AEI scholars' research: taxes vs. spending cuts

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Excerpts published at Examiner.com

An editorial grabbed my attention recently.  Titled, "The Right Way to Balance the Budget" the piece was published on page A13 of the Wall Street Journal on December 29th. 

Three scholars from the American Enterprise Institute (AEI) collaborated on the aforementioned article.  They examined the likelihood of success coming from three choices we have to address our deficits and the national debt.

The choices of course are: tax increases, spending cuts, or a combination of both.

AEI website: Andrew Biggs

AEI website: Kevin Hassett

Two PhD economists, Andrew Biggs (London School of Economics) and Kevin Hassett (University of Pennsylvania) and economic research analyst Matt Jensen, argue their case by building on the prior work of two Harvard economists: Albert Alesina and Silvia Ardagna.

Messrs. Biggs, Hassett and Jensen conclude the primary way to fix our fiscal predicament is singular in nature -- cut government spending.  Period.  (Although they'd hasten to add that the type of spending cuts implemented does matter).  According to their thesis, the notion of raising taxes, or even using a combination of tax raises and spending cuts -- will not work. 

The case for cutting federal (and state) government spending has been simple -- increasing revenues for the government without statutory spending restraints, will only result in continued spending because historically, government reverts to its spendthrift ways when it is not legally shackled to do otherwise.

Remember, we had a balanced federal budget as recently as 1998 and ran surpluses for a few years but Congress and the Executive branch of government failed to continue a fiscally responsible path, so here we are in 2010 facing a 14 Trillion dollar monster.

No wonder many Americans believe that neither Congress, or any President can be trusted to remain fiscally responsible.  What about other industrialized, debt-laden countries?  Here's the verdict from the AEI authors who analyzed the history of debt consolidations attempted in 21 nations over the course of 37 years...

The authors assert, "...the typical unsuccessful consolidation relied on 53% tax increases and 47% spending cuts."  

Some observers predict that this is precisely the sort of compromise (i.e. arriving at a closely weighted mix of tax increases and spending cuts) which will be hatched by pols in Washington trying to tackle our own debt problem (or appear as though they are).

Biggs-Hassett-Jensen conclude that nations achieve fiscal balance only after applying austerity measures which include a minimum 85% reduction in spending cuts.  In other words, no more than 15% of the total solution, comes from tax increases.  They also hold that nations achieve these cuts primarily by responsible reduction of social transfer payments.

Surprised?  We have to significantly reduce spending now to avoid much more devastating pain later. Nations don't tax their way to solvency.

Public Notice - the bankrupting of America

Public Notice is "an independent non-profit dedicated to providing facts and insight on the economy and how government policy affects Americans’ financial well-being."  

Here's a slide from them (with holiday flair) called "The 12 Days of Government Spending"

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A post-election reply to Mortimer and Stanley

Wikipedia

Here are excerpts from a reply to two friends - disguised with fake names - called Mortimer and Stanley.   

These guys fall at opposite ends of the political spectrum, but their exchanges are respectful.  The three of us have been "sparring" since our teens. 

Some text changed, but it is close to the original version when I responded to their post-election e-mail dual of 11/3/2010...

"Dear Mortimer and Stanley,

Thanks for your sentiments about today's political landscape and all that ails us.  I agree with both of you - to an extent. Ah, the advantage of going last...

I'll start with Stanley and his Mortimer rebuke - "Greed and avarice are as old as the Bible, Morty. And the Democrats are experts on that."  

Stanley, I assume you mean Dems are experts on greed, not the Bible. What's missing in your criticism, is the role of of the players who make policies, appropriations, budgets and tax incentives that perpetuate our fiscal hell. 

Take, the housing bubble, which was enabled by government policies (sorry Morty, mainly Dems and the Fed in my view) when millions of Americans "bought" houses that they could not afford.  That experience is the perfect example of why we are broke as a nation and as a people. We ate too much, drank too much, bought too much, saved too little and then the bill came due. 

Yes, we have a consumer-based economy Morty and it's a giant Petri dish of self indulgence.  An economy so dependent upon domestic consumption strikes me as doomed as ancient Rome. Our sense of liberty gave way to gluttony and we confuse the two nouns. 

These election outcomes?  Yes the people have spoken Stanley, but will a new majority in power practice sound fiscal principles by telling voters what many of them don't want to hear?  Will tax cuts be matched by corresponding spending cuts?  We'll see what the new Congress tries in January, but I don't believe we can tax our way out of the hole, or depend upon government to be a good steward of the peoples'' wealth.  Nor can the Fed save us by printing cash. What's the pain remedy?  First we must take some pain.  

Live within our means, keep the dollar strong and responsibly scale back entitlement programs.  Social Security, Medicare, a bevy of state and other federal programs, public sector defined benefit retirement plans, as well as Cadillac health plans are all part of the same problem.  Some austerity measures can kick in now, not in 2025.

As for Mortimer's remorse regarding Mr. Feingold's election fate, my view on how Russ Feingold devolved as a public servant would take too much space, but here's an example...

You called him a Maverick, Morty.  Sometimes yes, but not always when it mattered.  His lonevote against the Patriot Act was pointless grandstanding.  He acted as though he had a monopoly on wisdom and constitutional purity that somehow eluded 98% of the United States Senate (one senator didn't vote on the measure).

Libertarians later rebelled against this Maverick after he voted for his party's stimulus package and Obamacare.  All this and years of inactive legislative performance sunk his boat, Morty.  He fell in love with being a Senator and made an ill-timed dart to the entitlement-embracing, Left. It was too late for him to retreat to the Center. 

Your devoted friend,

John

A fiscal adult -- David M. Walker

Consider the national debt which as a percentage of gross domestic product is at its highest levels since World War Two.  Click here for a real-time depiction of our debt and consider the faith that the rest of the industrialized world has in the United States as a beacon of financial stability. 

What happens when that changes?  Why are some observers more worried about climate change than global economic calamity that is looming in our midst?  

We need more leaders like Mr. David M. Walker.  This post is dedicated to his mission.  What we need in Congress and the White House now are accountants more than crusaders. Mr. Walker, by the way, was an Arthur Andersen partner years ago. 

We need people who can balance a budget and say "no" and be proud to say no because it is right and just.  The only anecdote for a nation addicted to debt are politicians with the fortitude to say, "You'll be getting less now and you'll wait longer to receive it and here's why...."

