States face same/similar spending and deficit problems.  New Jersey may now be the best example, but Minnesota of all places is another example over the last 8 years.  Gov. Tim Pawlenty claims to have cut real spending levels by an average of 2% per year over his two 4-year terms.  Hostile liberal CBS affiliate television station ran a mixed fact check reply but concluded the main claim is True. http://wcco.com/realitycheck/pawlenty.legacy.spending.2.1702034.html

Pawlenty presided over the implementation of the tax cuts enacted by his predecessor (a wrestler) to take Minnesota  out of the top ten worst tax states.  Coincidentally, the unemployment rate just dropped to 7.2%.  http://www.minnpost.com/bradallen/2010/05/20/18330/minnesota_jobless_rate_drops_as_employers_add_10200_jobs_in_april

(Maybe this should be posted in the way forward for California.)

Minnesota loves its 'great liberals' Hubert Humphrey, Eugene McCarthy, Walter Mondale, Paul Wellstone, Garrison Keillor etc. but doesn't trust them to govern.  The last time Dems won the Gov. race was 1982/1988, a dentist from the iron range who ran against the party establishment and pioneered school choice.

[Crafty_Dog]

IMHO one of the most important things in making it difficult to understand and measure what the hell is going on is "baseline budgeting" under which a smaller than previously "planned" increase is called a "cut".

If someone can find a good definition/explanation of BB and post it here it would be appreciated.

[DougMacG]

"If someone can find a good definition/explanation of Baseline Budgeting and post it here it would be appreciated."
---------
I don't welcome the task of going inside the liberal, big government mind to explain its inner workings.  What if I never make it back out?

Take last year's budget for any one of the thousands of federal social spending programs (like that amount was a commandment from God) and add some artificial multiplier for inflation and for population increase.  Then any amount for the following year that is less than this 'required' increase is a 'cut' in a program.

So if your budget was $100 billion last year and we say inflation was 4% and population increase was 1% and then spend $102 Billion the next year, that is a 3% cut, in Washington-speak, typically hitting women and children the hardest.

A few small flaws in the logic:

a) If the $100 billion was spent to solve something, then presumably only $50 billion or ideally nothing would be required the following year.  But in fact, if you pay for homelessness or hunger, for example, you will get more of it.

b) Budgets in a rational world come out of money available, not need or wish.  So if the budget was in balance last year and tax revenues contract by 5%, then the baseline for each worthwhile program would be -5%, holding its share of the public money available.  Not in Washington.

The real solution is Zero-Based-Budgeting, every two years.  No congress has any right to obligate or presume that the following congress will choose to tax or spend on any of the same programs before the people have had their say.  That is a level of arrogance and unconstitutionality I will never understand.

[DougMacG]

I wonder what the blowback would be if a Bush or Reagan had submitted this budget.  33% of all spending is pretend money we admit we will never have, but agree to pay with interest.

Submitted    February, 2010
Submitted by    Barack Obama
Submitted to    111th Congress
Total revenue    $2.57 trillion (estimated)
Total expenditures    $3.83 trillion (estimated)
Deficit    $1.267 trillion (estimated)
   
http://www.whitehouse.gov/omb/budget/fy2011/assets/tables.pdf

For revenues at that level, 'baseline' spending should be at 2005-2006 levels, no more.

[Crafty_Dog]

Doug:

That is profoundly scary 

All:

We're from the government and we are here to help you, the Australian version.
================
The Australian Government and the NSW Forestry Service were presenting an alternative to NSW sheep farmers for controlling the dingo population. It seems that after years of the sheep farmers using the tried and  true methods of shooting and/or trapping the predators, the Labor Government (Peter Garrett - Environmental Minister), the NSW Forestry Service and the Greens had a 'more humane' solution.
What they proposed was for the animals to be captured alive, the males would then be castrated and let loose again. Therefore the population would be controlled.
 
This was ACTUALLY proposed to the NSW Sheep farmers Association and Farming Association by the Federal Government and the NSW Forestry Service.  All of the sheep farmers thought about this amazing idea for a couple of minutes. Finally, one of the old boys in the back of the conference room stood up, tipped his hat back and said, ‘Mr Garrett, son, I don't think you understand our problem. Those dingo’s ain't f*****' our sheep - they're eatin' 'em.'


You should have been there to hear the roar of laughter as Mr  Peter Garrett and the members of the NSW Forestry Service and  the  Greens  left the meeting very  "sheepishly".
 

[Body-by-Guinness]

Heavily illustrated piece demonstrating just how unsustainable the current budget and budgeting processes are:

http://www.heritage.org/Research/Reports/2010/06/Federal-Spending-by-the-Numbers-2010

[Crafty_Dog]

