Archive for Deficit

Fairy Tale

Once upon a time:

The Land of Lincoln [Illinois] has accrued a $111 billion unfunded liability for government workers’ pensions—up 75% from five years ago. There is an additional $56 billion of unfunded debt to cover health benefits for the state’s retirees. Illinois today is already spending more of its general fund on pensions than on K-12 education. One in four tax dollars pays for its retired workers’ benefits. Last year the state had to defer paying $7 billion owed to contractors. All this after Democrats in 2011 raised income taxes and corporate taxes by 67% and 30%, respectively.

The level of debt is staggering. According to a recent report by Statista Inc., Illinois residents owe $24,959 each as their share of the outstanding bonds, unfunded pension commitments and budget gaps the state has accumulated. Thank goodness this obligation doesn’t go on my credit report, or my credit rating would be in the tank along with the state’s A-minus bond rating, the worst of any state in the nation.

It is no wonder that 850,000 people have left Illinois for other states in the past 15 years, according to the Illinois Policy Institute. Or that Illinois has become one of the most business unfriendly states in the country (40th in a recent Forbes survey).

Crushing debt isn’t just Illinois’s problem. According to State Budget Solutions, America’s 50 state governments collectively owe $5.1 trillion, including outstanding bonds, unfunded pension commitments and budget gaps. California has by far the largest debt—$778 billion—more than twice that of No. 2, New York, with $387 billion in red ink.

It may be a coincidence, but the eight lowest debt-per-resident states have Republican governors.

The message of the midterm elections last month was that Americans want to put the era of fiscal irresponsibility and economic stagnation in the rearview mirror. I’m hoping that Bruce Rauner, the Republican elected governor of deep-blue Illinois, will show them how it can be done.

Talk about a non sequitur! Where did that happily ever after come from? I’m as hopeful as anyone that this country has changed course, but that’s not very hopeful. How do you fund the unfunded when the size of the unfunded dwarfs any source of funding? Scoot over, Detroit. There’ll be a lot more municipal defaults and reworked pension deals—all of them in Democrat strongholds—before this undigested mess passes.

PS: How does Illinois’ pension liability increase 75% in five years? I can’t even begin to comprehend.

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Why We Haven’t Cured Ebola

The bunnies needed their rubdowns:

Tom Coburn is going out with a bang with his final “Wastebook.”

In it, the retiring Oklahoma senator laces into the National Institutes of Health for complaining about lack of Ebola research money while NIH investigates the effect of Swedish massages on rabbits.

This particular study on rodent rubdowns cost $387,000 — a tiny fraction of the National Institute of Allergy and Infectious Diseases’ more than $4 billion budget. But the ranking member of the Senate’s Homeland Security and Governmental Affairs Committee cites many “unnecessary” spending programs that continue while NIH officials argue that important disease research has slowed.

The NIH director “claims a vaccine for Ebola ‘probably’ would have been developed by now if not for the stagnant funding for the agency, which has a $30 billion annual budget. Yet NIH did come up with the money to pay to give Swedish massages for rabbits,” Coburn writes.

Coburn notes that after the spa treatment, the rabbits were euthanized, so “those feet were not so lucky after all.”

Coburn identifies $2.1 million as the sum of the four NIH programs. NIH officials did not immediately comment.

Imagine how easily Ebola might have been cured if they had infected the bunnies and experimented with treatments, rather than give them “happy endings” (or maybe not so happy).

PS: I looked into the other wasteful boondoggle, origami condoms, but the missus told me to take it elsewhere:

Not that I blame her.

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Debt Man Walking

Happy Birthday, President Obama!

Only this time, it’s the nation that says “You shouldn’t have.”

The total federal debt of the U.S. government has now increased more than $7 trillion while Barack Obama has been president.

That is more than the debt increased under all U.S. presidents from George Washington through Bill Clinton combined.

The total federal debt first passed $7 trillion on Jan. 15, 2004, after President George W. Bush had been in office almost three years.

When President Obama took office on Jan. 20, 2009, the total federal debt was $10,626,877,048,913.08. As of the close of business on July 30, 2014, it had risen to $17,618,599,653,160.19–up $6,991,722,604,247.11 from Obama’s first inauguration day.

By the close of business on July 31, 2014, it had risen to $17,687,136,723,410.59—up $7,060,259,674,497.51 since Obama first inauguration day.