Mr. Walker is willing to accept more tax increases to offset spending cuts than some of us would like -- as opposed to demanding proportionally-larger spending cuts.  Yet, I still admire his zeal to reclaim a fiscally-sane America. I invite you to learn more about him by clicking on this Wiki...

David Walker: Wikipedia

Mr. Barrett's omission

Yesterday morning I listened to a radio program that sounded like a Town Hall celebration of Tom Barrett's Gubernatorial bid.  It was broadcast live from the University of Wisconsin - Milwaukee. 

The thirty minute portion I heard included Mr. Barrett's diatribe against Wisconsin's $2.7B structural deficit and his plan to end it which includes tax increases on "the wealthy."  Here's what bothers me...

Not once in the first thirty minutes of Mr. Barrett's monologue did I hear a single reference to a spending cut. If I missed such a bombshell in the remaining minutes of the program, please let me know.

Kapenga for Wisconsin's 33rd Assembly District

I'm supporting Chris Kapenga for this seat because we need a hard-nosed fiscal conservative now more than ever.  If only we had more accountants in the state legislature. Here's something I found on Mr. Kapenga's website written by William J. H. Boetcker

•You cannot bring about prosperity by discouraging thrift.

•You cannot strengthen the weak by weakening the strong.

•You cannot help little men by tearing down the big men.

•You cannot lift the wage earner by pulling down the wage payer.

•You cannot help the poor by destroying the rich.

•You cannot establish sound security on borrowed money.

•You cannot further the brotherhood of man by inciting class hatred.

•You cannot keep out of trouble by spending more than you earn.

•You cannot build character and courage by destroying men's initiative and independence.

•And you cannot help men by doing for them what they can and should do for themselves.

Mark Stoiber R.I.P.

One week ago today, I was shocked and saddened to read the obituary of Mark Stoiber.  Mark Stoiber's cause of death was a Pulmonary Embolism. 

Mr. Stoiber was Co-Founder and President of The Sleep Wellness Institute, a successful Milwaukee-area operation that helps people with sleep apnea.  He was also a proud husband, father of three children and a man of quiet confidence, patience and intelligence. Moreover, Mark Stoiber cared about others. 

It might be the most cruel paradox in life--someone like Mark Stoiber is taken ten days before his 48th birthday, while countless bastards live peaceably into their nineties.  

Class struggles, debt and happiness

Credit-related causes of the Great Recession included: lax underwriting standards (abetted by government programs and the GSEs), overuse of ARMs (because the borrower couldn't qualify for a fixed rate note), too much cash-out financing and artificially low interest rates.  Yet, the Wall Street factor (i.e. securitization of those obligations and excessive risk-taking) always seems to dominate the debate even though:

1) the Wall Street factor already gets most of the attention in the press,
2) regulatory reform for banks is a foregone conclusion,
3) Wall Street's culpability came during and after credit issuance to subpar borrowers, not beforehand. 

It's the third point that is lost on some who look only at the Wall Street role in this disaster.  The destruction could only have been possible with easy credit extended to in-over-their-heads borrowers, like our federal government that operates the same way -- in the red. 

Even today, many journalists treat sympathetically those homeowners who walk away from their mortgages when the principal amount owed, exceeds the current market value of a property. That's disturbing.  (Experts say, that between 20 and 25 percent of all outstanding mortgages in this country are under water.)

Author User: Brendel at en.wikipedia.org

Excessive consumer debt and government debt affect the rest of us who keep our promises and pay our obligations.  Yet some debtors and their advocates continue to ply us with excuses.  I have given you examples, but here's another one, which I'll call the Jon Stewart excuse:  You can't fault them because they were just "optimistic" about the future.  (If you're an optimistic borrower with bad credit and thus in need of an empathetic co-signer; please seek out Mr. Stewart.)  I'm genuinely sympathetic to people who suffered tremendous misfortune that led their financial problems.  Examples may include catastrophic medical issues, sudden job loss or sudden death of a primary wage maker.  Their pain was not self-induced.  My belief, is that people in those unfortunate circumstances constitute a smaller percentage of the people defaulting on their obligations, than what's portrayed by media figures. 

A new book by Arthur C. Brooks called, The Battle: How the Fight Between Free Enterprise and Big Government will Shape America's Future may add some perspective.  The book is reviewed by Matthew Continetti in the June 21 issue of National Review.  Mr. Continetti, an associate editor at The Weekly Standard in his article titled, "The Happiness of Pursuit" notes that Dr. Brooks thinks 30% of the American public believes "...free enterprise is unfair and the government ought to do more to ensure equal outcomes" and that wealth redistribution is a justifiable anecdote.  

Continetti notes that conservatives believe "redistribution is inefficient, or unfair to those from whom the money is taken, or a recipe for unlimited government".  He notes that Arthur Brooks has additional reasoning why redistribution fails in practice.  Based upon what Continetti calls an "abundance of empirical data" Brooks believes feelings of low self-worth, not inequality, actually make people unhappy and giving a man a fish not only won't help him fish, it won't help him feel good about himself either.  Brooks believes that earned success which he defines as, "the ability to create value honestly" is a proven prescription for happiness.

According to Brooks, 30% of Americans believe that wealth redistribution is justified.  That figure stuns me.  Apparently 30% of us do not realize (or care) that continuing down this slope could have apocalyptic repercussions for our current way of life -- a way of life that enabled America to flourish in the first place.  Perhaps despair and envy are the birth parents of Socialist states.

Blessed again!

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Another Progressive I've known since childhood read my last post - I'll call him "Cameron" and he takes issue with my claim, "Wealth re-distribution is the Excalibur sword of most Progressives."  Cameron feels redistribution is only reconciliation for 30 to 40 years of growing disparity between the wealthy and the less fortunate. Cameron summed it up thus: 

"So John, I have a question for everyone out there that talks about this so called wealth redistribution. Based upon the facts I have cited, why was it okay for that wealth redistribution to go on during the 80's, 90's and into the 2000's, but now it's not when it goes the other way around?"

"Cameron,

Thanks for taking the time to read my last post and share your views.  I appreciate it.

Regarding CEO pay at the S&P 500; I don't feel it's a useful benchmark for a public policy discussion, because by definition, you are citing 500 companies to represent a national employment landscape that comprises over six million private employer companies.  That's hardly a reasonable sample, but let's talk about it anyway. 

