Posts Tagged ‘Economy’

Case Made for Eliminating Vacant State Positions

Wisconsin’s Legislative Fiscal Bureau (LFB) released a projection of the state’s structural budget deficit last week and the view was ugly as far as the eye can see. Without any additional spending commitments, the state is facing a $2.5 billion hole to fill in the next biennial budget. In 2010-2011, the state will be spending $1.23 billion more than it collects, and will be short again $1.28 billion in 2011-2012.

This does not come at a time when government in Wisconsin is taking too little from us in taxes. The Wisconsin Taxpayers Alliance recently reported Wisconsin property taxes are now 4.5% of the state’s personal income, the highest level since 1996. Wisconsin taxpayers are being squeezed like lemons.

It’s not like we did not have any warning about the structural deficit. The state increased spending in the last budget by $3.6 billion. Making matters worse, Wisconsin used $2 billion of federal stimulus money on existing programs. With that money gone, the next governor and state legislature will need to get pretty creative to bring the budget into balance.

Legislators and Governor Jim Doyle knew that the increased spending and the one-time federal funds would only make problems worse in the long-term, but they decided to spend the money anyway. Rather than deal with the long-term structural issues affecting Wisconsin’s finances, they decided to go for the quick fix year after year.

Case in point: the number of positions being held vacant year after year to make each state budget “work” without addressing whether the positions are actually needed. Most people would be shocked to learn the state currently has 4,700 jobs that are vacant, especially as they don’t seem to be especially missed. So long as those positions remain on the books, they contribute to the state’s structural deficit because they’re considered an expense that will need to be paid for eventually.

Unfortunately, rather than ask why these positions continue to exist when nobody is missing them now, the politicians in Madison just hope for the day when an improved economy will generate enough tax revenue to pay the salaries and benefits for these government jobs. Meanwhile, the money for those positions is just reallocated to cover other expenses in government rather than used to fill them.

All across Wisconsin, employers are figuring out how to do more work with fewer employees. When they do, they don’t say, “When the economy is better, we’ll just stick somebody in those cubicles and add more payroll.” However, that seems to be the attitude of state government.

Milwaukee County Executive Scott Walker has proposed completely eliminating 4,000 positions that are currently vacant. Walker estimates it would result in saving $284 million per year, or $568 million per biennia.

To be fair, Walker’s opponents, Milwaukee Mayor Tom Barrett and former Cong. Mark Neumann have also announced plans to shrink the size of government. For some strange reason, though  neither thought much of the idea to eliminate bureaucrat positions that have been vacant for so long. Maybe we should just chalk it up to the fact that we are in the middle of the dog days of summer, a statewide campaign summer no less. How else can you explain opposition to such a common sense idea?

Of course, it isn’t hard to imagine the state employees’ unions are unhappy with Walker’s proposal. Marty Beil, Executive Director of AFSCME, also criticized Walker’s plan as a gimmick. Then he criticized Walker’s proposal for putting people out of work. Beil should talk to Barrett who would remind them that, since the positions were never filled, nobody is being put out of work. Perhaps Beil didn’t understand why Barrett was calling Walker’s plan a “gimmick” when Beil decided to echo Barrett.

Beil also criticized the Walker plan for placing the usual victims in danger. “Since he plans to exempt certain classes of employees from his axe, doesn’t this mean everybody else is going to be hit all the harder? Does this mean there will be fewer people to care for the mentally ill and developmentally disabled?”

Again, this misses the point. The positions considered by Walker for elimination are already vacant. None of these open positions are doing anything to care for the mentally ill and developmentally disabled because there is nobody currently filling them.

So for all of the double talk about how it’s a gimmick that will somehow cause the sky to fall, nobody has given a sound reason why these positions could not be eliminated. Wisconsin has somehow managed to survive without them getting filled prior to now, but their continued presence on the books only threatens to grow government more and make Wisconsin’s fiscal future that much more difficult.

By James Wigderson

Special Guest Perspective for MacIver Institute

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Posted in mi perspectives | July 13, 2010 | | 2 Comments

President Obama In Need Of Reality Check

Racine Town Hall with President Obama

President Obama has once again showed that he is in desperate need of a lesson in economic reality. I am referring to the latest instalment of ignoring economic reality by the President during his ‘town hall’ style speech, and question and answer session yesterday in Racine. The three main topics were economic stimulus, financial regulation and clean energy (with the President downplaying that the latter is mainly driven by his belief in catastrophic anthropogenic global warming). The underlying theme was that unregulated markets (aka Big Corporations) cause recessions, financial impropriety and environmental degradation and, thus, strong government action is needed.

At the base of the President’s fundamental economic beliefs appears to be the lack of a full awareness of the economic reality that wealth and prosperity are created by free people and free markets. This is the ‘fixed pie’ fallacy often believed on the Left. The key to the growth of wealth and prosperity for all Americans is entrepreneurial innovation and evolution. It is the minds of those who create new and better goods and services and ways of doing things for profit, subject to the pressures of competitors and consumers, that create and grow wealth and prosperity…not the poorly thought out actions of intrusive, self-righteousness, unaccountable, non-transparent and arrogant government. The President would do well to remember what the Founding Fathers intended government to do – ie to protect free people and markets from those who would initiate and inflict harm on other’s person and property…including from government itself!