Friday Feature /The Millionaire Cop Next Door
~~~~~~~~~~~~
RICH KARLGAARD, Forbes.com "Digital Rules" (06/01/10): It is said that
government workers now make, on average, 30% more than private sector
workers. Put that fantasy aside. It far underestimates the real figures.
By my calculations, government workers make more than twice as much.
Government workers are America's fastest-growing millionaires.

Doubt it? Then ask yourself: What is the net present value of an $80,000
annual pension payout with additional full health benefits? Working
backward, the total NPV would depend on expected returns of a basket of
safe investments--blue chip stocks, dividends and U.S. Treasury bonds.

Investment pros like my friend Barry Glassman say 4% is a reasonable
return today. That's a pitiful yield, isn't it? It is sure to disappoint
the scores of millions of baby boomers who will soon enter retirement with
nothing more than their desiccated 401(k)s, down 30% on average from 30
months ago, and a bit of Social Security.

Based on this small but unfortunately realistic 4% return, an $80,000
annual pension payout implies a rather large pot of money behind it--$2
million, to be precise.

That's a lot. One might guess that a $2 million stash would be in the 95th
percentile for the 77 million baby boomers who will soon face retirement.

That $2 million also happens to be the implied booty of your average
California policeman who retires at age 55. Typical cities in California
have a police officer's retirement plan that works as follows: 3% at 50.
As the North County Times of Carlsbad, Calif., explains:

"Carlsbad offers its police and firefighters a "3-percent-at-50"
retirement plan, meaning that emergency services workers who retire at age
50 can get 3 percent of their highest salary times the number of years
they have worked for the city.

City officials have said that in Carlsbad, the average firefighter or
police officer typically retires at age 55 and has 28 years of service.
Using the 3 percent salary calculation, that person would receive an
annual city pension of $76,440."

That does not include health benefits, which might push real retirement
compensation close to $100,000 a year.

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

Read On or Post a Comment:
http://blogs.forbes.com/digitalrules/2010/06/the-millionaire-cop-next-door/

[Body-by-Guinness]

Analysis: Election fears, deficit stymie Democrats
Andrew Taylor
Congressional Democrats returning this week to the Washington they control will confront an embarrassing pile of unfinished budget business after spending the winter and spring blowing deadline after deadline.


With many Democratic lawmakers running for their political lives five months before the fall elections, even relatively simple tasks such as helping the jobless and preventing cuts in Medicare payments to doctors are hanging — victims of the ever increasing anxiety over annual trillion-dollar-plus deficits.

A war funding bill is long overdue. The most basic chore of writing a budget has been all but abandoned. There's no sign of the 12 annual spending bills for keeping government agencies open four months from now.

On the horizon is the dilemma of what to do about renewing a long roster of tax cuts enacted under former President George W. Bush. They're due to expire two months after the November election. Lawmakers will be under tremendous pressure to act in September or October. Based on the record so far, it won't be smooth — and might not get done before Election Day.

Efforts to pass a nonbinding blueprint that sketches out fiscal goals have stalled in the House. Moderate "Blue Dog" Democrats have demanded spending cuts beyond President Barack Obama's proposed freeze on domestic agency operating budgets. House leaders and the liberal core of the party are resisting.

The most painful budget questions — where and how to raise taxes or cut popular benefit programs, or both — were handed them off to bipartisan fiscal commission, which many budget experts believe is unlikely to succeed in coming up with a deficit-cutting plan.

"Every family knows that in tough times, a budget is even more important — not less important," said House Republican leader John Boehner of Ohio. "A $13 trillion national debt is an alarm bell and a wake-up call together, and it demands more than just lip service."

It's hardly the first time that Congress won't have passed a budget resolution, but Democrats were harshly critical of Republicans' failures to do so in the past.

"If you can't budget, you can't govern," Rep. John Spratt Jr., D-S.C., now the House Budget Committee chairman, said when the GOP-controlled Congress failed to produce a budget in 2006.

Unemployment benefits for hundreds of thousands of long-term jobless workers have been interrupted three times this year because Congress failed to meet self-imposed deadlines for renewing them. Delays in passing a catchall bill for extending those benefits, popular tax breaks and safety net programs through the election appear to have cost governors $24 billion in federal help with their Medicaid budgets.

The Medicaid money had won passage earlier in the House and Senate, then got dumped last month after protests from Democratic moderates unhappy about voting for higher deficits. Democratic leaders also were forced to drop a $7 billion extension of a program providing generous health insurance subsidies to the jobless.

"I just wasn't willing to vote for a lot of stuff ... that while good and urgent, should be paid for," said freshman Rep. Jim Himes, D-Conn.

To be sure, Democrats spent much of their time and attention early in the year on passing Obama's health care overhaul, which promises to have a far greater long-term impact on fiscal policy and political debates.

Republicans have been relentlessly on the attack, offering up mostly small-bore ideas for cutting spending. Like Democrats, most Republicans have steered clear of politically risky topics such as cutting Medicare and other benefit programs.

Democratic leaders are optimistic that the unemployment insurance measure and its many companion elements will pass Congress this month and be signed by Obama.

Extending Bush's tax cuts sounds a lot easier than done, especially in the face of record deficits. Obama wants to renew them — except for families making more than $250,000 per year and individuals making more than $200,000. He would raise their taxes.

But most Democrats never voted for the Bush tax cuts. Recent moves by House Democrats to scrap billions of dollars for Medicaid and health insurance subsidies for the unemployed — after voting for them in December — provide evidence of how those worries over the deficit have intensified.

"It's pretty obvious that the Democrats are in a mass panic over the deficit," said GOP tax expert Ken Kies of the Federal Policy Group. "I don't think they're going to extend the Bush tax cuts. The deficit's too big."

There's been no sign this year of the 12 annual appropriations bills that usually dominate Congress' summer schedule. Last year, the House passed all 12 before the summer recess in August. This year, because there's no budget in place, lawmakers have yet to set bottom-line figures for working back to figure out much each agency and program can spend in the budget year that begins Oct. 1.

Moderate Democrats and the party's more liberal leaders are divided. Congress may end up bundling most of the bills into a giant stack and pass them as a catchall measure during a postelection lame-duck session.

http://www.realclearpolitics.com/news/ap/politics/2010/Jun/06/analysis__election_fears__deficit_stymie_democrats.html

[Crafty_Dog]

http://endoftheamericandream.com/archives/50-statistics-about-the-u-s-economy-that-are-almost-too-crazy-to-believe

[Crafty_Dog]

Medicaid Cut Places States in Budget Bind
By KEVIN SACK
Published: June 7, 2010

 
Having counted on Washington for money that may not be delivered, at least 30 states will have to close larger-than-anticipated shortfalls in the coming fiscal year unless Congress passes a six-month extension of increased federal spending on Medicaid.

MedicaidGovernors and state lawmakers, already facing some of the toughest budgets since the Great Depression, said the repercussions would extend far beyond health care, forcing them to make deep cuts to education, social services and public safety.

Gov. Edward G. Rendell of Pennsylvania, for instance, penciled $850 million in federal Medicaid assistance into the revenue side of his state’s ledger, reducing its projected shortfall to $1.2 billion. The only way to compensate for the loss, he said in an interview, would be to lay off at least 20,000 government workers, including teachers and police officers, at a time when the state is starting to add jobs.

“It would actually kill everything the stimulus has done,” said Mr. Rendell, a Democrat. “It would be enormously destructive.”

The Medicaid provision, which would extend assistance first granted in last year’s stimulus package, was considered such a sure bet by many governors and legislative leaders that they prematurely included the money in their budgeting. But under pressure from conservative Democrats to rein in deficit spending, House leaders in late May eliminated $24 billion in aid to states from a tax and jobs bill that was approved and forwarded to the Senate.

The Senate plans to take up the measure this week, and the majority leader, Senator Harry Reid of Nevada, favors restoring the money, said his spokesman, Jim Manley. The House speaker, Nancy Pelosi, signaled last week that her chamber was open to reconsidering the appropriation.

But state and Congressional officials said the evolving politics of a midterm election year meant that the federal aid could no longer be taken for granted. And if it does not arrive, it will leave gaping shortages for states that are already slashing services and raising taxes to balance their recession-racked budgets.

According to the National Conference of State Legislatures, states are relying on the money to close more than a fourth of the $89 billion in cumulative budget shortfalls projected for the 2011 fiscal year, which starts on July 1 in 46 states.

In California, Gov. Arnold Schwarzenegger’s proposed budget assumed $1.5 billion in increased federal aid for Medicaid. With his state reeling from $57 billion in cuts over three years and facing a shortfall of $19 billion in 2011, further reductions would be “both cruel and counterproductive,” Mr. Schwarzenegger, a Republican, wrote to members of Congress last week.

In New York, which started its fiscal year on April 1 without a financial plan, Gov. David A. Paterson’s proposed budget included $1.1 billion in unsecured federal financing. Mr. Paterson, who is depending on the money to narrow a $9.2 billion gap, joined Mayor Michael R. Bloomberg of New York City at Gracie Mansion on Thursday to lobby their state’s Congressional delegation.

Governors and state lawmakers were caught largely by surprise by the House’s removal of the appropriation. Over the previous 10 months, the Medicaid money had been included in separate bills passed by each chamber, and President Obama had wrapped the extension into his executive budget proposal.

“There was every reason to think they’d get together,” Mr. Rendell said.

But in recent weeks, Republicans and conservative Democrats began to complain that the proposed spending would add to the deficit because it was not “paid for” with new revenue or other cuts. Their success in reducing the size of the bill reflected a deepening debate in Congress — and on the campaign trail — about the long-term consequences of using deficit spending to fight the recession.

Democratic aides in both the House and the Senate said state officials had not pressed their case forcefully enough.

“We may have fallen asleep at the wheel a little bit because we took it as a certainty for so long,” said Michael Bird, federal affairs counsel for the National Council of State Legislatures.

Republican governors in particular, the aides said, had been reluctant to petition for relief while the party’s leaders in Congress were criticizing Democrats for driving up the national debt.

“Governors need to make it clear that it is vital that their states receive this money, instead of blasting Congress for ‘out-of-control spending,’ ” said a senior Democratic aide in the House, speaking on the condition of anonymity because he was not authorized to talk about the issue publicly.