(On a side note, I hear large public company CEO criticism often and find it interesting that few care about celebrity compensation like that paid to Oprah Winfrey or Alex Rodriguez - even though their pay dwarfs the average CEO paycheck and they don't create many jobs). 

Vastly undeserved executive compensation occurs, but it's really a matter for shareholders to deal with, isn't it?  After all, they own the company.  They can sell their shares, vote out the board, start a proxy fight, file lawsuits and do any number of things - and many do. 

Similar to any employee that just can't stand his/her Boss; vote with your feet, sue the bastard, etc. but let's not make policy for 300+ million people based upon a handful of public company executives, lax boards, or apathetic stockholders.

Two other items affecting prosperity are: housing and taxes.

More of our discretionary dollar goes to housing than anywhere else.  We were not raised in wealthy homesteads, Cam.  Our parents worked hard, but lived modestly by today's standards.  Perhaps a 1500 square foot bungalow on a postage stamp-sized lot, with two bedrooms, maybe three.  Can we agree on this description?  How do we live today?  More importantly, what has happened to American home sizes over this period you are pointing to? 

Researcher Moya Mason notes in a recent paper that while family sizes have decreased almost 25% over the last 30 years, the size of new houses actually increased over 50%.  This is consistent with my view of Americans in general.  Few of us are able to consume too little and the living standard has improved among all groups, since our childhood.

America has grown primarily through free markets, hard work and innovation - not government intervention.  I recognize this is traditional conservative orthodoxy, but it goes to the core of our disagreement.  You sound as though lower and middle third America have actually been exploited by the "top third."  How so, Cameron?  Think about income taxes (we can talk about taxes on property and consumption another day).

A column in the Wall Street Journal (April 14, 2010, `Spreading The Wealth Isn't Fair') by Arthur C. Brooks of the American Enterprise Institute alerts readers that last year, 38% of all Americans were expected to have zero tax liability.  They paid nothing in federal income taxes.  Under Mr. Obama's budget and other expected tax changes, this group of Americans that pay zip to federal coffers, is expected to grow to 46% in 2011 while the federal government continues to expand. 

Dr. Brooks also notes that according to the nonpartisan Tax Foundation, a full 60% of all Americans "consume more in government services than they pay in taxes."  And what about that top 5% of Americans earning more than the other 95%? These are the folks everyone loves to hate.  Well, they pay over half of all federal income taxes paid.  Yes, 5% of the tax paying public, pays over 50% of all federal income tax collected.

I understand the worry over a concentration of assets, but whether we advocate for the top third, bottom third, or middle third of America - we cannot tax our way to prosperity, or make transfer payments to reverse perceived inequities, unless we want to unwind the very system that facilitated America's rise. 

I'm going to close with part of that Arthur Brooks column:

"...our system is the envy of the world and should be a source of pride.  Generation after generation, it has rewarded hard work and good values, education and street smarts.  It has offered the world's most disadvantaged not government redistribution but a chance to earn their success."   

I can't improve on that statement, so I'll leave it there. 

Cam, I know we haven't resolved our debate, but I am excited about your visit this summer after not having seen you for years.  Please let me know your expected day(s) in town, so we can block the time and I can make the sauce.

Best,

John"

Blessed with friends on the other side

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This post contains excerpts from an April 10 e-mail response to a dear friend of mine (edited for emphasis and anonymity). 

“Mortimer,

I’ll say hello to the guys for you and I’ll be thinking about you this evening.

As for politics, yes, we tend to gravitate toward sources that share our views.  However, I also read the New York Times Op-ed pages and on occasion watch MSNBC.  I suppose you watch Fox on occasion and I know you read the WSJ – so good for both of us.  We try.  The state-sponsored education you cite that we both benefited from, came largely from our parents' sweat equity – translated into tax dollars – that funded the University of Wisconsin system. True, my friend. But, I'm not arguing for zero taxation, or zero government involvement, in our lives just less of each. 

When Progressives argue in favor of entitlement programs, they'll sometimes cite Social Security (under-funded as it is) to bolster their case. They'll ask, “Well do you think Social Security is a Socialist program too?”  

The bone of contention, gets down to whom you trust with your money.  Progressives wish to give more of it to government because they believe it helps society. Others say....

"I don’t trust you because of your history.  Not only do you choke economic growth with your tax and spending policies, but your programs fail and are fraught with waste, fraud and abuse."

Of the millions of foreclosures we've seen during The Great Recession, I believe the majority were assumed by reckless borrowers or cheats who had no business assuming those loans.  They lost “their” homes, tanked the market and made the climate more difficult for honest Americans who now - despite their best intentions - remain shut out of the market, perhaps for years.

A primary cause of our trouble was state-sanctioned, predatory borrowing that the Left now calls predatory lending, because their munificent homeownership scheme blew up. 

Wealth redistribution is the Excalibur sword of most Progressives, Mortimer.  Howard Dean admitted as much recently.  Their vision is not what made this country great and what’s more, all the anger you see out there coming from good people – will not fade away.

I deplore violence and lawlessness and I will not partake in it, but I fear that with the warmer weather and a relentless Progressive in the White House, you’ll see things boil over this summer.  I hope I am wrong, but things are going to get uglier because many see their way of life at stake - and a revolution of sorts, is already underway.  How many Americans can take another 2+ years of “hope and change?”   Is there not palpable anger and frustration is among the Right and the Center?  It's not just the GOP or John Kerry critics -- it's a cross section of Americana.  One last item Morty…

I believe most Progressives have a heart as warm as mine and I include you among them. I simply view most Progressives as honestly misguided on these matters - and you see me the same way - I get it.  It's a draw. 

We also agree there are Wing Nuts on both sides.  However, if life comes down to helping your fellow man, consider that Conservatives believe government is simply not the way to salvation and its very nature is to give what it does not have, in order to stay in power.  Fannie, Freddie, free Fed money, and the like, were all government conceived, packaged and delivered.  They just needed help from a few reckless Wall Street titans to package and insure the mess, in order to bring down the whole temple. 

But back to helping the less fortunate.  Consider that as a percentage of income, many observers believe Republicans give a larger percentage of their incomes to charity than Democrats.  If you doubt the assertion, check out this link…  I have not studied the question, but I think the generousity debate is another draw, Mort.