Although he was certainly quite charming and likeable during his speech and the Q&A session, the President once again strongly highlighted his ongoing denial of economic reality and his embrace of economic mysticism.

The President’s original economic stimulus policies were aimed at creating between 3 and 4 million jobs by the end of 2010, and that unemployment would hit its high of 8% in 2009. Instead, unemployment peaked at 10.6% in January 2010 and only fell to 9.3% by May. The latest jobs and unemployment figures are scheduled to be released on July 2nd, and most economists are not optimistic. This pessimism, according to the Cato Institute, is mainly driven by businesses reluctance “to invest or hire because they’re concerned that the President’s Big Government agenda will mean higher taxes and more onerous regulation”. This is backed up by a recent National Public Radio poll which showed that only 37% of voters in Democrat controlled districts believed “President Obama’s economic policies helped avert an even worse crisis, and are laying the foundation for our eventual economic recovery” and as many as 57% believed “President Obama’s economic policies have run up a record federal deficit while failing to end the recession or slow the record pace of job losses”.

The President’s financial industry regulation is based on the flawed premise that the financial meltdown was caused by the greedy and misleading financial industry. Bad financial industry decisions and the like was largely the symptom not the cause of the financial meltdown. The Fed, government social engineering policies (eg Freddie Mac and Fannie May), and government over and poor regulation, was largely to blame. Of these, it is the Fed that is the real ‘elephant in the room’. The Fed is essentially a government mandated monopoly which essentially dictates the price of money (ie interest rates)…and, as central planners always do, they always get pricing wrong, with huge ramifications in the supply and demand of money throughout the entire economy! Like all central planners, the Fed suffers from the ‘we know what’s best for everybody else’ delusion. They don’t know what is best, nor could they (even in theory), as they will never have the proper information and incentives that decentralised consumers and competitive markets have. This line of thinking is backed up by great economists like Hayek, and by many recent studies by the Institute of Economic Affairs and the Ludwig von Mises Institute.

The government-driven clean energy revolution desired by the President, which uses Spain as its template, is based on wildly exaggerated expectations of the amount of jobs to be created and ignoring the predicted net job losses. As pointed out in a study last year by economics professor Gabriel Calzada of King Juan Carlos University in Madrid, “the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created.” These sorts of studies are, of course, not cited as part of the reason for resistance against this noble cause, instead the President alleged that clean energy has no powerful backers. A study sponsored last year by the Science and Public Policy Institute, entitled Climate Money, would suggest otherwise. This study, by only beginning to scratch the surface, showed that Federal Government expenditure alone in response to global warning alarmism was of the order of $79 billion…versus ‘Big Oil’ expenditure in support of global warming scepticism/realism of $23 million. It is very important to remember that the President’s push for clean energy is still largely driven by global warming alarmism, which is in turn driven by so-called science that continues to be shown, by the Heartland Institute and many others (citing such recent revelations as Amazon-gate, Climate-gate, Glacier-gate, and NASA-gate), to be at best wildly exaggerated and at worst fabricated. It is worth noting a typical self-contradiction of environmental policies reported last month by the Institute for Energy Research. They reported that “fossil fuel consumption and CO2 emissions are increased, not reduced, with the introduction of wind” and more specifically that “at wind penetrations of about 3% (as is the case in the Netherlands), the savings are zero, and at 5-6% (as for Colorado and Texas) the savings become negative, that is, emissions actually increase due to the presence of wind power”.

Let me remind the President of the major lever that the Executive, the Legislature and the Judiciary have of helping to improve the economic environment for economic growth – mainly through getting out of the way of free people and free markets, especially through seriously reducing government regulation like that recently passed in health, and that being attempted to be passed in finance and global warming (the latter including clean energy). A relatively easy way to start would be putting a freeze on further job-killing regulation (of any kind, be it stimulus, financial or global warming) and to start to get serious about subjecting any and all further regulation to proper, independent and transparent processes of benefit-cost analysis (BCA) centered around allocative and dynamic efficiency – which is by-and-far the best way to start to properly balance the often conflicting objectives of social justice, the environment and the economy. Perhaps the Government Audit Office could play some role in this, including in ex post as well as ex ante BCAs of regulations and regulators (eg the Fed, EPA, etc).

The President once again stated that we need to move forward not backward. Only embracing economic reality and letting go of economic mysticism can move us all forward. Of course, it will be the people of the greatest democracy in the world that will be the ultimate judge of all this come November and beyond!