But the need to balance state and federal interests makes for awkward politics for some governors. Timing has made the conflict more pronounced because state budgets typically do not recover until well after a national recession fades.

“I’m very concerned about the level of federal spending and what it would mean for the long term,” said Gov. Jim Douglas of Vermont, a Republican and chairman of the National Governors Association. “But for the short term, states need this bridge to sustain the safety net of human services programs and education.”

A report issued Thursday by the National Governors Association and the National Association of State Budget Officers projected that state revenues would “remain sluggish” for two more years. State general fund spending declined by nearly $75 billion, or 11 percent, from 2008 to 2010, according to the report. But states, which unlike the federal government must balance their budgets, avoided even harsher cuts because of nearly $135 billion in stimulus grants from Washington.

The aid included $87 billion made available by adjusting how states and the federal government share the growing cost of Medicaid, the health insurance program for the poor and the disabled. The economic downturn is expected to drive up enrollment in the program by 21 percent from 2009 to 2011, according to the report.

Although the federal Medicaid share varies by state, the stimulus act raised it to an average of 66 percent, from 57 percent, according to the Kaiser Family Foundation.

The reimbursement increase was limited to a 27-month period that ends on Dec. 31. Almost as soon as it took effect, governors began fretting about the fiscal precipice they would face when the enhanced payments ended. In February, governors from 42 states and several territories signed a letter to Congressional leaders pleading for a six-month extension.

But with the public alarmed about deficit spending, House leaders found that they could not muster the Democratic votes needed to pass the tax and jobs bill without jettisoning several expensive components.

In a conference call with bloggers last week, Ms. Pelosi, Democrat of California, took note of the changed political climate, calling the package “too large for members to digest.”

“If I had all the votes that I needed in the non-Blue Dog world,” she said, referring to the caucus of conservative Democrats, “I would not have had to make some of the changes I made to get some of the Blue Dog support.”

Many states do not have contingencies for replacing the federal money. Their options will be limited by the severity of the steps they already have taken, and by federal requirements that they maintain eligibility levels for Medicaid.

“We don’t have a specific list of things we would do if we don’t get the money,” said Erik Kriss, a spokesman for Mr. Paterson’s budget office, “but we are looking for the most part at the cut side of the ledger.”

[Crafty_Dog]

Wall Street's War
Congress looked serious about finance reform – until America's biggest banks unleashed an army of 2,000 paid lobbyists
Matt Taibbi

It's early May in Washington, and something very weird is in the air. As Chris Dodd, Harry Reid and the rest of the compulsive dealmakers in the Senate barrel toward the finish line of the Restoring American Financial Stability Act – the massive, year-in-the-making effort to clean up the Wall Street crime swamp – word starts to spread on Capitol Hill that somebody forgot to kill the important reforms in the bill. As of the first week in May, the legislation still contains aggressive measures that could cost once-indomitable behemoths like Goldman Sachs and JP Morgan Chase tens of billions of dollars. Somehow, the bill has escaped the usual Senate-whorehouse orgy of mutual back-scratching, fine-print compromises and freeway-wide loopholes that screw any chance of meaningful change.

The real shocker is a thing known among Senate insiders as "716." This section of an amendment would force America's banking giants to either forgo their access to the public teat they receive through the Federal Reserve's discount window, or give up the insanely risky, casino-style bets they've been making on derivatives. That means no more pawning off predatory interest-rate swaps on suckers in Greece, no more gathering balls of subprime shit into incomprehensible debt deals, no more getting idiot bookies like AIG to wrap the crappy mortgages in phony insurance. In short, 716 would take a chain saw to one of Wall Street's most lucrative profit centers: Five of America's biggest banks (Goldman, JP Morgan, Bank of America, Morgan Stanley and Citigroup) raked in some $30 billion in over-the-counter derivatives last year. By some estimates, more than half of JP Morgan's trading revenue between 2006 and 2008 came from such derivatives. If 716 goes through, it would be a veritable Hiroshima to the era of greed.

"When I first heard about 716, I thought, 'This is never gonna fly,'" says Adam White, a derivatives expert who has been among the most vocal advocates for reform. When I speak to him early in May, he sounds slightly befuddled, like he can't believe his good fortune. "It's funny," he says. "We keep waiting for the watering-down to take place – but we keep getting to the next hurdle, and it's still staying strong."

In the weeks leading up to the vote on the reform bill, I hear one variation or another on this same theme from Senate insiders: that the usual process of chipping away at key legislation is not taking place with its customary dispatch, despite a full-court press by Wall Street. The financial-services industry has reportedly flooded the Capitol with more than 2,000 paid lobbyists; even veteran members are stunned by the intensity of the blitz. "They're trying everything," says Sen. Sherrod Brown, a Democrat from Ohio. Wall Street's army is especially imposing given that the main (really, the only) progressive coalition working the other side of the aisle, Americans for Financial Reform, has been in existence less than a year – and has just 60 unpaid "volunteer" lobbyists working the Senate halls.

The companies with the most at stake are particularly well-connected. The lobbying campaign for Goldman Sachs, for instance, is being headed up by a former top staffer for Rep. Barney Frank, Michael Paese, who is coordinating some 14 different lobbying firms to fight on Goldman's behalf. The bank is also represented by Capitol Hill heavyweights like former House majority leader Dick Gephardt and former Reagan chief of staff Ken Duberstein. All told, there are at least 40 ex-staffers of the Senate Banking Committee – and even one former senator, Trent Lott – lobbying on behalf of Wall Street. Until the final weeks of the reform debate, however, it seemed that all these insiders were facing the prospect of a rare defeat – and they weren't pleased. One lobbyist even complained to The Washington Post that the bill was being debated out in the open, on the Senate floor, instead of in a smoky backroom. "They've got to get this thing off the floor and into a reasonable, behind-the-scenes" discussion, he groused. "Let's have a few wise fathers sit around the table in some quiet room" to work it out.

As it neared the finish line, the Restoring American Financial Stability Act was almost unprecedentedly broad in scope, in some ways surpassing even the health care bill in size and societal impact. It would rein in $600 trillion in derivatives, create a giant new federal agency to protect financial consumers, open up the books of the Federal Reserve for the first time in history and perhaps even break up the so-called "Too Big to Fail" giants on Wall Street. The recent history of the U.S. Congress suggests that it was almost a given that they would fuck up this one real shot at slaying the dragon of corruption that has been slowly devouring not just our economy but our whole way of life over the past 20 years. Yet with just weeks left in the nearly year-long process at hammering out this huge new law, the bad guys were still on the run. Even the senators themselves seemed surprised at what assholes they weren't being. This new baby of theirs, finance reform, was going to be that one rare kid who made it out of the filth and the crime of the hood for everybody to be proud of.

Then reality set in.

Picture the Restoring American Financial Stability Act as a vast conflict being fought on multiple fronts, with the tiny but enormously influential Wall Street lobby on one side and pretty much everyone else on the planet on the other. To be precise, think World War II – with some battles won by long marches and brutal campaigns of attrition, others by blitzkrieg attacks, still more decided by espionage and clandestine movements. Time after time, at the last moment, the Wall Street axis has turned seemingly lost positions into surprise victories or, at worst, bitterly fought stalemates. The only way to accurately convey the scale of Wall Street's ingenious comeback is to sketch out all the crazy, last-minute shifts on each of the war's four major fronts.

Front #1
AUDITING THE FED

The most successful of the reform gambits was probably the audit-the-Fed movement led by Sen. Bernie Sanders, the independent from Vermont. For nearly a century, the Federal Reserve has been, within our borders, a nation unto itself – with vast powers to shape the economy and no real limits to its authority beyond the president's ability to appoint its chairman. In the bubble era it has been transformed into a kind of automatic bailout mechanism, helping Wall Street drink itself sober by flooding big banks with cheap money after the collapse of each speculative boom. But suddenly, with both the Huffington Post crowd and the Tea Party raising their pitchforks in outrage, Sanders managed to pass – by a vote of 96-0 – an amendment to force the Fed to open its books to congressional scrutiny.

If Alan Greenspan and Ben Bernanke don't take that 96-0 vote as a kick-to-the-groin testament to the staggering unpopularity of the Fed, they should. When 96 senators agree on something, they're usually affirming their devotion to the flag or commemorating the death of Mother Teresa. But as it turns out, the more than $2 trillion in loans that the Fed handed out in secret after the 2008 meltdown is something that both the left and the right have no problem banding together to piss on. One of the most bizarre alliances of the bailout era took place when Sanders, a democratic socialist, and Sen. Jim DeMint, a hardcore conservative from South Carolina, went on the CNBC show hosted by crazy supply-sider Larry Kudlow – and all three found themselves in complete agreement on the need to force Fed loans into the open. "People who come from very different places agree that it ought not to be done in secret, that the Fed isn't Skull and Bones," says Michael Briggs, an aide to Sanders.

The Sanders amendment, if it survives in conference, will lead to some delicious disclosures. Almost exactly a year ago, Sanders questioned Bernanke at a Senate-budget hearing, asking him to name the banks that had been bailed out by the Fed. "Will you tell the American people to whom you lent 2.2 trillion of their dollars?" Sanders demanded.

After a little hemming and hawing, a bored-looking Bernanke – Time magazine's 2009 Person of the Year, by the way – bluntly said, "No." It would be "counterproductive," he explained, if clients and investors learned that these poor banks were broke enough to need a public handout.

Bernanke's performance that day so rankled Sanders that he wrote up his amendment specifically to bring the Fed's goblin-in-chief to heel. The new law will force Bernanke to post the identity of loan recipients on the Fed's website for all to see. It also mandates that the Government Accountability Office investigate potential conflicts of interest that took place during the bailout, such as the presence of Goldman CEO Lloyd Blankfein in the room during the negotiations of the AIG bailout, which led to Goldman's receiving $13 billion of public money via the rescue.