Either way, too many Dems pretend that they belong to the party of compassion and that the GOP doesn't care.  That stifles productive debate, so thanks for not playing that nauseating card!

Gotta run...

Your devoted friend,

John“

Mark Neumann's time for a new goal

By WisPolitics.com - Mark Neumann 

Here's to Mark Neumann, a fiscal conservative and effective legislator with the best interests of the people in mind.  He's the kind of candidate we need to help take back our state from what Ayn Rand called, "the looters." The problem is that the Governor's job won't be his. Mr. Neumann's could instead challenge Russ Feingold for a Senate seat (that could have become his in 1998) and abandon his Gubernatorial ambitions because....

• The Walker forces are too strong, better funded and possesses support of the party leadership and the GOP rank and file.
• Mr. Walker has a very real chance of beating Mr. Barrett - you could cast more momentum his way, by throwing your support to the Walker campaign.
• Neumann is the only credible candidate with Washington experience and a chance to beat Feingold.  
• He lost to Mr. Feingold by a slim margin last time. Feingold and other stalwarts in his party, are more vulnerable today.  

So, Mr. Neumann, please be a pragmatist.  You will not win the September primary anyway. There is still time to displace Mr. Feingold, but you must change horses....soon.

Kanjorski & Armey - a worthy dual.

This morning, while watching CNBC's Squawk Box, I was struck by a welcome reminder that civility and reasoned political discourse still exist.

Democratic Congressman Paul Kanjorski and former Republican House Majority Leader Dick Armey debated.  The issues and the exchanges mattered less to me than the tone and outcome of the segment. 

Neither man gave much ground, but neither fell prey to stupid sniping or demagogic interruptions while the other man spoke.  Honest officials can put forth opposing views without acting like vicious morons.

I don't know if it is because Mr. Armey and Mr. Kanjorski were reared in an earlier era, or if actual maturity comes to one later in life.  Joe Wilson rants and Keith Olbermann types do us no good.  

Torinus & Geanakoplos

Today, I came upon a message I sent August 16, 2009 to Milwaukee columnist and entrepreneur, John Torinus.  Mr. Torinus has some terrific ideas about creating fiscal health and opportunity here in the Badger state.  However, I was piqued by something in his column last summer and I wrote to him:

"John,

While I agree with 95% of the column, the notion – apparently advanced by John Geanakoplos -- that the government ought to force “a write-down of principal on sub-prime home loans that are under water” is wrong. 

I recall hearing one of your presentations on healthcare and the insurance plans of yesteryear which offered no incentive to control costs (as opposed to high deductible plans many of us now have). You likened the situation to a 10 cent Martini night that you observed as a young Marine. Such arrangements, you reminded the audience, just might lead one to be “over-served.”

Well that’s precisely, the story of most sub-prime borrowers – they were over-served and just as no one forced you to drain too many martinis, no lender could force someone to buy more home than they could afford.

Of course, the rest of us who behave responsibly with our health and wealth, pay the price for those who don’t, but that’s fodder for another column.

To keep sub-prime borrowers in "their" homes - the ones with jobs anyway who may just need a little time - there are better options like converting them to renter status, interest only payment extensions, etc. But write down the principle? No. Doing so abets irresponsible behavior instead of suppressing it.

Tougher mortgage underwriting standards have already taken hold because far too many people, left to their own devices, will drink from the trough until they burst."

Noonan, Isaacson and Caro on Zakaria's program

It was quite a panel assembled today on Fareed Zakaria's Sunday cable program.  Mr. Zakaria typically focuses his program on foreign affairs, but today he turned his sights to the domestic political challenges of the Obama administration.

It was sort of a "Where did he go wrong and what should he do now?" theme addressed by three fine writers - Walter Isaacson, Peggy Noonan and Robert Caro. 

Mr. Caro asserted, "If Obama backs away from healthcare, he will have lost his ideals." 

On a personal note, I am a huge fan of Mr. Caro's work on LBJ.  (I wish he'd complete his book on the final years of Johnson's life soon.)  However, some might take exception with his reference today, to the "fifty million" Americans without health insurance, for two reasons. 

First, many tend to use interchangeably, the notion of "care and insurance" as Mr. Caro did, which obscures the debate. 

Second, the "fifty million" figure needs to be deconstructed and put it into perspective for a nation of 308 million people.  When one looks at "the number" which appears to be closer to 45 million than 50 million, and subtracts from it, the number of people falling under one of the following conditions:

• eligible for free or heavily subsidized health insurance, but won't take it
• receives free or subsidized health insurance but reports to census takers they have no insurance
• can afford traditional (non-subsidized) insurance, but chooses not to buy it
• are not American citizens

. . . then one ought to reduce the 45 (or 50) million number, by at least 30 million people according to an analysis by former White House economic adviser, Keith Hennessey.  What remains, is the number of uninsured we have a duty to help, but that number approaches 15 million people, not 50 million people.

Perhaps we need not nationalize 1/6th of our economy against the wishes of most Americans to produce a policy that does nothing to lower costs.  Market reforms, tort reforms, increased patient responsibility and other measures could lower costs and improve the system.

Walter Isaacson (author of a critical but engrossing biography of Henry Kissinger) may have made the most practical prescription on today's program when he concluded, "The country is best governed and transformed from the center."

In time we'll know if Mr. Obama will heed this advice and succeed, or choose to double down on the current course.

Milwaukee's fiscal woes won't be solved by Dems' press releases

Published 1.15.2010 at Examiner.com

The primary reason I decided to support Scott Walker's bid for Governor last year is that he is one of the few state pols who "gets it." The "it" in this case -- is fiscal sanity.

I make no claim of neutrality, so when a Web article from the state Democratic machine came into view yesterday, I was naturally skeptical. The title alone was hair-raising, "Inmates Released, Public Safety Plans Cut: "Patchwork" Walker's Latest Hypocrisy Exposed by Political Ally"

The "Political Ally" referred to is Milwaukee County Sheriff, David A. Clarke Jr. -- another leader who also understands how to operate within his means.  My word, I wondered, what had County Executive Scott Walker done? The piece issued by the Democratic Party of Wisconsin, references, "...a scathing letter to Walker" from Sheriff Clarke.

