Spending


Sen. Claire McCaskill who faces a tough reelection battle in 2012 tried to stake out her independence from preisdent Obama with mixed reults.

The only thing the stimulus did was prop op a faltering economy at a cost now estimated by the CBO of $814 billion rather than the $787 billion originally estimated by the Obama administration.  That cost will be borne by future generations long after Obama  and McCaskill is gone from the scene.

As for TARP and the GM bailout if success is measured by how much money was lost then maybe McCaskill is right.  The latest estimate is that TARP will cost the taxpayers $105.4 billion while the GM shares will have to rise about 50% for the government to break even.

That’s success I can live without.

The Obama administration has been spending a lot of taxpayer money in an effort to stave off a financial and political collapse with very little to show for their largesse.

The latest example of the White House’s failure to grasp the real problem with the economy comes from the $50 billion being expended to help individuals obtain mortgage relief under the Home Affordable Modification Program (HAMP).

To date a whopping 650,000 people have been placed in trial modifications though only 2,000 have been made permanent.

The Obama administration decided this week that this was a far cry from what they had expected and issued a warning to mortgage companies that they need to get on the bandwagon to make more of the trials permanent or else.

That’s all well and fine if you believe as the administration does that the slow pace of permanent re-fi’s is the fault of the mortgage companies alone and that it’s okay for the government to bully private firms into submission.

But upon closer inspection it turns out that the mortgage firms have tried to help homeowners but many of those that had applied failed to meet the terms of the program.  Banks report that in some areas they have received less than 20% of the necessary paperwork required for a modified loan and even when payments are reduced many borrowers failed to make even one of the three required reduced payments to qualify for a permanent reduction.

There is plenty of blame to go around, mortgage companies who are reluctant to act if a borrower is current on their loan, onerous government paperwork and homeowners who overpaid for their homes and think that they deserve a bailout and that the government won’t make them homeless.

Yet the real problem is that many of the troubled homeowners lost their jobs and have been living off of unemployment benefits or the generosity of family and friends hoping that the economy would turn around. They can’t pay a mortgage if they don’t have any income.

The president held a jobs summit with some business leaders and liberal economists yesterday to explore ways to create jobs and get the economy back on track.  But the White House excluded both the Chamber of Commerce and the National Federation of Independent Business two groups that know quite a bit about job creation and growth because they aren’t political allies of the president.

In the end the president came away with some feel good talking points and left the impression that he was concerned and wanted to solve the worst unemployment crisis in over a quarter century though by excluding some very important voices he did just the opposite.

As a result of this half-hearted effort taxpayers will have wasted another $50 billion as foreclosures will continue to march on.

The United States Postal Service announced this week that they lost $3.8 billion in the most recent fiscal year which ended September 30th.  This follows losses totaling $7.8 billion in the previous two years.

In order to keep operating the quasi-governmental agency borrowed money from the U.S. Treasury and now owes the government $10.2 billion.

Federal law allows the Postal Service to borrow up to $3 billion per year- but the total debt can’t exceed $15 billion which means the agency will reach that cap in less than two years if they borrow the maximum amount each year.

That would give the Postal Service a little time to get their feet back on the ground but with an estimate that they will lose another $7.8 billion in the next year alone the clock may have already run out.

The problem for the postal agency is that they are a slow moving government behemoth trying to compete in a fast moving world.

Granted they have taken steps to cut costs by slashing 40,000 jobs, but they still have over 700,000 employees.

One of the biggest costs is retiree health insurance payments.  As the automakers and other corporations have discovered retirees are living far longer than originally predicted, the plans are far too generous and trimming the benefits is a political nightmare.  The Postal Service losses would have been even greater had the government not given the Service a $4 billion break last year but they aren’t likely to continue to do that in an era of soaring deficits.

One proposal that the Postal Service has made is to eliminate Saturday mail delivery.  This could save between $2 billion and $3.5 billion per year depending on which estimates are used.

Normally a business would be able to cut back and maybe face the wrath of some customers but with the Postal Service this proposal has raised not the ire of regular customers but politicians bent on protecting their districts.