The Sanders amendment was perhaps the headline victory to date in the ongoing War for Finance Reform, but even this battle entailed some heavy casualties. Sanders had originally filed an amendment that was much closer to a House version pressed by libertarian hero Ron Paul, one that would have permanently opened the Fed's books to Congress. But as the Senate crawled closer to a vote, the Sanders camp began to hear that the Obama administration opposed the bill, fearing it would give Congress too much day-to-day involvement in Fed policy. "The White House was saying how wonderful transparency is, but they still had 'concerns,' "Briggs says. "Within a couple hours, those concerns were being worked out."

The end result was a deal that restricted the audit to a one-time shot: Congress could only examine Fed loans made after December 2007. Once the audit was complete, the Fed's books would once again be sealed forever from public scrutiny. Sen. David Vitter, a Democrat from Louisiana, countered with an amendment to permanently open up the Fed's books, but it was shot down by a vote of 62-37. In one of the most absurd and indefensible retreats of the war, a decisive majority of senators voted to deny themselves the power to audit the Federal Reserve on behalf of the American people. When it comes to protecting the world's wealthiest banks from public scrutiny, it turns out, Democrats and Republicans have no trouble achieving bipartisanship.

FRONT #2
PROTECTING CONSUMERS

The biggest no-brainer of finance reform was supposed to be the Consumer Financial Protection Bureau. The idea was simple: create a federal agency whose sole mission would be to make sure that financial lenders don't rape their customers with defective products, unjust fees and other fine-print nightmares familiar to any American with a credit card. In theory, the CFPB would rein in predatory lending by barring lenders from making loans they know that borrowers won't be able to pay back, either because of hidden fees or ballooning payments.

Wall Street knew it would be impossible to lobby Congress on this issue by taking the angle of "We're a rapacious megabank that would like to keep skull-fucking to death our customers using incomprehensible and predatory loans." So it came up with another strategy – one that deployed some of the most inspired nonsense ever seen on the Hill. The all-powerful lobbying arm of the U.S. Chamber of Commerce, which has been fierce in its representation of Wall Street's interests throughout the War for Finance Reform, cued up a $3 million ad campaign implying that the CFPB, instead of targeting asshole bankers in flashy suits and hair gel, would – and this isn't a joke – target your local butcher, making it hard for him to lend you the money to buy meat. That's right: The ads featured shots of a squat butcher with his arms folded, standing in front of a big pile of meat. "The economy has made it tough on this local butcher's customers," the ad reads. "So he lets some of them run a tab and pay the bill over time to make ends meet. But now Washington wants to make it tougher on everyone." After insisting – falsely – that this kindly butcher would be subject to the new consumer protection bureau, the ad warns that the CFPB "would also have the ability to collect information about his customers' financial accounts and take away many of their financial choices."

Sitting in the Senate chamber one afternoon not long before the vote, I even heard Sen. Mike Enzi, an impressively shameless Republican from Wyoming, insist that the CFPB would mean that "anyone who has ever paid for dental care in installments could be facing the prospect of paying for dental care upfront." Other anti-reform ads claimed that everyone from cabinetmakers to electricians would be hounded by the new agency – even though the CFPB's mandate explicitly excludes merchants who are "not engaged significantly in offering or providing consumer financial products or services."

The CFPB was always a pretty good bet to pass in some form. Just as pushing through anything that could plausibly be called "health care reform" was a political priority for the Obama administration, creating a new agency with the words "consumer protection" in the title was destined from the start to be the signature effort of the finance bill, which is otherwise mostly a mishmash of highly technical new regulations. But that didn't stop leading Democrats from doing what they could to chisel away at the thing. Throughout the process, Chris Dodd, the influential chairman of the Senate Banking Committee, has set new standards for reptilian disingenuousness – playing the role of stern banker-buster while taking millions in Wall Street contributions. Dodd worked overtime trying to craft a "bipartisan" bill with the Republican minority – in particular with Sen. Richard Shelby, the ranking Republican on the committee. With his dyed hair, porcine trunk and fleshy, powdery-white face, Shelby recalls an elderly sumo wrestler in drag. I happened to be in the Senate on the day that Shelby proposed a substitute amendment that would have stuffed the CFPB into the FDIC, effectively scaling back its power and independence. Throughout the debate, I was struck by the way that Dodd and his huge black caterpillar eyebrows kept crossing the aisle to whisper in Shelby's ear. During these huddles, Dodd would gently pat Shelby's back or hold his arm; it was like watching a love scene in a Japanese monster movie.

Shelby's amendment was ultimately defeated by a vote of 61-37 – but he and Dodd still reached a number of important compromises that significantly watered down the CFPB. The idea was to rack up as many exemptions as possible for favored industries, all of which had contributed generously to their favorite senators. By mid-May, Republicans and Democrats had quietly agreed to full or partial "carve-outs" for banks with less than $10 billion in deposits, as well as for check-cashers and other sleazy payday lenders. As the bill headed toward a vote, there was also a furious fight to exempt auto dealers from anti-predatory regulations – a loophole already approved by the House – even though car loans are the second-largest source of borrowing for Americans, after home mortgages. The purview of the CFPB, in essence, was being limited to megabanks and mortgage lenders. That's a major victory in the war against Wall Street, but it will be hard to be too impressed if Congress can't even find a way to vote for consumer protection against used-car salesmen.

FRONT #3
ENDING "TOO BIG TO FAIL"

Perhaps the fiercest fight of all over finance reform involved a part of the bill called "resolution authority" – also known as, "The next time an AIG or a Lehman Brothers goes belly up, do we bail the fuckers out? And if so, with whose money?" In its original form, the bill answered these crucial questions by requiring that banks contribute to a $50 billion fund that could be used to aid failing financial institutions. The fund was hardly a cure-all – $50 billion "wouldn't even be enough to bail out Citigroup's prop-trading desk," as one industry analyst observed – but it at least established a precedent that banks should pay for their own bailouts, instead of simply snatching money from taxpayers.

The fund had been established after a fierce battle last fall, when Democrats in the House beat back a seemingly insane proposal backed by the Obama administration that would have paid for bailouts by borrowing from taxpayers and recouping the money from Wall Street later on, by means of a mysterious, convoluted process. That heroic stand in the House, which was marked by long nights of ferocious negotiations, was wiped out in one fell swoop on May 5th, after Dodd and Shelby huddled up in another of their monster-love sessions and hammered out a deal to strip the bailout fund from the bill. The surprise rollback was introduced by the Senate leadership late on a Wednesday and voted on three hours later. Just like that, taxpayers were back to fronting the nation's biggest banks the money when they find themselves in financial trouble.

One day after the Shelby-Dodd wipeout, another key reform got massacred. This was the "Too Big to Fail" amendment put forward by two reform-minded freshmen, Sens. Ted Kaufman of Delaware and Sherrod Brown of Ohio. The measure would have mandated the automatic breakup of any bank that held more than 10 percent of all insured deposits, or had at risk more than two percent of America's GDP. The amendment was just the kind of common-sense, loophole-proof, no-bullshit legislation that, sadly, almost never passes in the modern Senate.

Brown is an interesting character. Whenever I talk to him, I often forget he's a U.S. senator; he feels more like a dude you met on an Amtrak train and struck up a conversation with. He remains the only member of Congress I've ever met who took off his shoes and socks in the middle of an interview. But when I catch up with him in an anteroom outside the Senate chamber on the day his and Kaufman's amendment ends up being voted on, he seems harried and tense, like a man waiting for bad news in a hospital lobby. In recent weeks, he confides, he has found himself facing both barrels of the banking lobby.

"There are 1,500 bank lobbyists in this town, and they're coming by all the time," he says. "And it's not just the lobbyists. When the bank lobbyist from Columbus comes by, he brings 28 bankers with him."

[Crafty_Dog]

At the moment, though, Brown has a more pressing problem. He and Kaufman are both making themselves conspicuous in the Senate chamber, and the reason why is illustrative of the looniness of Senate procedure. Unlike in the House, where a rules committee decides in advance which amendments will be brought to a vote, senators have no orderly, dependable way of knowing if or when their proposals will get voted on. Instead, they're at the mercy of a strange and nebulous process that requires them to badger the leadership, who have the sole discretion of deciding which amendments go to a vote. So Brown is reduced to hanging around the Senate floor and trying to get a committee chair like Chris Dodd to put Too Big to Fail to a vote before other amendments use up all the time allotted for debate. It's not unlike fighting a crowd of pissed-off airport passengers for a single seat on an overbooked flight – you're completely at the mercy of the snippy airline rep behind the desk.

Near the end of the day, to Brown's surprise, Dodd actually allows his amendment to go to a vote. In the end, however, the proposal to break up the nation's riskiest banks gets walloped 61-33, with an astonishing 27 Democrats – including key banking committee heavyweights like Dodd and Chuck Schumer of New York – joining forces to defeat it. After the debate, Kaufman, a gregarious and aggressive advocate of finance reform, seems oddly unfazed that his fellow Democrats blew the best chance in a generation to corral the great banking monsters of Wall Street. "For some of them, it was just a bridge too far," he says. "There's an old saying: Never invest in anything you don't understand." Given the bizarre standards of the Senate bureaucracy, Kaufman considers it a victory just to have gotten his amendment into the woodshed for an ass-whipping.

I encounter that same "just glad to be here" vibe from Sen. Jeff Merkley, a Democrat from Oregon who co-authored one of the handful of genuinely balls-out reforms in the entire bill. The Merkley-Levin amendment couldn't have been more important; it called for restoring part of the Glass-Steagall Act, the Depression-era law that prevented commercial banks, investment houses and insurance companies from merging. The repeal of Glass-Steagall in 1999 paved the way for the creation of the Too-Big-to-Fail monsters like Citigroup, who drove the global economy into a ditch over the past 10 years.

Merkley-Levin was the Senate version of the "Volcker Rule," a proposal put forward by former Fed chief and Obama adviser Paul Volcker, that would prevent commercial banks from engaging in the kind of speculative, proprietary trading that helped trigger the financial crisis. When I meet with Merkley, he is in the same position as Brown and Kaufman, waiting anxiously for a chance to get his amendment voted on, with no idea of when or if that might happen. A vote – even if it means defeat – is all he's hoping for. When I ask if he's excited about the prospect of restoring a historic piece of legislation like Glass-Steagall, he smiles faintly. "I'm not saying I'm real optimistic," he says.