In the first place, the Sheriff's letter was addressed to several County supervisors and Mr. Walker, not solely to Mr. Walker, as the article implies.

Secondly, when the sum and substance of this piece didn't square with my own understanding of Mr. Walker's views, I looked to his Communications Director for Mr. Walker's official positions, which were described thus:

"The budget Scott presented for 2010 DID NOT include furlough days for Sheriff's deputies."

An amendment passed by the members of the County Board applied floating furlough days to everyone and it could not be line-item vetoed. The County Board are the ones that put this into Scott's budget.  

Now, the Sheriff has a series of actions he wants to take as an alternative to furlough days for deputies. Scott supports an alternative and has been working with his office for past few weeks.

Scott Walker WILL NOT and DOES NOT support the early release of inmates as part of an alternative plan. In fact, he would veto such a plan if approved by the County Board.

Instead, Scott will continue to work with the Sheriff's office to avoid the release of inmates - as well as furlough days"

Finally, I contacted Sheriff Clarke's office seeking comment on the "scathing" letter as described in the article in question, and the Sheriff responded through a representative that Sheriff Clarke,

“...is not going to politicize his budget and these conversations should definitely take place between himself, the County Board and the County Executive.”

Perhaps someone forgot to tell the Dems.

Rick Santelli is right

Rick Santelli, CNBC

This morning I watched CNBC's Rick Santelli talking from the Chicago Board Of Trade.  His so-called, "Santelli Rant" has been watched on YouTube over a million times and his sentiments today, once again, represent the views of many Americans who believe in living within one's means. It's how we were raised -- but we lack Mr. Santelli's microphone.

Rick Santelli was in fine form this morning while debating Steve Liesman.  The topic was banking reform and Mr. Santelli made a case for an elegantly simple cure -- raise the banks' capital requirements. 

Another CNBC commentator astutely chimed in that this is the same premium banks require when a homeowner has a marginal credit history -- the bank looks for more cash in the deal -- a bigger down payment to compensate for the risk of default.

Why can't we use the same mechanism to minimize chances of another banking meltdown?  Do we need new federal agencies, reams of new regulations, congressional hearings, class warfare speeches and on and on?  I realize that raising the amount of capital that banks must hold affects their profitability, but maybe it's a reasonable way to manage systemic risk.

S/he who frames the healthcare debate...wins.

When the topic of healthcare reform took center stage this summer, I felt that "healthcare reform" had suddenly become code for "let's change health insurance." 

I was certain that I was missing something like the "3.5M jobs saved or created" metric I wrote about last March.  I thought I was the only one disturbed by how stimulus programs would be "measured" and conveyed by this administration. 

Surgeons, Wikipedia

In my opinion, the healthcare reform yardstick that counts, is the one that actually lowers healthcare costs for the greatest number of patients.  But that isn't how we frame the national debate and measure success or failure.  Is an expanded insurance pool run by the government going to achieve this goal?  I don't know, but uniformly lowering the cost of that pill, that surgery, that MRI, whatever it is -- would benefit us all.  I do not see how the House bill will lower health care costs.  

President Obama, Ms. Pelosi, Mr. Reid, etc. have successfully shifted the narrative from lowering healthcare costs, to demonizing the health insurance industry and expanding government control.  All this delights their base.  If their bill passes, everyone will be 'covered' by virtue of a new mechanism.  That new mechanism is government-mandated, taxpayer funded, healthcare which is not reform at all -- unless one frames the debate that way.

When will we reward the savers?

This week, the author of a Barron's cover story posits that it's time for the Fed to raise interest rates.  The macro debate for and against doing so, I'll leave for economists.  The argument in favor of raising rates, however, has some advocates at Barron's.  The Barron's article titled, "C'mon Ben!" is accompanied by a reminder that keeping rates so low "hurts savers." 

The policy notion of incenting savers to save more, seems to fall on deaf ears.  The Fed keeps the cheap money flowing, but they also hamper returns from savings accounts, money markets, CDs, etc. to remain at paltry levels.  

When will we reward citizens who save and invest conservatively, instead of the masses who borrow mainly to consume?

freepik image

Of nuts and acorns

Contrast two recent cases that received national media focus: the arrest of Harvard professor Henry Louis Gates Jr. and video tape of ACORN employees giving advice to individuals posing as operators of an under-aged prostitution business.

In the first case, the President declares that law enforcement officers in the Gates case, "acted stupidly" then he hosts an awkward reconciliation meeting over beers on the White House lawn. 

In the second case, the President demurs when asked to share his opinion about the ACORN workers and Congressional action to stop federal funding for their organization. President Obama did say that actions he viewed on the ACORN videotape were "inappropriate" and deserved to be investigated, but then he added...

"This is not the biggest issue facing the country. It is not something I'm paying a lot of attention to."

Nor should he have paid much attention to a civil disturbance involving one man in Cambridge, Massachusetts...but he did.  Mr. Gates, for his part, could have had the last laugh and made buffoons of the Cambridge police, by maintaining his cool. Instead while being questioned, he ranted as though he had been robbed of his human dignity and got himself arrested.  

Back to the President.  At the time he uttered the "acted stupidly" remark, I thought he was reacting as a man who had felt the sting of racism conjured by painful episodes from his own past.

Let's say hypothetically that 25 years ago, citizen Barack Obama attracted the suspicions of some dim-witted alarmist for no other reason than Mr. Obama was black and in the wrong place at the wrong time. It happens and I bet it hurts like hell and leaves one justifiably angry.  

But candidate Obama ran his campaign as the "post-racial" choice.  People who've grown weary of bitter and endless racial debates are attracted to a person of color that espouses a color-blind agenda. However, acting with complete indifference to race is much easier said than done.  

The President would have been well-advised to say as little about the Gates matter as he said about ACORN.  To be fair, Mr. Obama wisely distanced himself from the race mongering recently exhibited by former President Jimmy Carter.  Sometimes, even racism -- or reverse racism -- is colorblind.

Tea party rocks Milwaukee's lake front



John Maddente photo

Ever attend a tea party?

They don't serve tea at this party, but visitors do receive a generous helping of speeches and opportunities to express themselves.

Yesterday on a sunny afternoon at Milwaukee's Veterans Park, thousands of attendees were treated to a litany of views on issues including our federal and state tax climate and sweeping health care and environmental proposals.