By D. Brady Nelson
Special Guest Perspective for the MacIver Institute
D. Brady Nelson (d.brady.nelson@mac.com) is an Australian-American freelance economist with over 15 years experience in economic regulation and policy.
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Posted in mi perspectives | July 1, 2010 | | No Comments

Beyond the Spin, State Employment Numbers Dismal

Next vacation, I’ll tour government offices…

I did my part for the Wisconsin economy. Last week the Lovely Doreen from Waukesha and I ventured to the Wisconsin Dells with our children, doing our part to pump dollars into the local economy. We took full advantage of the increase in the seasonal employment in Wisconsin as tourists. I even got a picture of myself wearing a funny Moose hat.

Seasonal employment is the key. Every May, Wisconsin adds jobs to ready itself for the summer tourism season, ramping up for construction, and other industries that require the warmer weather. Indeed, the numbers are out for May unemployment and in numbers not seasonally adjusted, leisure and hospitality added 10,700 new jobs last month.

With the release of the May unemployment numbers, the state announced a reduction in unemployment last month and the creation of 32,000 jobs, according to the unemployment figures not seasonally adjusted. The champagne corks were popping and the governor celebrated as the state’s unadjusted unemployment rate dropped 0.5%.

Governor Jim Doyle released the following statement:

“The tremendous drop in the May unemployment rate and the state’s addition of tens of thousands of jobs reflects our hard work to help communities across the state recover from the national economic crisis. I will continue to do everything possible to make sure that as this national economy turns around, Wisconsin is in a position to come roaring back.”

Unfortunately, every silver lining has a cloud attached to it.

When we take into account the seasonal adjustment, instead of adding 32,000 private sector jobs, the Wisconsin economy lost 7,900 private sector jobs in May. The net change from a year ago is a loss of 37,400 jobs in the private sector.

Even the hospitality industry is worse off. In seasonally adjusted terms, 3,700 jobs were lost in May and 6,700 jobs were lost since last year. Using the terms the governor would prefer, in non-adjusted numbers leisure and hospitality may have added jobs in the last month, but there is still a loss of 7,500 jobs since last year.

Overall, Wisconsin’s economy in May added 1,600 jobs in seasonally adjusted terms, not the “tens of thousands” that the governor claimed. 

According to the seasonally adjusted unemployment numbers, the number of government jobs in Wisconsin grew by 7,900. The net change in seasonally adjusted government jobs is plus 9,500. The other economic sectors that have seen any job growth in the last year are waste management and administrative services (5,500), educational services (3,100) and health care and social assistance (2,900).

State government alone added 3,100 jobs in the last month, although Department of Administration Deputy Secretary Dan Schooff says the numbers used by the federal Department of Labor “can be easily misconstrued.” Schooff says the actual number of state jobs increased only by 222 positions from April to May. 

The federal government added 3,800 jobs using seasonally adjusted figures, while the local governments added 1,000 jobs using seasonally adjusted figures.

Using figures not seasonally adjusted, government jobs went up 8,200. Of them, 4,100 were federal jobs, 2,900 jobs were at the state level, and 1,200 jobs were at the local level.

It is not known how many government jobs are the result of stimulus spending, nor was it clear how many of the jobs were census-related. However, the state’s relied upon over $3.4 billion in federal stimulus money to attempt to bring the state budget into balance last year (see the MacIver Institute’s $13 Billion of Bad). When that federal money goes away so will many of these government jobs. The alternative is higher state and local taxes, further hurting the private sector and reducing the number of private sector jobs.

Far from celebrating, Wisconsinites should be concerned about the continued wrong direction for the state’s employment figures. When we continue to have a net loss of private sector employment, and we add in a shaky funding foundation for future government expenditures, the result is likely to be more economic trouble and continued high unemployment.

That will continue regardless of how many funny hats I buy.

By James Wigderson
Special Guest Perspective for the MacIver Institute

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Posted in mi perspectives | June 21, 2010 | | 1 Comment

Wisconsin Borrows $1.4 Billion from Feds for Unemployment Funds

MacIver News Service [Madison, Wisc…] The State of Wisconsin has run out of money to pay unemployment benefits and has borrowed one point four billion dollars from the federal government to fill the gap.

Wisconsin’s loans place the state as one of the largest Unemployment Reserve debtors in the country.

As the economic climate worsened in Wisconsin the past few years, more and more people lost their jobs and the state’s Unemployment Reserve Fund became insolvent.

“We are coming out of the worst national economic times since the Great Depression,” said John Dipko, Wisconsin Department of Workforce Development Communications Director. “Unemployment insurance has been a critical lifeline for many workers who are out of work through no fault of their own.”

The Wisconsin DWD administers the state’s Unemployment Reserve Fund.

If the amounts in Wisconsin’s Unemployment Reserve account in the U.S. Treasury are not sufficient to cover anticipated unemployment payments, the state can borrow funds from the federal government.

Despite receiving $134 million in Stimulus funds, Wisconsin’s Unemployment Reserve Fund ended 2009 with a deficit of nearly one billion dollars.

DWD’s most recent forecast for the Fund, released in April, indicates that deficit is expected to double by the end of this year, leaving a closing balance of -$1,946,000,000.

“These benefits help these workers put food on the table, pay their electric bills, fuel their cars and cover other necessities while they search for work,” said Dipko.