In the end, Merkley is forced to resort to the senatorial equivalent of gate-crashing: He attaches his amendment to the sordid proposal to exempt auto dealers from the CFPB, which has already been approved for a vote. That Merkley has to invoke an arcane procedural stunt just to get such a vital reform a vote is a testament to how convoluted American democracy looks by the time it reaches the Senate floor.

As with the whittled-down victories over the Fed audit and the Consumer Finance Protection Bureau – and the brutal defeat of Too Big to Fail – the stalling over the Volcker Rule underscores the basic dynamic of the Senate. With deals cut via backroom consensus, and leaders like Reid and Dodd tightly controlling which amendments go to a vote, the system allows a few powerful members whose doors are permanently open to lobbyists to pilot the entire process from beginning to end. One Democratic aide grumbles to me that he had no access to the negotiations for months, while a Wall Street lobbyist he knows could arrange an audience with the leadership. The whole show is carefully orchestrated from start to finish; no genuinely tough amendment with a shot at being approved receives an honest up-or-down vote. "It's all kind of a fake debate," the aide says.

FRONT #4
REINING IN DERIVATIVES

When all the backroom obfuscation doesn't work, of course, there is always one last route in Congress to killing reform: the fine print. And never has an amendment been fine-printed to death as skillfully as the proposal to reform derivatives.

Imagine a world where there's no New York Stock Exchange, no NASDAQ or Nikkei: no open exchanges at all, and all stocks traded in the dark. Nobody has a clue how much a share of IBM costs or how many of them are being traded. In that world, the giant broker-dealer who trades thousands of IBM shares a day, and who knows which of its big clients are selling what and when, will have a hell of a lot more information than the day-trader schmuck sitting at home in his underwear, guessing at the prices of stocks via the Internet.

That world exists. It's called the over-the-counter derivatives market. Five of the country's biggest banks, the Goldmans and JP Morgans and Morgan Stanleys, account for more than 90 percent of the market, where swaps of all shapes and sizes are traded more or less completely in the dark. If you want to know how Greece finds itself bankrupted by swaps, or some town in Alabama overpaid by $93 million for deals to fund a sewer system, this is the explanation: Nobody outside a handful of big swap dealers really has a clue about how much any of this shit costs, which means they can rip off their customers at will.

This insane outgrowth of jungle capitalism has spun completely out of control since 2000, when Congress deregulated the derivatives market. That market is now roughly 100 times bigger than the federal budget and 20 times larger than both the stock market and the GDP. Unregulated derivative deals sank AIG, Lehman Brothers and Greece, and helped blow up the global economy in 2008. Reining in derivatives is the key battle in the War for Finance Reform. Without regulation of this critical market, Wall Street could explode another mushroom cloud of nuclear leverage and risk over the planet at any time.

The basic pillar of derivatives reform is simple: From now on, instead of trading in the dark, most derivatives would have to be traded on open exchanges and "cleared" through a third party. Last fall, Wall Street lobbyists succeeded at watering down the clearing requirement by pushing through a series of exemptions for "end-users" – that is, anyone who uses derivatives to hedge a legitimate business risk, like an airline buying swaps as a hedge against fluctuations in jet-fuel prices. But the House then took it even further, expanding the exemption to include anyone who wants to hedge against balance-sheet risk. Since every company has a balance sheet, including giant insurers like AIG and hedge funds that gamble in derivatives, the giant loophole now covered pretty much everyone except a few megabanks. This was regulation with a finger crossed behind its back.

When it came time for the Senate to do its version, however, the lobbyists were in for a surprise. Sen. Blanche Lincoln of Arkansas – best known as one of the few Democrats to vote for Bush's tax cuts – suddenly got religion and closed the loophole. Facing a tough primary battle against an opponent who was vowing to crack down on Wall Street, Lincoln tweaked the language so derivatives reform would apply to any greedy financial company that makes billions trading risky swaps in the dark.

Republicans went apeshit, pulling the same tactics they tried to gut the Consumer Finance Protection Bureau. Sen. Enzi, back at the lectern after his failed attempt to claim that the CFPB was a government plot to control the orthodontics industry, barked to the Senate gallery that Lincoln's proposal would harm not millionaire swap dealers at JP Morgan and Goldman Sachs, but "a wheat-grower in Wyoming." Unmoved by such goofy rhetoric, the Senate shot down an asinine Republican amendment that would have overturned Lincoln's reform by a vote of 59-39.

Then reform advocates started reading the fine print of the Lincoln deal, and realized that all those Wall Street lobbyists had really been earning their money.

That same day the GOP amendment failed, the derivatives expert Adam White was at his home in Georgia, poring over a "redline" version of the Lincoln amendment, in which changes to the bill are tracked in bold. When he came to a key passage on page 570, he saw that it had a single line through it, meaning it had been removed. The line read, "Except as provided in paragraph (3), it shall be unlawful to enter into a swap that is required to be cleared unless such swap shall be submitted for clearing."

Translation: It was no longer illegal to trade many uncleared swaps. Wall Street would be free to go on trading these monstrosities by the gazillions, largely in the dark. "Regulators can't say any longer if you don't clear it, it's illegal," says White.

Once he noticed that giant loophole, White went back and found a host of other curlicues in the text that collectively cut the balls out of the Lincoln amendment. On page 574, a new section was added denying the Commodity Futures Trading Commission the power to force clearinghouses to accept swaps for clearing. On page 706, two lines were added making it impossible for buyers who get sold an uncleared swap to void the deal. Taken altogether, the changes amount to what White describes as a "Trojan Horse" amendment: hundreds of pages of rigid rules about clearing swaps, with a few cleverly concealed clauses that make blowing off those rules no big deal. Michael Greenberger, a former official with the Commodity Futures Trading Commission who has been fighting for derivatives reform, describes the textual trickery as a "circle of doom. Despite the pages and pages of regulations, violating them is risk-free."

On May 18th, as the clock ran out on the deadline to file amendments, reform-minded Democrats staged a concerted push to close the loopholes. But when Sen. Maria Cantwell of Washington offered a proposal to eliminate the "Trojan Horse" sham, Reid tried to slam the door on her and everyone else working to strengthen reform. The majority leader called for a vote to end debate – a move that would squelch any remaining amendments. This extraordinary decision to cut off discussion of our one, best shot at revamping the rules of modern American finance was made, at least in part, to enable senators to get home for Memorial Day weekend.

But then something truly unexpected took place. Cantwell revolted, joined by Sen. Russ Feingold of Wisconsin. That left Reid in the perverse position of having to convince three Republicans to come over to his side to silence a member of his own party. On May 20th, Reid got the votes he needed to kill the debate. A few hours later, the Senate passed the bill, loopholes and all, by a vote of 59-39.

In a heartwarming demonstration of the Senate's truly bipartisan support for Wall Street, Sen. Sam Brownback – a Republican from Kansas – stepped in to help Democrats kill one of the bill's most vital reforms. At the last minute, Brownback mysteriously withdrew his amendment to exempt auto dealers from regulation by the CFPB – a maneuver that prevented the Merkley-Levin ban on speculative trading, which was attached to Brownback's amendment, from even being voted on. That was good news for car buyers, but bad news for the global economy. Senators may enjoy scolding Goldman Sachs in public hearings, but when it comes time to vote, they'll pick Wall Street over Detroit every time.

The rushed vote also meant that the Democratic leadership wasn't able to gut 716, the amazingly aggressive section of Lincoln's amendment that would cut off taxpayer money to big banks that gamble on risky derivatives. Not that they didn't try. With just three minutes to go before the deadline, Dodd had filed a hilarious amendment that would have delayed the ban on derivatives for two years – and empowered a new nine-member panel to unilaterally kill it. Sitting on the panel would be Bernanke, Treasury Secretary Tim Geithner and FDIC chief Sheila Bair, all of whom violently opposed 716.

Dodd was forced to withdraw his amendment after Wall Street complained that even this stall-and-kill tactic would create too much "uncertainty" in the market. That left 716 still alive for the moment – but even its staunchest supporters expected the leadership to find some way to gut it in conference, especially since President Obama personally opposes the measure. "Treasury and the White House are in full-court mode, assuring everybody that this will be fixed," says Greenberger. "And when they say fixed, that means killed."

Whatever the final outcome, the War for Finance Reform serves as a sweeping demonstration of how power in the Senate can be easily concentrated in the hands of just a few people. Senators in the majority party – Brown, Kaufman, Merkley, even a committee chairman like Lincoln – took a back seat to Reid and Dodd, who tinkered with amendments on all four fronts of the war just enough to keep many of them from having real teeth. "They're working to come up with a bill that Wall Street can live with, which by definition makes it a bad bill," one Democratic aide explained in the final, frantic days of negotiation.

On the plus side, the bill will rein in some forms of predatory lending, and contains a historic decision to audit the Fed. But the larger, more important stuff – breaking up banks that grow Too Big to Fail, requiring financial giants to pay upfront for their own bailouts, forcing the derivatives market into the light of day – probably won't happen in any meaningful way. The Senate is designed to function as a kind of ongoing negotiation between public sentiment and large financial interests, an endless tug of war in which senators maneuver to strike a delicate mathematical balance between votes and access to campaign cash. The problem is that sometimes, when things get really broken, the very concept of a middle ground between real people and corrupt special interests becomes a grotesque fallacy. In times like this, we need our politicians not to bridge a gap but to choose sides and fight. In this historic battle over finance reform, when we had a once-in-a-generation chance to halt the worst abuses on Wall Street, many senators made the right choice. In the end, however, the ones who mattered most picked wrong – and a war that once looked winnable will continue to drag on for years, creating more havoc and destroying more lives before it is over.

[Body-by-Guinness]

Fannie-Freddie Fix at $160 Billion With $1 Trillion Worst Case
June 14, 2010, 3:00 AM EDT

By Lorraine Woellert and John Gittelsohn
June 14 (Bloomberg) -- The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history.
Fannie and Freddie, now 80 percent owned by U.S. taxpayers, already have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts.
“It is the mother of all bailouts,” said Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry.
Fannie, based in Washington, and Freddie in McLean, Virginia, own or guarantee 53 percent of the nation’s $10.7 trillion in residential mortgages, according to a June 10 Federal Reserve report. Millions of bad loans issued during the housing bubble remain on their books, and delinquencies continue to rise. How deep in the hole Fannie and Freddie go depends on unemployment, interest rates and other drivers of home prices, according to the companies and economists who study them.