One politician who has come to the rescue is Danny Davis (D-IL) who is supporting a government bailout to keep the Postal Service afloat.   We all know how well those government bailouts work.

Admittedly the Postal Service is in a tough spot as their mandate is to deliver mail to every address in the country.   That is a very expensive proposition.  It costs far more money to deliver to rural and remote areas than cities and suburbs where homes and businesses are clustered closer together.

But why should those that choose to live further away be subsidized by others who live in what I’ll call a more cost efficient delivery area?

Over the years UPS and FedEx have added rural and home delivery surcharges to reflect the added cost of delivery to those addresses.  The airlines have cut service to areas that aren’t profitable and in some locales cities are actually paying them to provide service.

In a true free market why shouldn’t people pay for the cost of delivery?

Another major challenge for the Postal Service is an increasingly electronic world where e-mail and text messages have largely replaced mail.

Mail volume fell by 26 billion pieces in the last fiscal year, no doubt affected by the recession and is expected to drop another 11 billion this year.  That is not a recipe for success.

So while mail volume is dropping like a stone some brilliant person in the Postal Service thought that selling greeting cards would be a great way to add revenue.  Has anyone checked the state of greeting card sales?  Even those are going electronic

The best solution will be to privatize mail delivery.  Yes that will probably mean higher costs for everyone but at the same time it will probably mean less junk mail and for environmentalists a greener planet as less paper is used- saving forests and less greenhouse gas emissions as mail delivery will no longer be mandated to every address in the country.

 

President Barack Obama has joined the chorus of politicians expressing outrage at the bonuses paid by insurance giant AIG ostensibly using taxpayer funded bailout money.

Various politicians from both parties have proposed levying an excise tax on the bonuses ranging from 35 to 100 percent in an attempt to make up for their own complicity with regard to the bonuses.

Sen. Chris Dodd (D-CT) added an addendum to the bailout legislation that gave an “exception for contractually obligated bonuses agreed upon before Feb. 11, 2009.” And now he claims that he is outraged by these very same bonuses?

Who else is to blame for this mess? Try the Congressmen and Senators who in 2002 passed the Sarbanes-Oxley bill that limited the deductibility of executive pay above $1,000,000 that led to the generous bonus contracts that are now in such ill repute.

Or try Treasury Secretary Tim Geithner who said that he just learned about the bonuses a week ago, but was exposed by AIG CEO Edward Liddy who testified yesterday that Geithner actually knew a week earlier than he admitted.

Maybe we should blame Fed Chairman Ben Bernanke who Liddy said knew of the bonuses three months ago but did nothing.

Then there is Barney Frank (D-MA) who is demanding the names of everyone who received a bonus. What right does he have to this information? Is he planning on making the recipients scapegoats for something his party signed off on? That’s all we need is more government intrusion into our lives. We have seen how well that has worked in the past.

There is ample evidence that virtually everyone involved with the bailout shares the blame for the bonus scandal if that’s what we want to call it. But is it a scandal or is this an example of feigned moral outrage now that these politicians and administration officials have been exposed for approving the bonuses?

Obama said he is willing to take the blame even though he didn’t write the contracts. That’s all well and fine but he ignored the real problem which is the bailout itself. The taxpayers have had to continue to pour money into AIG and they are still losing tons of money and there is no end in sight. The bonus issue is a small part of a larger problem. But since the bailouts are a key strategy of the administration to revive select large corporations and the economy as a whole he can’t very well criticize his own strategy so he strikes a populist tone by going after employees and painting them as greedy.

Any more hope and change like this and we will be in real trouble.

Several Republican governors announced over the weekend that they plan to turn down some of the federal government’s stimulus money rather than face the prospect of having to raise taxes in the future when the money runs out.

The governors from Idaho, Alaska, Texas, South Carolina, Mississippi and Louisiana are concerned that money targeted towards expanding unemployment benefits will only last for two years leaving the states to either raise taxes or reduce benefits back to the pre-stimulus level neither of which would be politically popular.