The deficit numbers are staggering to critics of the Doyle Administration, who also chide the Governor and legislative Democrats for their poor record on job creation.

“These alarming figures should be another wake-up call for state government leaders to focus on improving Wisconsin’s business climate for permanent, high wage jobs, rather than creating temporary government make-work at taxpayer expense,” said State Senator Alberta Darling (R-River Hills), a member of the Legislature’s Joint Committee on Finance.

The federal loan could have been even more detrimental to the State; however, the federal government has waived the interest for all funds borrowed through the end of this year.

Normally, the interest rate charged on these funds either 10 percent or the average rate on specified federal securities. However, no interest is charged if a) the loan is made in the first nine months of a year b) the loan is repaid prior to October 1st of the same year and c) no additional loans are made before the end of that calendar year.

Future interest obligations, according to a memo from the Wisconsin’s Legislative Fiscal Bureau, are significant. Based on the projected deficits in the Reserve Fund, Wisconsin’s DWD has estimated the state would owe the feds $317 million dollars in interest by 2014 if it were to continue to borrow funds from the Treasury to cover the shortcomings in the state account.

According to the National Conference of State Legislatures’ analysis of statistics provided by the U.S. Department of Labor, more than 30 states have borrowed unemployment funds and Wisconsin’s total places the state in the top one third of borrowers.

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Posted in News | June 4, 2010 | | 9 Comments

WHEDA Partners with Fannie Mae, Promotes No-Money-Down Lending Scheme

Have they not learned anything?

The taxpayer-supported Wisconsin Housing and Economic Development Authority is promoting “no-money-down” home mortgages.

Still.

Really.

As they proclaim in this new radio ad:

“WHEDA…We do…So you can buy your first home with no money down! Coming up with a down payment prevents a lot of renters from becoming homeowners. That’s why WHEDA created the Advantage Home Loan. With the Advantage Loan, you don’t need a down payment.”

Are they serious?

Apparently.

From their website: Learn more about how you can get into a home with a mortgage you can afford long-term with no money down and very little cash to close.

WHEDA is promoting the Advantage program in spite of the fact that from October 2008 to February of this year the agency actually stopped issuing mortgages for single family housing in the wake of the credit crunch which was created when the housing bubble burst.

From a 2008 press account. 

Wisconsin’s affordable-housing agency has temporarily stopped issuing mortgages for single-family homes because it’s having trouble raising the money needed to make the loans —a situation it said is a direct result of the national financial system crisis.

It’s the clearest evidence yet that the crisis on Wall Street is hitting Wisconsin’s Main Street.

“We primarily operate with tax-exempt mortgage revenue bonds. That’s what funds our mortgages. And right now, we can’t raise capital. There’s nobody investing in those bonds,”said Kate Venne, spokeswoman for the Wisconsin Housing and Economic Development Authority.

It is the first time in the 30-year history of WHEDA, which works through local lenders to offer below-market interest rates to first-time home buyers who have low and moderate incomes, that it has suspended its mortgage lending program because of liquidity problems.

But now WHEDA is back with a vengeance.

Who is making this new WHEDA Advantage program possible?

None other than Fannie Mae. 

Yes, that Fannie Mae. Really.

For those who need a refresher course: Here is how the Heritage Foundation explains Fannie Mae’s role in the housing crisis:

Fannie Mae and Freddie Mac do not actually lend money to borrowers. Instead, they make their money by purchasing loans, bundling them together and then selling them as mortgaged back securities. Due to their quasi-government status, Freddie and Fannie are exempt from state and local taxes and can borrow money at lower rates than their competitors. With these advantages, Freddie and Fannie have cornered the market on mortgage securitization. Most years, Freddie and Fannie help finance 40% of all U.S. mortgages. In the first quarter of 2008, they handled 80% of the market. If Fannie and Freddie were private entities, they would be a considered a monopoly by Department of Justice anti-trust guidelines.

Fannie and Freddie are neck deep in the subprime industry as well. In 1995 Fannie and Freddie convinced the Department of Housing and Urban Development (HUD) to let them get affordable-housing credit for buying subprime securities that included risky loans to low-income borrowers. In 2003 Fannie and Freddie bought $81 billion in subprime securities. In 2004 they bought $175 billion —

44% of the subprime market. Now Fannie and Freddie are in the same financial hole as Countrywide. They suffered $9 billion in mortgage-related losses last year and are sitting on another $19 billion in additional losses they have not yet fully acknowledged.

Conservatives have been pushing for fundamental reform of Freddie and Fannie for years. Long before the subprime crisis became apparent, conservatives warned that “their commanding presence exposes U.S. financial markets to excessive risk and instability.”

Since September 2008, Fannie Mae and its sister organization Freddie Mac have received a combined $145 billion in emergency funding to cover their investments. Together, propped up by our tax dollars, the two behemoths control upwards of $5 trillion in mortgage debt.