‘Worst-Case Scenario’
The Congressional Budget Office calculated in August 2009 that the companies would need $389 billion in federal subsidies through 2019, based on assumptions about delinquency rates of loans in their securities pools. The White House’s Office of Management and Budget estimated in February that aid could total as little as $160 billion if the economy strengthens.
If housing prices drop further, the companies may need more. Barclays Capital Inc. analysts put the price tag as high as $500 billion in a December report on mortgage-backed securities, assuming home prices decline another 20 percent and default rates triple.
Sean Egan, president of Egan-Jones Ratings Co. in Haverford, Pennsylvania, said that a 20 percent loss on the companies’ loans and guarantees, along the lines of other large market players such as Countrywide Financial Corp., now owned by Bank of America Corp., could cause even more damage.
“One trillion dollars is a reasonable worst-case scenario for the companies,” said Egan, whose firm warned customers away from municipal bond insurers in 2002 and downgraded Enron Corp. a month before its 2001 collapse.
Unfinished Business
A 20 percent decline in housing prices is possible, said David Rosenberg, chief economist for Gluskin Sheff & Associates Inc. in Toronto. Rosenberg, whose forecasts are more pessimistic than those of other economists, predicts a 15 percent drop.
“Worst case is probably 25 percent,” he said.
The median price of a home in the U.S. was $173,100 in April, down 25 percent from the July 2006 peak, according to the National Association of Realtors.
Fannie and Freddie are deeply wired into the U.S. and global financial systems. Figuring out how to stanch the losses and turn them into sustainable businesses is the biggest piece of unfinished business as Congress negotiates a Wall Street overhaul that could reach President Barack Obama’s desk by July.
Neither political party wants to risk damaging the mortgage market, said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and White House economic adviser under President George W. Bush.
“Republicans and Democrats love putting Americans in houses, and there’s no getting around that,” Holtz-Eakin said.
‘Safest Place’
With no solution in sight, the companies may need billions of dollars from the Treasury Department each quarter. The alternative -- cutting the federal lifeline and letting the companies default on their debts -- would produce global economic tremors akin to the U.S. decision to go off the gold standard in the 1930s, said Robert J. Shiller, a professor of economics at Yale University in New Haven, Connecticut, who helped create the S&P/Case-Shiller indexes of property values.
“People all over the world think, ‘Where is the safest place I could possibly put my money?’ and that’s the U.S.,” Shiller said in an interview. “We can’t let Fannie and Freddie go. We have to stand up for them.”
Congress created the Federal National Mortgage Association, known as Fannie Mae, in 1938 to expand home ownership by buying mortgages from banks and other lenders and bundling them into bonds for investors. It set up the Federal Home Loan Mortgage Corp., Freddie Mac, in 1970 to compete with Fannie.
Lower Standards
The companies’ liabilities stem in large part from loans and mortgage-backed securities issued between 2005 and 2007. Directed by Congress to encourage lending to minorities and low- income borrowers at the same time private companies were gaining market share by pushing into subprime loans, Fannie and Freddie lowered their standards to take on high-risk mortgages.
Many of those went to borrowers with poor credit or little equity in their homes, according to company filings. By early 2008, more than $500 billion of loans guaranteed or held by Fannie and Freddie, about 10 percent of the total, were in subprime mortgages, according to Fed reports.
Fannie and Freddie also raised billions of dollars by selling their own corporate debt to investors around the world. The bonds are seen as safe because of an implicit government guarantee against default. Foreign governments, including China’s and Japan’s, hold $908 billion of such bonds, according to Fed data.
‘Debt Trap’
“Do we really want to go to the central bank of China and say, ‘Tough luck, boys’? That’s part of the problem,” said Karen Petrou, managing partner of Federal Financial Analytics Inc., a Washington-based research firm.
The terms of the 2008 Treasury bailout create further complications. Fannie and Freddie are required to pay a 10 percent annual dividend on the shares owned by taxpayers. So far, they owe $14.5 billion, more than the companies reported in income in their most profitable years.
“It’s like a debt trap,” said Qumber Hassan, a mortgage strategist at Credit Suisse Group AG in New York. “The more they draw, the more they have to pay.”
Fannie and Freddie also benefited by selling $1.4 trillion in mortgage-backed securities to the Fed and the Treasury since September 2008, bonds that otherwise would have weighed on their balance sheets. While the government bought only the lowest-risk securities, it could incur additional losses.
‘Hard to Judge’
Treasury Secretary Timothy F. Geithner has vowed to keep Fannie and Freddie operating.
“It’s very hard to judge what the scale of losses is,” Geithner told Congress in March.
One idea being weighed by the Obama administration involves reconstituting Fannie and Freddie into a “good bank” with performing loans and a “bad bank” to absorb the rest. That could cost taxpayers as much as $290 billion because of all the bad loans, according to a May estimate by Credit Suisse analysts.
At the end of March, borrowers were late making payments on $338.4 billion worth of Fannie and Freddie loans, up from $206.1 billion a year earlier, according to the companies’ first- quarter filings at the Securities and Exchange Commission.
The number of loans more than three months past due has risen every quarter for more than a year, hitting 5.5 percent at Fannie as of the end of March and 4.1 percent at Freddie, according to the filings.
Surge in Delinquencies
The composition of the $5.5 trillion of loans guaranteed by Fannie and Freddie suggests that the surge in delinquencies may continue. About $1.98 trillion of the loans were made in states with the nation’s highest foreclosure rates -- California, Florida, Nevada and Arizona -- and $1.13 trillion were issued in 2006 and 2007, when real estate values peaked. Mortgages on which borrowers owe more than 90 percent of a property’s value total $402 billion.
Fannie and Freddie may suffer additional losses as a result of the Treasury’s effort to prevent foreclosures. Under the program, banks with mortgages owned or guaranteed by the companies must rewrite loan terms to make them easier for borrowers to pay.
The Treasury program is budgeted to cost Fannie and Freddie $20 billion. The companies have already modified about 600,000 delinquent loans and refinanced almost 300,000 more, in some cases for an amount greater than the houses are worth.
The government is using Fannie and Freddie “for a public- policy purpose that may well increase the ultimate cost of the taxpayer rescue,” said Petrou of Federal Financial Analytics. “Treasury is rolling the dice.”
Republican Phase-Out
If the plan works and foreclosures fall, that could help stabilize Fannie’s and Freddie’s balance sheets and ultimately protect taxpayers.
“Avoiding foreclosures can be a route to reducing loss severity,” said Sarah Rosen Wartell, executive vice president of the Center for American Progress, a Washington research group with ties to the Obama administration.
Loans issued since 2008, when the companies raised standards for borrowers, should be profitable and help offset prior losses, Wartell said.
Republicans attempted to include a phase-out of the mortgage companies in the financial reform bill. Democratic lawmakers and the Obama administration opted for further study, and the Treasury began soliciting ideas in April.
Representative Scott Garrett, a New Jersey Republican and co-sponsor of the phase-out amendment, said eliminating Fannie and Freddie would force the government and the housing market to confront the issue.
“It’s somewhat impossible to predict the magnitude of their impact if they continue to be the primary source of lending,” Garrett said in an interview.
Caught in ‘Quandary’
Democrats dismissed the phase-out idea as simplistic.
“We need to have a housing-financing system in place,” Senate Banking Committee Chairman Christopher Dodd said last month. “If you pull that rug out at this particular juncture, I don’t know what the particular result would be. We’re caught in this quandary.”
By delaying action, the Obama administration keeps losses off the government’s books while building a floor under housing prices during a congressional election year.
Keeping Fannie and Freddie functioning could also support an overall economic recovery. Residential real estate -- the money spent on rent, mortgage payments, construction, remodeling, utilities and brokers’ fees -- accounted for about 17 percent of gross domestic product in 2009, according to the National Association of Home Builders.
‘Already Lost’
Allowing the companies to go under and hoping that private financing will fill the gap isn’t realistic, analysts say. It would require at least two years of rising property values for private companies to return to the mortgage-securitization market, said Robert Van Order, Freddie’s former chief international economist and a professor of finance at George Washington University in Washington.
The price tag of supporting Fannie and Freddie “needs to be evaluated against the cost of not having a mortgage market,” said Phyllis Caldwell, chief of the Treasury’s Homeownership Preservation Office.
Whatever the fix, the money spent will not be recovered, said Alex Pollock, a former president of the Federal Home Loan Bank of Chicago who is now a fellow at the Washington-based American Enterprise Institute.
“It doesn’t matter what you do or don’t do, Fannie and Freddie will cost a lot of money,” Pollock said. “The money is already lost. There’s an attempt to try to avert your eyes.”
--Editors: Lawrence Roberts, Robert Friedman
To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net; John Gittelsohn in New York at johngitt@bloomberg.net.

http://www.businessweek.com/news/2010-06-14/fannie-freddie-fix-at-160-billion-with-1-trillion-worst-case.html

[G M]

http://article.nationalreview.com/436123/the-other-national-debt/kevin-williamson?page=1

It gets worse.

[Body-by-Guinness]

America's Municipal Debt Racket
State and local borrowing as a percentage of U.S. GDP has risen to an all-time high of 22% in 2010.
By STEVEN MALANGA

New Jersey officials recently celebrated the selection of the new stadium in the Meadowlands sports complex as the site of the 2014 Super Bowl. Absent from the festivities was any sense of the burden the complex has become for taxpayers.

Nearly 40 years ago the Garden State borrowed $302 million to begin constructing the Meadowlands. The goal was to pay off the bonds in 25 years. Although the project initially went according to plan, politicians couldn't resist continually refinancing the bonds, siphoning revenues from the complex into the state budget, and using the good credit rating of the New Jersey Sports and Exposition authority to borrow for other, unsuccessful building schemes.

Today, the authority that runs the Meadowlands is in hock for $830 million, which it can't pay back. The state, facing its own cavernous budget deficits, has had to assume interest payments—about $100 million this year on bonds that still stretch for decades.

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The authority that runs the new Meadowlands stadium in New Jersey is $830 million in hock.

This tale of woe has become familiar in the world of municipal finance. Governments have loaded up on debt, stretched out repayment times, and used slick maneuvers to avoid constitutional borrowing limits. While the country's economic troubles have helped expose some of these practices, a sharp decline in tax revenues has prompted more abuse as politicians use long-term debt to kick short-term fiscal problems down the road.