This was an audience that is passionate about their country and freedoms, but also well behaved and well informed. Nationally-acclaimed author Michelle Malkin roused the crowd with criticisms of left-leaning figures including Carol Browner, Director of the White House Office of Energy and Climate Change Policy whom Malkin referred to as a "Beltway Swamp Creature" (ouch), Attorney General Eric Holder "Chief Endangerment Officer" and "union thugs" (in particular she cited Andy Stern and the S.E.I.U.).

A number of speeches sounded out a call to action. "Joe the Plumber" reminded the crowd of a Ben Franklin maxim -- well done is better than well said.

Midwestern watchdog reporting still works

Here are two current examples of how the Fourth Estate still serves the public interest.

1.  Locally, in my home town of Milwaukee, readers were shocked and angry to learn how their tax dollars are squandered (again) by a $350 million state child care program that is routinely plundered by a number of providers, including one -- who as a result of Journal Sentinel investigations -- turned herself in to state authorities.  Fine reporting indeed, by Ms. Raquel Rutledge and others at the Journal Sentinel. Read more about the scams they uncovered at www.jsonline.com/cashinginonkids

2.  Ninety miles south of me, another series by the Chicago Tribune exposes corrupt admission practices at the University of Illinois, as well as other cheats and cronyism throughout the Land of Lincoln. Here's the spot to read, "State of Corruption".

Bloggers did not break these stories. I'm not sure how we'd learn about these issues if old fashioned, gumshoe reporting didn't occur.

Julie & Julia reviewed

Julie & Julia is a new film starring Meryl Streep and Amy Adams. I watched the film yesterday alongside sixty or so other theater goers.

For anyone who loves Julia Child (as I do) the film is worth watching. Meryl Streep's depiction of the late great gourmand, is stunningly good. It's easy to replicate the oft parodied high-pitch voice, but Ms. Streep's cadence and accent on choice syllables is so faithful to the real deal, it's almost unsettling. 

The screen writer of this movie is Nora Ephron whose style I didn't care for before the film.  Before seeing the film, I listened to two separate Nora Ephron interviews. Her tone and lack of enthusiasm during both interviews left me with the distinct impression she felt she was doing us a favor by sitting for them. At least, that's how she sounded. However, while viewing the film yesterday I realized something else -- she takes cheap shots.

Example: In this movie, Amy Adams plays a character that works in a call center to help 911 survivors and takes a "sick" day to cook a Julia Child dish.  She then blogs about the experience to the dismay of her boss who calls her into his office to beseech her for writing the post. He ends his rant by saying, "a Republican would have fired you."

In my case, the theater audience was silent after hearing that little gem.  (Perhaps they cheered on the coasts). Could Ms. Ephron have had any purpose other than to slam Republicans or Conservatives? Doing so is hardly unusual for Hollywood and inconsistent with the memory of Julia Child who was publicly apolitical. 

Finally, there is the weak ending to the film that leaves one wondering if Ms. Ephron was tired and decided to finish the script too quickly, or whether something else crippled her imagination before limping over the writer's finish line.

All this notwithstanding, the film succeeds on the strength of Meryl Streep's affectionate performance and the unique legacy of the woman she portrayed. On a five star scale, this blogger gives Julie & Julia three and 1/2 stars and a pinch of salt for the screen writer.

The Atlantic considers The Economist

public domain

Check out this article by Michael Hirschorn in The Atlantic (July/August 2009) in which Mr. Hirschorn examines how a printed magazine like The Economist can thrive, while other printed weeklies it competes with -- notably Newsweek and Time -- are languishing. 

Print publishing success in the digital age may lay in what Mr. Hirschorn describes as "razor-sharp clarity and definition" and owning a particular niche instead of trying to replicate one owned elsewhere. In the case of The Economist, Mr. Hirschorn asserts that the magazine "...canvasses the globe with an assurance that no one else can match" and "...prides itself on cleverly distilling the world into a reasonably compact survey.'' 

Mr. Hirschorn, a contributing editor at The Atlantic, even made a frank admission that his own magazine, "...has never delivered impressive profit margins."  Impressively profitable or not, his piece is worthwhile for anyone interested in the devolution of paper-based, weekly news products and the remaning ones that are still prospering.

Rather than add a new Palin post...

I'll simply provide a link to a CBS poll, taken this month, that reports an astonishing share -- 51% -- of the GOP views Ms. Palin as unqualified to be an effective President.  I guess I posted too early.  Here's the link, if you care to review more evidence to support my suspicions about Ms. Palin as a VP choice.

Nearly forty percent of GOP doubts Palin's abilities

Glad I'm not alone. A recently-released ABC News/Washington Post poll with a sampling error of plus or minus 3% shows that not only is Ms. Palin's support waning across the political spectrum, it is also slipping among Republicans as a whole.

Like the 83% of Republicans surveyed, I believe that Ms. Palin shares my values. However, almost four out of ten Republicans (and 57% of Americans overall) also say we doubt her ability to "understand complex issues." Which is another way to say what I first wrote last November - that, as much as we like what she stands for, she lacks credentials for national office.

Sarah Palin, Wikipedia

The Washington Post quoted one gentleman, thus: "Rick Buila, 38, of Sharonville, Ohio, who works in finance and voted for the McCain-Palin ticket in November, said his opinion of the governor has changed. `I don't think that she is cut out to be on the national stage,' he said. `I look at her education and her background and the way she carries herself and her [resignation] speech, and when you have someone who's out there saying 'You betcha' about 50 times, I don't think that's the person we want to have negotiating with other countries.'

Sadly, a few blowhards will seize on a remark like Mr. Buila's "You betcha" comment and dismiss any GOP criticism of Ms. Palin as elitist, or worse. That's unfortunate and wrong. We don't begrudge her for her style, we simply believe that she is not ready - and frankly might never be ready - for The White House.

Peggy Noonan in today's WSJ & the Palin factor

Republicans might thank Peggy Noonan for explaining what some of us lack the courage to say -- Sarah Palin -- was unhelpful for the party.

I can't match Ms. Noonan's eloquence, but I can identify with what she says in this piece entitled, "A Farewell to Harms".

Peggy Noonan, Wikipedia

If you are one of my five six readers, you may recall when I just couldn't take Ms. Palin's performance any longer and consoled myself in this November 8, 2008 post. Yesterday morning, I called in to a local radio program to express similar Palin-related thoughts (Joy Cardin takes my call @ approximately 9 minutes and 42 seconds into the 8 AM program on this tape if you care to listen).