So when Fannie ‘partners’ with WHEDA, just consider it your right pocket partnering with your left; pouring more tax dollars into a dubious program and failing to learn from the mistakes of the past

Here’s a newsflash: Home ownership is not a right–it is an investment strategy, complete with benefits and risk.

You cannot eliminate risk from investment. You can mitigate risk. You can reduce your exposure to risk. You can transfer risk to someone else. But you cannot eliminate risk. In the case of the housing bubble, taxpayers absorbed the risk…and paid dearly.

False promises of risk-free investments in home ownership played a crucial role in this country’s Great Recession. Politicians like Barney Frank (D-Massachusetts) and Chris Dodd (D-Connecticut) used the coercive force of government to ‘encourage’ lenders to ignore would-be home buyers’ ability to make good on their obligations when making loans for first time home purchases. (In the early 2000’s these ‘defenders of the poor’ demanded these programs. Now they call such efforts predatory lending.)

As the result of getting lines of credit they did not earn by merit (via an analysis of credit rating, available assets, income stream, ability to repay loan), people defaulted on these mortgages. Banks ate the losses. Investments based on the securitization of those mortgages crumbled. While people can argue over the appropriate underwriting standards and the strength of government oversight of these securities, you can’t deny the fact that they were undermined by the fact that people defaulted on loans they could never afford.

The economic instability that came about in the wake of the burst of the housing bubble severely hurt WHEDA to the point they could no longer help first-time home buyers for more than a year. That is until, like so many other entities over the last two years, they were bailed out by taxpayers.

Last year, WHEDA got back on its fee with the infusion of massive amounts of tax dollars. They received $139 million in American Recovery and Reinvestment Act (Stimulus) funds to for the Low Income Housing Tax Credit developments around the state. WHEDA further received $325 million from the US Treasury to “revitalize its home ownership programs.”

So, thanks to an infusion of hundreds of thousands of dollars of tax dollars and the support of the ‘too big to fail’ Fannie Mae, WHEDA has decided to double down on the ‘Hey you don’t have to work for it, why worry?” mentality.

WHEDA. They do (make mistakes), so you can too!

In fact, WHEDA boasts, renters who can not afford any down payment on a home loan can take advantage of the misfortune of their peers who had earlier ventured into home ownership while ill equipped to do so.

“The loan can be used to purchase a foreclosed and vacant single family home and finance limited home repairs,” proclaims the WHEDA website.

The cycle continues.

WHEDA notes that the new no-money-down required program is only available for a limited time.

The program is available for a limited time, but apparently when it comes to pouring gasoline on the housing fiasco fire, stupidity is perpetual.

By Brian Fraley
 A MacIver Institute Perspective

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Posted in mi perspectives | May 26, 2010 | | 4 Comments

First Year Tab for State Employees’ Domestic Partner Benefits Tops $7 Million

MacIver News Service – [Madison, Wisc...] Providing health insurance benefits to the domestic partners of state employees will cost more than $7 million dollars this year.

State Senator Glenn Grothman

On Tuesday, the Department of Employee Trust Funds reported 700 employees have switched from single to family coverage to take advantage of the extended benefits. That will cost the state $7.4 million dollars this year. $3.1 million of that will come from general purpose tax revenues and $4.3 million will come from program revenues and segregated funds.

Even though the benefits are currently coming in under projections, some state lawmakers are disappointed the state chose to offer additional benefits while facing a $6.6 billion deficit at the time the budget bill was drafted. For Senator Glenn Grothman (R-West Bend) a $7.4 million price tag is no cause for celebration.

“Both numbers struck me as high,” said Grothman. “Both the 700 people and the $7.4 million.”

Grothman pointed out that with 70,000 state employees, 700 people taking advantage of the new benefits amounts to a full one percent of the workforce.

The new domestic partner benefits were adopted as part of the state’s biennial budget last summer. They went into effect on January 1, 2010. The Department of Employee Trust Funds released their cost estimate at a meeting of the Joint Legislative Committee for the Review of Administrative Rules on Tuesday.

Domestic partner state benefits are different from the state’s domestic partner registry. Domestic partner benefits are available to same sex and heterosexual couples who have one partner who receives employee benefits while working for the State.

“Registration on the domestic partner registry under Chapter 770 does not create a domestic partnership for Chapter 40 benefit purposes. The ONLY way to establish a domestic partnership for Chapter 40 benefit purposes is by filing this completed affidavit with ETF,” reads the affidavit for establishing proof of domestic partnership.

That affidavit is the only proof the state requires to sign up for domestic partnership benefits, which leaves the program at risk for abuse. The affidavit outlines the definition of domestic partnership, which includes: both people are over 18, live together, not related by blood but consider themselves to be members of the same immediate family, and are responsible for each other’s basic living expenses.

The initial cost domestic partner benefits  only cost the state more if employees switched from single to family coverage. That is because the first-year costs only account for initial premiums, not losses. 

“However, over time, as the additional medical costs of more enrollees are built into future premium calculations, additional costs would accrue to the state. It is not possible, therefore, to accurately estimate the extent to which these costs would emerge in the 2009-11 biennium,” according to an analysis of the proposal written by the nonpartisan Legislative Fiscal Bureau before it became law upon the passage of the 2009-11 State Budget.