It hasn't always been this way. Government debt has long fostered the expansion of the American republic, helping to build roads, bridges and water works to serve a growing population. But there have also been spectacular failures. In the mid-1970s, New York City almost defaulted on its debt after it used borrowing to fund an aggressive and ultimately unaffordable expansion of services (like the nation's most generous Medicaid program) inaugurated by Mayor John Lindsay. Gotham was bailed out by New York State and the federal government. But Cleveland, whose spending outpaced tax revenues thanks to borrowing, did default on $14 million in bonds in 1978.

The 1970s debt crises woke politicians up. Over the next 20 years the municipal fiscal picture improved, with debt rising only slightly. But memories of past busts have since faded, and outstanding debt has soared to $2.2 trillion today from $1.4 trillion in 2000. State and local borrowing as a percentage of the country's GDP has risen to an all-time high of 22% in 2010 from 15%, with projections that it will reach 24% by 2012.

Even more disconcerting is what the borrowing now often finances. One favorite scheme for muni debt is giant and risky development projects.

California's redevelopment regime is an object lesson. Starting in the 1950s, the state gave localities the right to create public agencies, funded by increases in property taxes, which can issue debt to finance redevelopment. A whopping 380 such entities now exist. They collect 10% of all property taxes—nearly $6 billion annually—and they have amassed $29 billion in debt never approved by voters for projects ranging from sports facilities to concert venues to retail malls, museums and convention centers.

More

Investors Looking Past Red Flags in Muni Market
WSJ.com/Sports | WSJ.com/NY
Critics, including taxpayer groups, say most such agency projects add little economic value. Sometimes the outcome is much worse. In 1999, Fresno conceived plans to revive its downtown area with various projects, including a baseball stadium for the minor-league Grizzlies, which it had lured from Phoenix. The city's redevelopment agency floated some $46 million in bonds to build the stadium. But the Grizzlies fizzled in their new home, demanded a break on rent, threatening to skip town and stick taxpayers with the entire $3.4 million annual bond payment on the facility. The team is now receiving $700,000 in annual subsidies to stay in the city.

Adding to the city's woes: Last June, another development project, the Fresno Metropolitan Museum, went bust, leaving the city's taxpayers on the hook for three-quarters of a million dollars in annual debt payments.

Cities now also use taxpayer-financed debt to engage in fierce bidding wars that benefit private enterprises. Charlotte, N.C., for instance, won the bidding for the new Nascar all of Fame with a $154 million offer, funded by a new hotel tax dedicated to servicing bonds for constructing the hall. But the venue employs only about 115 people—and an economic development study estimated the increased annual tourism from the venture won't even equal what a single Nascar race generates.

Why did politicians offer the deal? For the dubious and hard-to-quantify purpose of "branding" the city with a major attraction, according to the Charlotte Observer.

Voters have wised up to the failings of many grand, politically inspired projects, and when given the chance they've defeated new taxes and borrowing for them. But much state and local debt now exists in independent authorities whose borrowings are not subject to voter approvals. Some of these agencies have operated recklessly.

In 2000, Massachusetts moved to make the entity that runs Boston area mass transit, the Massachusetts Bay Transportation Authority, financially independent. As part of the plan the authority was supposed to gradually pay down some $5.6 billion in debt and use cash from operations to finance capital projects.

Instead, the agency deferred payments on its debt, put off capital projects, and borrowed more money, so that it now owes $8.5 billion. Today, the authority is paying a staggering $500 million yearly in debt service, forcing it to neglect maintenance, shelve expansion plans, and cut service. Even so, last year the agency needed a $160 million bailout from taxpayers to close a budget deficit.

Another weapon in the debt arsenal is the so-called pension-obligation bond. For two decades, governments have played a risky arbitrage game in which they issue bonds and then deposit the money in their pension funds to be invested in the stock market with the hope that the money will outperform the interest rate on the bonds. In a stock market that's been stagnant for years, pension bonds have become fiscally toxic. As the Center for State and Local Government Excellence noted in a report earlier this year, most pension bonds issued since 1992 have been money losers for states and cities, exacerbating severe underfunding of pension systems in places like New Jersey.

These abuses came to a head in the second half of 2008, when spooked investors were unwilling to bet on more municipal debt after several insurers who typically back these bonds exited the market. Then Washington stepped in with a new Build America Bond (BAB), allowing states and municipalities to issue them. Thanks to a federal subsidy, they carry attractive interest rates. Last year municipalities used BABs to rack up another $58 billion in debt.

Taxpayers are only slowly realizing that their states and municipalities face long-term obligations that will be increasingly hard to meet. Rick Bookstaber, a senior policy adviser to the Securities and Exchange Commission, recently warned that the muni market has all the characteristics of a crisis that might unfold with "a widespread cascade in defaults." If that painful scenario materializes, it will be because we have too long ignored how some politicians have become addicted to debt.

Mr. Malanga is a senior fellow at the Manhattan Institute and the author of "Shakedown: The Continuing Conspiracy Against the American Taxpayer," forthcoming from Ivan R. Dee. This op-ed is adapted from the forthcoming issue of City Journal.

http://online.wsj.com/article/SB10001424052748704269204575270802154485456.html

[Crafty_Dog]

http://www.marginalrevolution.com/
Not from the Onion: EPA Classifies Milk as Oil
Alex Tabarrok

New Environmental Protection Agency regulations treat spilled milk like oil,
requiring farmers to build extra storage tanks and form emergency spill
plans.

Local farming advocates says it’s ridiculous to regulate a liquid with a
small percentage of butter fat the same way as the now-infamous BP oil
spill.

“It’s just another, unnecessary over-regulation by the government just
lacking any common sense,” said Bill Robb, dairy educator for Michigan State
University Extension...

The EPA regulations state that “milk typically contains a percentage of
animal fat, which is a non-petroleum oil. Thus, containers storing milk are
subject to the Oil Spill Prevention, Control and Countermeasure Program rule
when they meet the applicability criteria..."

Seriously, this is
not<http://www.hollandsentinel.com/news/x1224670387/Outcry-from-farmers-over-spilled-milk-rule>
 from The Onion.

Do note that the issue is not even regulation of milk spills it's regulation
of milk under the *oil spill* prevention law.  Given the power of farmers,
my bet is that these laws will not go into effect; even so I do not expect a
milk gusher.

[Rarick]

NAIS  National Animal Identification System.  It is another overreaction by government in resoonse to the British Madcow disease problem.  A gogle will probably turn up plenty of information way more current than my own- which is a couple years out of date.

[Body-by-Guinness]

Homebuyer Tax Credit: Debt Financed Public Policy
By Emily Skarbek on Jun 28, 2010 in Budget and Tax Policy, Economics, Employment, Housing, Money and Banking, Taxation, corruption, mercantilism

As expected by many economists, the Homebuyer Tax Credit did little to nothing to encourage new home purchases and only shifted the purchase of new homes from May to April.  Howard Gleckman over at the Tax Policy Center reports on the waste and fraud afforded by deficit financed public policy of this sort, noting that the “total amount of permanent job creation from this timing change [was] pretty close to zero. Cost to taxpayers: $12.6 billion just through last February.”

Gleckman highlights several points from the Treasury Department’s report that would otherwise be comical if not so costly:

1,295 prisoners received $9.1 million in credits for houses they claimed to buy while incarcerated, 241 of which were serving life sentences at the time

67 different people claimed the tax break for the same house

More than 2,500 got almost $18 million for homes they bought before the credit was effective

A total of 14,132 people received erroneous credits, totaling $17.6 million

So here is what the federal government accomplished.  It succeeded in increasing home sales in April at the expense of those same home sales in May, injecting distortions into a relatively stable pattern of home sales.  In addition to these immediate distortions, arbitrary rule changes increased the uncertainty facing consumers which undermines economic recovery.  Maybe a few people purchased homes they otherwise wouldn’t, but that in itself is poor policy because it encourages individuals to take on more risk than they can afford.  The tax credit created no permanent jobs, but it did increase the expected value of cheating on your taxes, thereby incentivizing tax fraud.  All of this with a price tag of more than $12.6 billion, on which taxpayers will pay about 3% interest ($378 million) per year!

The real stench of the waste comes from the knowledge that this type of policy is systemic.  The complete inefficacy of the Homebuyer tax credit will not prevent similar schemes from emerging from a democratic process through which benefits are handed out while the costs are billed to future generations.

Governments do not bear the full costs of the policies they pass in legislative sessions.  Even the most myopic consumer, because he bears the costs of his actions, would consider postponing consumption if faced with a similar deal.  And if he tossed prudence aside and made the purchase anyway, he would be forced to curtail consumption on other margins to pay for his preferences.  For the individual, if it turns out he could not afford the costs of his decisions, he would eventually be forced to reconcile the reality of his resource constraints with his desires.  At present, no such mechanisms of constraint tie the hands of our policy makers.

http://www.independent.org/blog/?p=6767

[Crafty_Dog]

Generally I do not like Boener at all, but here he actually talks seriously on SS:

http://link.brightcove.com/services/player/bcpid1886260998?bctid=104611069001

[Body-by-Guinness]

Timothy P. Carney: On jobs, Obama giveth, and Obama taketh away
By: TIMOTHY P. CARNEY
Examiner Columnist
July 2, 2010

President Barack Obama speaks during a town hall meeting, Wednesday, June 30, 2010, in Racine, Wis. (AP Photo/M. Spencer Green) (ASSOCIATED PRESS)
"So those who talk about 'this is Big Government,' " Vice President Biden told a crowd at a General Electric factory in Kentucky, "this is Big Government giving a little bit of help to jump-start America to lead the world in the 21st century."

Biden was at GE's Appliance Park in Louisville, where a raft of government subsidies (and probably some gentle urging from the White House) has spurred the multinational conglomerate to begin manufacturing hybrid electric water heaters -- part of the "new foundation for a new economy," Biden said.

But later this month, 75 miles east, workers at GE's Kentucky Glass Plant get to see the other side of Big Government. About 175 workers there make glass, which is shipped to the Winchester Bulb Plant. Winchester Bulb is being shut down in September, and so the Lexington Glass Plant will be shuttered in late July.

GE explained in a press release last year, "A variety of energy regulations that establish lighting efficiency standards are being implemented in the U.S. and other countries, in some cases this year, and will soon make the familiar lighting products produced at the Winchester Plant obsolete."

These were "green" regulations that then-Sen. Obama supported in the 2007 energy bill -- as did GE. The company, you see, makes more profit off the more efficient compact fluorescent bulbs, because the company can charge more, but also because it makes those bulbs in China, with cheaper labor costs and fewer environmental regulations.