I deplore the torrent of abuse leveled at Ms. Palin and her family by the Left, but we can't trot out unqualified national candidates and expect cheap shot artists to remain mute. We need more knowledgeable, more bullet-proof candidates that can do more than just say the`right' things on cue. We need depth and agility.

I admire Ms. Palin, but she was hopelessly in over her head last year. The aforementioned Noonan piece is not a tired rant to criticize Ms. Palin's work. It's more of a description as to what is needed to rebuild the GOP. So let's end on a hopeful note - shall we? Yes we can!

Think of the Gopher State with it's schizophrenic voting populous that can elect Comic Al Franken but also install what may be our best chance for a 2012 run at the White House - Tim Pawlenty. There is hope.

Milwaukee County furloughs and remembering Reagan

The Milwaukee Journal Sentinel reports today that a judge has allowed the furloughs (days off without pay) of some public union workers to commence in accordance with Milwaukee County Executive Scott Walker's order -- starting Monday.

It's unfortunate, that instead of supporting his fiscal responsibility, the County Board continues to jawbone the County Executive and the unions, of course, continue to file lawsuits. All of this for five hours off a week.

I never understood why organized labor behaves as though pay (and benefits most of us dream of) ought to be guaranteed. I cannot fathom any responsible authority agreeing on behalf of county taxpayers to anything more than the rest of us live with AKA an "at will" employment arrangement. The concept is quite simple. Either party (employer or employee) can sever their relationship with the other, for any reason, at any time.

This morning I recalled former President Ronald Reagan's decision to fire striking air traffic controllers in 1981. The union organization, known as PATCO, sought to express its grievances with a strike and jeopardize the safety of American travelers. After the President warned PATCO members that if they did not show up for work they would be fired, they tested him and he kept his word.

It was something of a milestone. Organized labor has continued its decline since. Baseless threats, lawsuits and strikes are not part of an effective strategy.

Now flash forward to modern day Milwaukee County and consider its fiscal challenges. We see all the labor vitriol we had on a national level back in 1981. . . over five hours a week.

Somehow I think that if Mr. Walker's furlough order was twice as stringent, the sun would still come up the next day.  I commend Governor Doyle's plan for limited furloughs and wish only that he and the Democrat-controlled legislature, went further to reduce state spending and lower taxes. 

Taxes, polls and pols

Yesterday morning at the beautiful Discovery World facility at Pier Wisconsin, Milwaukee Mayor Tom Barrett participated in a panel discussion on Wisconsin's transportation needs and how to fund them. The event was also attended by Milwaukee County Executive Scott Walker, who had some decidedly different ideas than the Mayor.

Tom Barrett, Wikipedia

At one point, Mr. Barrett cited two separate polls to conclude: few citizens want services cut (one poll), yet few want to pay for them in the form of higher taxes (a second poll). 

Of course, but if you require people to choose between them (think one poll question), perhaps many would choose to hang on to more of their own money, even if the service pool shrinks.  Leadership often requires one to make unpopular choices. 

My dowdy prediction

A week has elapsed since I wrote about Maureen Dowd. I thought by now she would have acknowledged an intentional 43-word copy job, followed by a sorry-I-forgot-to-attribute apology.  I think that's all it would have taken to make this saga go away.

Ms. Dowd points out that she had indeed given proper credit to two other writers and so by her reckoning, she could not have planned to copy from a third. Two out of three isn't bad.

I'd have preferred to hear her say she was working too quickly, or she was distracted when a bird smacked into her office window, or whatever, but that after she used the work of another writer, she simply forgot to credit the author, but had meant to do so. I would have bought that, but it isn't what we are asked to believe.

Maureen Dowd, Wikipedia

The essence of her account is this: After communicating with a friend about another person's work, she plopped some sentences in her column and then discovered she was using the same 43 words after bloggers told her.  Here's what she wrote to explain her actions (repeated from Michael Calderone's space at Politico.com): "i was talking to a friend of mine Friday about what I was writing who suggested I make this point, expressing it in a cogent -- and I assumed spontaneous -- way and I wanted to weave the idea into my column. but, clearly, my friend must have read josh marshall without mentioning that to me. we're fixing it on the web, to give josh credit, and will include a note, as well as a formal correction tomorrow."

My prediction that within a week Ms. Dowd would be finished if still bereft of a plausible explanation, was completely wrong. I misjudged how serious the matter would be taken by the New York Times.  I see reader and writer outrage and some scorn, but little objection from the Times itself. 

I think Ms. Dowd made a mistake, got rattled during the firestorm and then made more mistakes by blaming her quotable friend.  My reasoning is that she didn't need to take risks deliberately, so it probably wasn't theft. She's already a famous, award-winning columnist in little danger of losing her space, so she doesn't need to lift other people's work including the unremarkable 43 words at issue.

I rarely agree with her (save for the attention she aptly paid to Bill Clinton's peccadilloes in the 90s).  So I admit that my antennae went up easily when I learned about her ordeal.  However, I'd like to think that if a columnist I normally agree with like Noonan, Krauthammer, or Goldberg, had inserted 43 words written by another writer and then proffered such a lame excuse, that I'd have been equally critical.  When and if something like that happens, we'll see if I rise to the task.

Is Maureen Dowd in trouble?

The answer is yes.

Forty-three words without attribution, a poor excuse and by now, I suspect, a truth audit of her work is well underway.

Had Ann Coulter done this, the New York Times (and perhaps Ms. Dowd herself) would have hung her from the highest limb. My prediction is that Ms. Dowd will either come out and declare she knew what she was doing after all and apologize profusely within the next week, or she's finished as a nationally-syndicated columnist.

French lessons

We are fortunate to have a young student from France living with us these days. It is her first visit to the US and we are learning as much (or more) from her, as she is learning from us.

Here's an example. After attending high school classes with my younger daughter for a week or so, we prompted our guest to share her honest impressions of class here in America. She told us that students here strike her as more disrespectful to their teachers than what she is accustomed to in her native France.

Where are our children learning how to behave this way?  Oh, that's right -- it's us.

Saved or created? That is the question.