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Posted in News | May 25, 2010 | | 1 Comment

Repeal Obamacare?
Aftermath of Contoversial Vote Not Going As Left Had Planned

The sweeping health care financing overhaul known as Obamacare is proving to be a pivotal moment in American politics and a seminal turning point within the political culture in America, but not in ways its proponents had imagined.

Galen Institute’s Grace-Marie Turner has written a quick summary of the drip, drip, drip of news and information made available to the public AFTER Congress voted on the plan.

Americans consistently said controlling health costs was their top priority for health reform. But Washington didn’t listen, and independent experts now say the new health law actually will drive up the cost of health care and insurance premiums.

Federal and state governments as well as businesses, consumers and taxpayers are finding they cannot afford this massive and unpopular health overhaul law.

The Congressional Budget Office recently issued a revised estimate showing the law will cost $115 billion more than it projected the week before it was enacted. That puts the CBO’s initial price tag at $1 trillion, still a conservative estimate that is based upon unrealistically high assumptions about cuts in Medicare spending and unrealistically low assumptions about the cost of the new law.

Further, the CBO says that preventive care and pilot projects designed to modernize care delivery, while important, are unlikely to reduce costs and may actually increase health spending.

A report by the Obama administration’s own actuary, issued a month after Congress passed the reform legislation, showed it will increase federal health spending by $311 billion over the next decade and likely much more.

The chief actuary for the administration’s Centers for Medicare and Medicaid Services, Richard Foster, also predicts higher health insurance premiums for individuals and businesses.

One reason is the billions of dollars in new fees and excise taxes the law imposes that Foster says will “generally be passed through to health consumers in the form of higher drug and devices prices and higher premiums.” These include more than $20 billion in taxes on medical devices, $60 billion in taxes on health plans, and $27 billion in taxes on prescription drug companies.

Foster’s report also highlights the shaky financial footing of the new long-term care insurance program – the CLASS Act, which Sen. Kent Conrad, D-N.D., has described as “a Ponzi scheme of the first order.” Foster says the program faces “a significant risk of failure” and finds the program will result “in a net federal cost in the long-term.”

The CBO estimates that individuals and businesses also will face at least $120 billion in fines and penalties for failing to comply with the law’s new health insurance mandates. And it says families purchasing health insurance in the individual market will pay $2,100 a year more for coverage by 2016 than they would had the measure not passed.

States also fear a flood of red ink. Indiana has released a study showing that the health overhaul law could cost the state an additional $3.6 billion over 10 years – money that Hoosiers don’t want to spend for a law that polls show they strongly oppose.

And major companies also face tax hits, fines and huge risks. Large, publicly traded companies have issued reports showing reduced earnings as a result of tax changes.

However, proponents have been quick to argue that there are broad tax cuts and incentives for small businesses that will ease the pain!

Ah, not so much.

As the AP reports:

When the administration unveiled the small business tax credit earlier this week, officials touted its “broad eligibility” for companies with fewer than 25 workers and average annual wages under $50,000 that provide health coverage. Hoffman’s workers earn an average of $35,000 a year, which makes it all the more difficult to understand why his company didn’t qualify.

Lost in the fine print: The credit drops off sharply once a company gets above 10 workers and $25,000 average annual wages.

It’s an example of how the early provisions of the health care law can create winners and losers among groups lawmakers intended to help—people with health problems, families with young adult children and small businesses. Because of the law’s complexity, not everyone in a broadly similar situation will benefit.

(Note: Small business owners can go to the NFIB website and use their online calculator to see just how much ‘help’ they could receive from the government.)

In Wisconsin, Republican congressmen Paul Ryan and Jim Sensenbrenner discuss a ‘Repeal and Replace” strategy regarding the health care financing overhaul. US Senate Candidate Ron Johnson said Obamacare’s passage was the ‘straw that broke the camel’s back’ that inspired his involvement in both the Tea Party movement and electoral politics. The Left continues to belittle those who push repeal, mocking their efforts as right-wing folly at best, and economically-devastating at worse. However, it is undeniable that the more the public knows about what was really in the health care bill, the less we like it.

It is clear that Sensenbrenner, Ryan, Johnson and others who favor repeal are not alone.

According to Rasmussen Reports:

Support for repeal of the new national health care plan has jumped to its highest level ever. A new Rasmussen Reports national telephone survey finds that 63% of U.S. voters now favor repeal of the plan passed by congressional Democrats and signed into law by President Obama in March.

Prior to today, weekly polling had shown support for repeal ranging from 54% to 58%.

Currently, just 32% oppose repeal.

The new findings include 46% who Strongly Favor repeal of the health care bill and 25% who Strongly Oppose it.

While opposition to the bill has remained as consistent since its passage as it was beforehand, this marks the first time that support for repeal has climbed into the 60s. It will be interesting to see whether this marks a brief bounce or indicates a trend of growing opposition.