Rep. Jim Clyburn (D-SC) told the Associated Press that he was insulted that the four southern governors in the “proverbial black belt” were refusing the money and intoned by doing so would hurt blacks.  He didn’t use the R word but it was obvious what he meant.

Contrast that with liberal Pennsylvania Gov. Ed Rendell who said on “Fox News Sunday” that “I’m not sure that we can, over the long run, cope with the high unemployment compensation standard that this mandates for states” but that he didn’t care because his people are suffering and they need the extra money now. 

In reality Rendell doesn’t care because he will be out of office when the bill comes due from the effect of the federal mandate.

Not all Republican governors are as principled as those I mentioned previously.  In fact California Gov. Arnold Schwarzenegger who has mastered the art of financial chicanery along with a Democratically controlled state legislature said that he would gladly take any money other states refused.  Schwarzenegger like Rendell will not be in office when the federal money runs out and won’t have to struggle with the hard decisions that will result.

The Republican governors decision may hurt their political future and will in some areas prove to be unpopular, but taxpayers should thank them for taking a principled stand now and saving them from a future of higher taxes and budget deficits.

Even before the votes were cast in last month’s election, conservatives around the country were already hoisting the banner for Louisiana governor Bobby Jindal as a potential Republican presidential candidate in 2012.

All was going well for Jindal as he came into office on the heels of the disasterous Kathleen Blanco administration who mismanged the state’s reaction to Hurricane Katrina.

With Katrina reconstruction tax revenues on the rise and the record price of oil giving the state a windfall, legislators overwhelmingly passed a $360 million income tax cut and Jindal eagerly signed it.

Now with oil prices below $40 a barrel versus the $127 price in the spring when the tax cut passed so easily and with Katrina related revenues on the wane the state is now facing a budget deficit of $340 million this year and expects it to rise to $2 billion next year.

Liberal opponents of Jindal are now pointing to the tax cut as inappropriate and singling it out as an example of how unprepared Jindal is to oversee a state budget.  But I am not worried about the tax cut.  Sure it looks expensive considering what has happened in the state in just the last few months, but in tough economic times the taxpayers appreciate any effort to allow them t make spending decisions instead of the state.

On the other hand Jindal should have known that nothing lasts forever and he convinced himself that Louisiana was an economic recovery story that had no end.  It seems like that he forgot the old adage of “What goes up must come down” by thinking that oil prices would stay at the lofty levels of the spring.

Jindal doesn’t deserve all the blame as the state legislature which is in charge of craftting the state’s budget were drunk at the well of high oil prices and ignored any advice for fiscal restraint, but as the chief executive he should have insisted on a more conservative approach to spending.

Now he will have to face the same difficult decisions other governor’s are facing as he addresses the grwoing deficit.

If he wants to put some shine back on that rising star, he would be wise to take a tough stance and trim the fat from the budget without any tax or phony fee increases and streamline the government’s operations.

Jindal still has a chnace for higher office in 2012 or beyond, but it will his handling of the budget gap that will largely determine his fate.

As the economy continues to falter local governments across the country are facing sizable budget deficits and being forced to trim expenses in an effort to baance their budgets.

For some it is a painful experience, and in Alexandria, Va the pain is so great that they have hired an ethicist to assist them in deciding which programs to trim or eliminate.

Granted budget cuts are never easy for those tasked with making the cuts  and are doubly painful for those on the receiving end, but they are a by-product of short sighted and greedy politicians spending every dime in site rather than being prudent and planning for the inevitable slowdown or recession.

Now as a result of the liberal expansion of government programs and the lack of setting enough money aside for a “rainy day” the city is facing a $2.3 million budget gap.  Budget cutting is an economic decision.  Either there is money for a program or there isn’t.  Politicians are elected to make the tough decisions.  But in this case rather than do what they were elected to do they have chosen to turn budget cutting into an ethical and moral decision and creating a touchy-feely scenario rather than letting objectivity guide them,

Using an ethicist to help make budget cuts may salve the collective consciences of the officials involved, but it sets a bad precedent that all budget decisions should have an ethical and moral component and that it is okay to cede their responsibilities to someone who has no government budgeting experience.

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