It hit me while driving someplace and listening to the radio, maybe a month ago.  The President was talking about the outcome of his stimulus package while using the now oft-repeated phrase about three and half million jobs being, "saved or created."

(Freepik image)

I'm hearing it again as I watch one of President Obama's acolytes on "Meet The Press" and so I'll ask you dear reader...

How does one measure a job saved?  How can one record a job loss that didn't occur, but might have occurred under the circumstances?

Data on new jobs created are obviously available and broadly examined -- but jobs saved?  It seems like a clever mechanism to avoid any rigorous assessment of the relative success or failure of the stimulus plan.

What's actually been created, is a new rhetorical device called "jobs saved".  That phrase is designed to portray an anemic employment picture as something more robust, even if the jobs created metric can't be measured. 

_________________________________________________________

Submitted to US Senator Herb Kohl moments ago...

"Dear Senator Kohl,

I am writing as a private citizen to voice my strong opposition to the bill misleadingly labeled as the `Employee Free Choice Act' also known as Card Check.

The coercive leadership of organized labor does not need additional tools to intimidate ordinary men and women who prefer to remain outside the union. I would urge you to speak out against this legislation and expose it for what it is -- a catalyst for union demagoguery.

I am not against organized labor per se, but I am against bullies and thugs gaining ground with sanction from Congress.

Respectfully,


John J. Maddente"

The individual and our economic crisis

If you had never met Milwaukee County Executive Scott Walker, you'd be hard pressed to spot him in a crowded room.  Mr. Walker is an average-looking man, with plain features and an unassuming demeanor. Even his name is common. He looks like millions of other guys. I made his acquaintance last year after he introduced himself to me moments before a debate with his election opponent, Ms. Lena Taylor.


Scott Walker
Wikipedia image

Yes, a common guy he is, but don't be fooled -- Mr. Walker packs a wallop and his piece in this morning's Wall Street Journal, "Why I'm Not Lining Up for Stimulus Handouts" defines his fiscal moorings and shows why he has drawn acclaim among conservatives and scorn from progressives.

Mr. Walker mentioned what other politicians know but often fail to highlight -- which is that our current fiscal calamities, were abetted by individuals -- not just banks, not just regulators, not just mortgage brokers, not just government. Those were all culpable parties to be sure, but what Walker reminds us today, is that our current turmoil began,

"...when millions of people were allowed (or encouraged) to spend borrowed money on homes they couldn't afford and were later forced into foreclosure." 

Amen. I've been dismayed by the lack of discussion about individual responsibility and reckless borrowing.  In due course, we'll see more acrimony coming from the public, or at least the part of it that still believes in living within one's means.

There are two arguments currently offered to defend bailouts for homeowners who bought too much house, or who should have remained renters until their income and assets warranted otherwise, or who foolishly sucked all the equity out of their homes to buy stuff they couldn't afford. Here are those arguments:

Argument #1) "This is no time to teach people a lesson."

Who said anything about teaching? This isn't about vengeance either. Those who advocate for mortgage bailouts are appropriating money from responsible Americans to pay for the mistakes of others. Bailouts simply perpetuate that pattern.

The only way to help a heroin addict is to take away his opiate (in this case easy money), then encourage him or her to live healthfully. I see no reason why the responsible many should pay the freight of the irresponsible few, simply because the irresponsible few no longer meet their obligations. We're discussing a self-induced foreclosure on a house, not a death sentence visited upon the falsely accused.

Many foreclosure "victims" are personally responsible for their circumstances. There was too much predatory borrowing going on that is now being characterized, as predatory lending.  Yes, I know there were exceptions, people who were truly duped, lost their jobs, became seriously ill, or were improperly foreclosed upon -- but do you think that those cases constitute the majority of borrowers who suffered a foreclosure?  

Argument #2) "If we don't have mortgage bailouts to stem foreclosures, housing prices will continue to fall precipitously, including yours, so you should support this plan."

Markets work if we let them work. If housing prices continue to fall, they'll only be receding to a current level of value. The continuing collapse of our financial system and our way of life, which appears to be careening toward Euro-Socialism, is as disturbing as the trajectory of home values.

However, if we allow the eggs to break, the values of our homes could appreciate again one day. Things get better after the hangover. The reality that too few wish to acknowledge is this: we can't have a painless hangover.

Although the thrust of Mr. Walker's piece today is not about individual responsibility, it's about government's financial stewardship -- he gets it. We cannot, individually, or as a society, continue to kick the debt can down the road. It's immoral and stupid.

Our current state Governor, unfortunately, wants to leverage our future, reward his supporters like public teachers' unions and expand government programs we don't need and can ill-afford.  It's widely speculated that Mr. Walker will run for Governor in the next election. If he does run, I intend to support him. I hope like-minded voters in this state will do the same, unless a stronger candidate emerges.

Right now, I don't see a stronger one.

What sequence of events caused the mess?

Hedge fund executive Oscar Schafer in a Barron's interview (January 12, 2009, "Hang on Tight!") described our current economic condition thus: "The world is experiencing a giant margin call."

Yes, a giant margin call enabled by easy credit extended to millions of people who couldn't afford as much home as they purchased, or as much cashed out equity to finance a lifestyle they couldn't afford, before defaulting on their mortgages. 

These mortgages would be bundled into what equated to securitized time bombs gobbled up by over-leveraged financial institutions. 

How did it all happen?


Policy makers in Washington wanted to guarantee home ownership for anyone with a pulse. Then the Fed left open the spigot of cheap money by keeping rates too low for too long and America became intoxicated by illusory home price appreciation. Money center moguls and central bankers made enormous bets upon this whole sorry misuse of credit, until the system collapsed.  

Millions of people, who either ought to have remained renters until their income and assets could justify their mortgage, or who should have purchased more modest homes and received loans at fixed rates, were enabled by government-coddled institutions like Fannie and Freddie and populist legislation to "invest in our communities". 

The risks they took (policy makers, investment banks...and millions of  Americans), have poisoned the well that the rest of us must drink from -- perhaps for decades. Now we hear that the other shoe to drop will come from commercial credit busts, or the next highest risk level of mortgages above subprime.  

Grandma warned us when we were children.  If you can't afford it -- don't buy it. If you can't afford to lose it -- don't risk it. In short, live within your means.  Greed is the same thing that destroyed Rome. How will we get treatment and beat our addiction to debt before we all go down in flames?