Thirty-three percent (33%) of voters now believe the health care plan will be good for the country, down six points from a week ago and the lowest level of confidence in the plan to date. Fifty-five percent (55%) say it will be bad for the nation. Only three percent (3%) think it will have no impact.

The Political Class continues to be a strong supporter of the plan, however. While 67% of Mainstream voters believe the plan will be bad for America, 77% of the Political Class disagree and think it be good for the country.

The Tea Party movement is a tangible symbol of the chasm between the general public and the political class. Supporters of the behemoth health care plan are siding with the political class. Those who voice support for repeal are siding with the more broad general public.

If I were an elected offiical, or perhaps more significant, a candidate this fall, I know in whose hands I would want to place my fate.

By Brain Fraley
 A MacIver Institute Perspective

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Posted in mi perspectives | May 24, 2010 | | No Comments

In Defense of Oil Exploration

How in good conscience can someone defend the practice of off-shore oil drilling in the wake of the massive oil spill in the Gulf of Mexico?

I don’t know how one’s conscience could allow for anything but.

The incident in the Gulf is obviously a tragedy from which lessons must be learned, but it shouldn’t scare us away from the natural resource that is oil.

The Left seems to think sun and wind are free gifts from mother earth but that oil is some nefarious un-natural concoction created by Dick Cheney and Dow Chemical. Oil, too, is from the earth. It is just as natural as the sun or the air.

Our ability to harness the earth’s petroleum resources has perhaps been the single most impactful discovery…ever. It fueled the second Industrial Revolution; helped end society’s acceptance of child labor; brought clean water and heat and electric light to the masses; helped us advance from an agrarian society where our lives were dictated by the seasons; helped women become recognized as productive wage earners; lengthened the life expectancy and increased the standard and quality of life for peoples across the globe.

We can’t run away from Oil because it is icky or because people and animals die when tragedies like this happen.

We must appreciate that our ability to safely and efficiently harness natural resources helps promote freedom, liberty and equal opportunity for prosperity. We must do all that we can to manage and mitigate the risk associated with this endeavor, but we cannot walk away from it. Oil is essential to fuel prosperity in a modern world. Certainly, the oil supply is extremely volatile both due to the risks associated with exploration and the political realities of OPEC. While we obviously need to continue to explore more politically-viable sources of energy for the future, we can’t abandon the resources we know are available.

Oil and natural gas account for sixty percent of our energy supply. Disrupting this equation would result in a massive transfer of wealth from the private sector. Trendy ‘green’ sources of energy like solar and wind are heavily subsidized and not particularly efficient (I’ve  written in the past about the inefficiencies and high cost of solar and wind). When consumers pay for solar and wind, a substantial portion of those monies go to fund the government subsidies which promote their use.

We need oil. We know where to get it. We shouldn’t let accidents scare us off from pursuing it. Instead, when a mess like the Deepwater Horizon disaster takes place, we need to fix it, learn from it and prevent it from happening in the future.

But the Left, predictably, simply uses tragedies like the one on the BP rig as an opportunity to bash business once again, and to push for a Luddite-inspired, pre-Industrial Revolution, horse-and-buggy/windmill economy wherein citizens must rely upon the State, and not themselves, for opportunities to improve their lot in life.

Each week, the website WisOpinion.com asks me and lefty Scot Ross of One Wisconsin Now to engage in exchanges on a topic of our choosing.

From my latest ‘That’s Debatable’ entry, wherein oil exploration was the topic:

You offer the false choice of no drilling or status quo.  Personally, I support the “Drill, Baby, Drill” and everything else plan. Let’s build some damn nuke plants while we’re at it.  We should be pursuing all domestic sources we know exist; that includes the oil in the Gulf of Mexico, ANWR in Alaska and public lands in the Dakotas and elsewhere. And we should invest in creating new technologies and exploring new sources of energy that make economic sense. Scot, how is our national security improved if we fail to tap into the resources we have here and instead are beholden to foreign government cartels like OPEC?  How is our economic security improved if we abandon oil and coal and instead rely totally on the more expensive, less reliable and less efficient solar and wind?  I can’t speak for anyone else, but I’m obviously not silent about this. The incident in the Gulf is a tragedy, but it shouldn’t scare us away from the natural resource that is oil. I thought PROGRESS was the root of progressive? Why the call for retreat?

The Left’s demand for a risk-free world is not only pure fantasy, it is dangerous. A retreat from proven sources of energy, without affordable and efficient alternatives, not only denies the benefits society has reaped from oil, it destabilizes our economy and our national security.

But it certainly won’t stop the Left from using this tragedy as a bogeyman.

By Brian Fraley
A MacIver Institute Perspective

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Posted in mi perspectives | May 18, 2010 | | 1 Comment

CEOs Rank Wisconsin as Poor for Business

MacIver News Service – Wisconsin fares poorly in a national magazine’s annual survey of best and worst states for business.

Chief Executive surveyed 651 CEOs across the U.S.  and once again gave Texas top honors, closely followed by North Carolina, Tennessee and Virginia.