So, Obama and GE teamed up, pushed Big Government environmental regs and killed nearly 500 jobs in Lexington, Winchester, and another glass factory in Niles, Ohio.

But don't worry, Obama's got an answer for these workers, too. Obama's Labor Department this spring declared the plant an "adversely affected employer" under the 1974 Trade Act. It's true imports are replacing the bulbs Lexington workers used to make, but the culprit isn't free trade -- it's the light bulb law. And the imports are GE's compact fluorescents.

Back to Louisville, where Biden is touting the benefits of Big Government, the picture is far murkier. It's true Congress and the administration have opened the spout of corporate welfare for GE in order to keep jobs in Louisville: $24.8 million in "advanced manufacturing tax credits" from the stimulus, plus "p to $17 million in incentives from the state and metro government" according to a GE press release.

These water heater jobs are largely replacing lost refrigerator jobs, which brings us back to Big Government, although Obama bears no blame in this one. In July 2000, the U.S. Export-Import Bank, a government agency, subsidized GE's construction of a factory complex in Celaya, Mexico. That complex makes GE refrigerators -- fridges that used to be made in the United States.

To be fair, the Ex-Im subsidy exported the jobs making high-end fridges, while Appliance Park made low-end fridges. So Ex-Im helped kill GE jobs in Bloomington, Ind., rather than in Lexington.

So Big Government policies are killing GE jobs that might thrive in the free market, while creating GE jobs that never would survive in a free market. Obama is replacing unsubsidized jobs with subsidized jobs.

Biden calls this "a new economy." Obama calls it "remaking America." GE Chief Executive Officer Jeff Immelt calls this relationship "capitalism ... reset." Immelt wrote to shareholders days after Obama's inauguration, "The interaction between government and business will change forever. In a reset economy, the government will be a regulator; and also an industry policy champion, a financier, and a key partner."

This partnership of Big Business and Big Government has been good for the workers in Appliance Park. It's also helped GE shareholders and executives. Of course, Biden and the Democrats benefit by getting to take credit for new jobs.

But will Biden be in Lexington later this month, telling workers laid off because of environmental regulations that Big Government is for their own good?


Timothy P. Carney is The Washington Examiner's Lobbying Editor. His K Street column appears on Wednesdays.



Read more at the Washington Examiner: http://www.washingtonexaminer.com/opinion/columns/On-jobs_-Obama-giveth_-and-Obama-taketh-away-97603664.html#ixzz0sezEPEJu

http://www.washingtonexaminer.com/opinion/columns/On-jobs_-Obama-giveth_-and-Obama-taketh-away-97603664.html

[Crafty_Dog]

Tangent:

Not disagreeing at all with the essence of this piece-- govt regs here are absurd and are destroying jobs.  That said, the LED market is going to be really big-- not only because of economic regs, but more because of the "creative destruction" of the free market. 

CREE will be the leader in this market.  AIXG, recently with a cup and a handle pattern that broke wrong, still bears watching.  Disclaimer: Most of my CREE was bought at 22 but I am buying more at 60 and more yet at 57 should it go there.

End of tangent.

[DougMacG]

This could go under housing but the economic point is to point out another failed government spending program.  Artificial stimulus does not replace market fundamentals:

http://finance.yahoo.com/news/Newhome-sales-plunge-33-pct-apf-1718773153.html?x=0
New-home sales plunge 33 pct with tax credits gone
New-home sales drop to lowest level on record in May after federal homebuyer tax credits end

That was the slowest sales pace on records dating back to 1963. And it's the largest monthly drop on record. Sales have now sunk 78 percent from their peak in July 2005.

Analysts were startled by the depth of the sales drop.

[Crafty_Dog]

Yet the market is strongly up this morning.  
========

The Washington Post babbled again today about Obama inheriting a huge deficit from Bush. Amazingly enough,...... a lot of people swallow this nonsense. So once more, a short civics lesson.    

Budgets do not come from the White House. They come from Congress, and the party that controlled Congress since January 2007 is the Democratic Party. They controlled the budget process for FY 2008 and FY 2009, as well as FY 2010 and FY 2011. In that first year, they had to contend with George Bush, which caused them to compromise on spending, when Bush somewhat belatedly got tough on spending increases.
For FY 2009 though, Nancy Pelosi and Harry Reid bypassed George Bush entirely, passing continuing resolutions to keep government running until Barack Obama could take office. At that time, they passed a massive omnibus spending bill to complete the FY 2009 budgets.  

And where was Barack Obama during this time? He was a member of that very Congress that passed all of these massive spending bills, and he signed the omnibus bill as President to complete FY 2009. Let's remember what the deficits looked like during that period:    (below)

GRAPH

If the Democrats inherited any deficit, it was the FY 2007 deficit, the last of the Republican budgets.  That deficit was the lowest in five years, and the fourth straight decline in deficit spending. After that, Democrats in Congress took control of spending, and that includes Barack Obama, who voted for the budgets. If Obama inherited anything, he inherited it from himself.
In a nutshell, what Obama is saying is I inherited a deficit that I voted for and then I voted to expand that deficit four-fold since January 20th.  
(remember that the federal government’s fiscal year runs from October 1st of the preceding calendar year to September 30th of the actual calendar year.  So, FY 2007 ran from October 1, 2006 to September 30, 2007.  The budget “deemed passed” by the last House bill is for FY 2011.)

========
Not sure where to put this one, but here is as good a place as any:

“If you really want to see when an empire is getting vulnerable, the big giveaway is when the costs of servicing the debt exceed the cost of the defense budget,” Niall Ferguson said. Ferguson also predicts that will happen in the U.S. within the next six years because politicians lack urgency over the crisis to come.

[DougMacG]

"Yet the market is strongly up this morning.   huh "

That housing start headline was a couple of weeks old, sorry that didn't come through with my excerpting.  I guess the market is over the concern about worst housing since 1963...
------
"what Obama is (really) saying is I inherited a deficit that I voted for and then I voted to expand that deficit four-fold since January 20th."   - Exactly true.  That is the line they should run on - and be proud!
------
"Budgets do not come from the White House. They come from Congress"

Surrounded by liberals over the holiday at one point they all agreed that our deficits really came from Reagan.  Points already covered here but a) Reagan never had a Republican house, b) tax cuts caused revenues to double in the 1980s, c) the deficits came from spending over, above and ahead of the doubling, and d) the delay from congress to enact Reagan's tax cuts caused initial downturn, delaying the growth.
------

Back to Crafty's point about 2007, 2008, 2009, 2010, etc: 

The two largest tax revenue increase years in history in terms of dollars collected by the Treasury were the two years that ended with the election of the Pelosi-Obama congress.  If they had taken that opportunity to lock in the successful tax rates (remove expiration) and committed to spending within those means, the economic results that followed would be enormously different.  Unfortunately that was not the path chosen.

This current group of Democrats has been in charge since Jan. 2007 when the deficit headed upward.  They were also on board during all of the emergency measures passed during the Presidential transition.  They want power but don't seem to like taking responsibility.

[ccp]

Probably all on this board has seen or will see this calculation on the costs of illegals to state budgets.  Non taxpayers, illegals all have more rights than the rest of us who pay the taxes - particularly the middle class tax payers.  Dems will of course deny these numbers and they will also point out this beckons and can easily be reckoned for and by "comprehensive reform".  Surely if we make illegals suddenly pay taxes and fines these budget shortfalls will all disappear. (sarcasm implied).
I am infuriated by one of the reform remedies is to make illegals pay all back taxes.  If this is not ridiculous.  How do you make people who were paid under the table in cash back taxes?  Does anyone think they are going to declare all their money - any more than bar tenders or waitresses/waiters do?

http://www.foxnews.com/projects/pdf/Cost_Study_2010_Budget_Gaps_vs_Costs.pdf

[JDN]

As I have mentioned, I am against illegal immigration; I think to start, we need to seal the border and enforce the laws and implement severe penalties for employers who employ illegal immigrants.

That being said, I am not sure as CCP said, how "Non taxpayers, illegals all have more rights than the rest of us who pay the taxes - particularly the middle class tax payers."
What does "have more rights" mean?

Also, I went to the National Conference of State Legislatures Homepage.
While I could not find CCP's chart, I did find;

"A Summary of State Studies On Fiscal Impacts of Immigrants" where studies show immigrants do pay taxes and provide a positive cash flow in many states states.

http://www.ncsl.org/default.aspx?tabid=16867

[DougMacG]

I'm not CCP  but I can imagine that he has no right to free legal, free health care, free food stamps etc while many of them do.

[ccp]

http://www.foxnews.com/us/2010/07/02/immigration-costs-fair-amnesty-educations-costs-reform/

[ccp]

Click on link to "click here for Fair's executive summary".

I doubt very much that intake is greater than outlays.

"What does "have more rights" mean?"

A figure of speech to point out that 50% of the country footing the bill for the other half do not have rights to say no to this.  They simply continue to have their money confiscated.

"I am against illegal immigration; I think to start, we need to seal the border and enforce the laws and implement severe penalties for employers who employ illegal immigrants."

Yes we agree.



 

[JDN]

I'm not CCP  but I can imagine that he has no right to free legal, free health care, free food stamps etc while many of them do.

Actually, citizen CCP if eligible (below poverty level) WOULD qualify for free legal, free health care, free food stamps, etc. AND much more
than an illegal alien could ever possibly qualify for.

Click on link to "click here for Fair's executive summary".

I doubt very much that intake is greater than outlays.

Ahhh now I understand.  The FAIR report is a very biased report.  FAIR's stated purpose is not only to oppose illegal immigration but to curtail even legal immigration. In contrast, the National Conference of State Legislatures is a very IMPARTIAL body existing to serve Democrat and Republican State Legislatures.  While not true in all cases, most of their independent studies indicate that the intake IS greater than the outlays.  See my previous reference and others under their Home Page.

[G M]

So California is just a couple million illegal aliens away from financial success, right?

[JDN]

So California is just a couple million illegal aliens away from financial success, right?

What?  You noticed that the National Conference of State Legislatures "State Studies On Fiscal Impacts"
forgot to mention CA?   

That being said, CA, regardless of the illegal immigrant issue, seems perfectly capable of driving themselves
into bankruptcy by themselves.  American Citizens in CA seem to be in a state of denial.  And so is our legislature (another subject).
But, I think immigrants, legal or illegal, are a convenient scapegoat.

[G M]

Legal aliens pay taxes and like US citizens, face civil and criminal penalties for failing to do so. Illegal aliens skirt the system, while enjoying taxpayers funded goods.