Wisconsin, which at 42nd is actually one place higher than last year’s ranking, is among the 5 states that have fallen the most in the last five years. In 2005, Wisconsin ranked 26th, 16 spots higher than this year’s ranking. Only New Jersey has fallen further since then.

Wisconsin ranks 30th in net business migration and 35th in debt per resident.

Those business leaders who were surveyed were told to draw upon their direct experience to rate each state in three general categories: taxation and regulation, quality of workforce and living environment.

The CEOs ranked California as the worst state for business, with New York, Michigan, New Jersey and Massachusetts filling out the bottom five-a line-up, according to ChiefExecutive.net, that is virtually identical to last year’s poorest performers.

See the chart, here.

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Posted in News | May 8, 2010 | | No Comments

Everyone, including owners and employees of Harley, pays when taxes are raised

With the news from Harley Davidson last week that they need to find $54 million in cuts to their costs, the debate renewed over just how bad Wisconsin’s taxes are for business. Attention is now focused on combined reporting, the corporate tax increase passed as part of the budget reconciliation bill and the last state budget. Of the $54 million, Harley Davidson is facing $22.5 million in increased taxes as a result of the new combined reporting requirement. 

Combined reporting requires corporations to combine income from all subsidiaries regardless of where they are located and lump it together with the corporate entity based in Wisconsin, with some allowance for the amount of actual business conducted in the state.  It is supposed to be more “fair” in that it prevents corporations from paying their subsidiaries based out of state for services in order to avoid paying Wisconsin taxes. Never mind that the Department of Revenue already had the power to go after companies that did such transfers with the sole purpose of avoiding Wisconsin taxes. 

Liberal special interest groups, such as the Institute for Wisconsin’s Future, might claim it was a matter of fairness, but they saw it as a way of increasing state revenue from the corporate income tax without raising taxes. They claimed it was merely closing a loophole that could be used to fund all sorts of state spending. 

That supposed “closing a loophole” raised corporate income taxes $1.2 billion, money that could have been better spent in the private sector creating jobs and retooling for the post-recession economy. That $1.2 billion is how much less competitive Wisconsin businesses are compared to businesses in other states.  

At the time combined reporting was passed, business groups warned of the consequences. The Coalition to Save Wisconsin Jobs, a group of manufacturing and service industry companies, prophetically said,  

Combined reporting creates a significant disincentive to invest in and grow Wisconsin business because it will inevitably lead to taxing income earned from entities without nexus in this state.  Taxing the significantly reduced income of employers will certainly do nothing to “stimulate” the economy; on the contrary it will make Wisconsin less economically attractive than it is at present. 

That is the burden Harley Davidson faces today. While Governor Jim Doyle may say combined reporting is not an issue for Harley Davidson, as he did on Friday, but the $22.5 million in combined reporting taxes is hitting their bottom line like a farm combine slices through a corn field. 

Wisconsin now faces the burden of doing what it can to prevent another large manufacturer from leaving the state. While Harley Davidson so far wishes to handle this as an internal cost-control issue, will the state find itself creating financial incentives to keep Harley Davidson from leaving? Would it not be easier than riding to the rescue of these companies and their employees to just have a business climate already in place that fosters the economic conditions for growth?  

If the goal is tax fairness, as the supporters of combined reporting claim, how is it fair that a company needs to be drowning under the Wisconsin tax burden before they can seek any sort of relief, and then it’s just more exceptions carved out the state tax code? 

Aha! The supporters of higher taxes will say. The state tax burden isn’t so bad according to them, and they point to a study released just prior to the close of the legislative session saying Wisconsin’s tax burden is about average, 24th overall.  

The problem with the study is that the numbers they are using are from 2006-2007, prior to the current budget in place, and even prior to the state budget fix passed last year, too. It’s from a time when Democrats were only in control of the Governor’s mansion and responsibility for the state’s tax policy was shared between the two parties. 

In the 2009-2010 biennium, under complete Democratic control, Wisconsin had one of the largest tax increases in the country (see here for a snapshot on the detrimental budgetary moves of the last two years). Only six other states had a higher percentage increase. That increase includes the new combined reporting tax burden on corporations. 

Defenders of the combined reporting requirement, like former Commerce Secretary Dick Leinenkugel, like to point out that Wisconsin is one of 23 states (out of 45 that tax corporate income) that now have a combined reporting requirement. We might not have been on the cutting edge of new taxes, but that hasn’t prevented Wisconsin business from bleeding. 

State Representative Leah Vukmir has called for a special session to put an end to the combined reporting requirement so Wisconsin businesses can once again be competitive and thrive. It would certainly beat the fire drill method of helping businesses in the state now. 

When the state legislature adjourned with many bills still on the agenda, one of them was recognition of Harley Davidson as the state’s official motorcycle. We’re lucky it didn’t pass, because it might have been a good-bye present to the company as they rolled production out of here. 

By James Wigderson
Special Guest Perspective for the MacIver Institute


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Posted in mi perspectives | May 3, 2010 | | 6 Comments
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