Seven trillion dollars in five and a half years: as much debt as had accumulated in 211 years and 63 wars.

I am speechless.

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Grow Three Times Through the Ceiling If You Want Me

Sorry, Tony, it’s twice on the pipe: the answer is no.

Untitled

So far, the Obama administration has wracked up a tremendous bill in promotional and advertising costs for Obamacare. The results? A paltry number of Obamacare signups as the March 31 deadline for enrollment quickly approaches.

“President Obama promised a joint session of Congress in 2009 to spend $900 billion over ten years on his health care law: ‘Now, add it all up, and the plan that I’m proposing will cost around $900 billion over 10 years.’

A Senate Budget Committee analysis (based on CBO estimates and growth rates) finds that that total spending under the law will amount to at least $2.6 trillion over a true 10-year period (from FY2014–23)—not $900 billion, as President Obama originally promised.”

The total amount to be spent nationally on publicity, marketing and advertising will be at least $684 million, according to data compiled The Associated Press from federal and state sources.

The Obama administration confirmed to Forbes the Centers for Medicare & Medicaid Services budget for paid media is $52 million from the beginning of January of this year through the end of this month.

Number of people “enrolled” in Obamacare: four million, three million of whom already had health insurance before Obamacare went into effect and cancelled their previous plans and health coverage.

It’s hard to make an honest accounting out of all these numbers. But if ObamaCare spent $684 million to gain one million new customers (again, if any of this is to be believed), that’s nearly seven hundred dollars per new (not previously cancelled) enrollee. At a minimum wage of $10.10, that’s about 68 hours, which is about how much time people have had to spend on the phone or filling out paper applications.

Sounds about right!

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My Hero

But you already knew that.

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Congratulations, Detroit!

Bankruptcy becomes you:

The city of Detroit today officially became the largest municipality in U.S. history to enter Chapter 9 bankruptcy after U.S. Bankruptcy Judge Steven Rhodes declared it met the specific legal criteria required to receive protection from its creditors.

The landmark ruling ends more than four months of uncertainty over the fate of the case and sets the stage for a fierce clash over how to slash an estimated $18 billion in debt and long-term liabilities that have hampered Detroit from attacking pervasive blight and violent crime.

Rhodes — in a surprise decision this morning — also said he’ll allow pension cuts in Detroit’s bankruptcy. Rhodes emphasized that he won’t necessarily agree to pension cuts in the city’s final reorganization plan unless the entire plan is fair and equitable.

“The court finds that Detroit was and is insolvent,” he said. “The court finds that the city was generally not paying its debts as they became due.”

Major creditors objecting to the bankruptcy included AFSCME, the UAW, Detroit’s two pension funds, the city’s public safety unions, retiree associations and a committee created to officially represent retirees during the bankruptcy.

Rhodes ruled the city is legally insolvent and obtained the necessary legal authorization from Gov. Rick Snyder to enter Chapter 9.

Creditors are expected to appeal the ruling, although experts say that appeals courts are hesitant to overturn bankruptcy rulings based on the facts.

Sharon Levine, an attorney for Michigan Council 25 of AFSCME, the city’s largest employee union, recently called the process a “terrifying use of Chapter 9” during the trial.

Chapter 9 terrifying? What does that make Chapters 1 through 8? It’s how you got here that scares the [bleep] out of me, toots. As the namesake of Obama said recently of his own fortunes, you’ve got nowhere to go from here but up!

From “Obama money” to no money:

And now that you’ve got the finances out of the hands of the local politicians, you might find capitalism beats socialism:

An all-star lineup of business and political leaders pitched entrepreneurship as the key to Detroit’s comeback today at the rollout of Goldman Sachs’ 10,000 Small Businesses program in the city.

Speaking at a Ford Field news event were famed investor Warren Buffett, Gov. Rick Snyder, Goldman Sachs CEO Lloyd Blankfein, Mayor Dave Bing and U.S. Sen. Debbie Stabenow, D-Mich., plus three Michigan congressmen and assorted others.

“The resources are here to have a great, great city,” Buffett told the news conference. He added that Detroit is an underutilized resource, much like the auto industry was a few years ago, and that creates a huge potential for growth.

Peppered with questions at the news conference, Buffett, an adviser to the Goldman Sachs program, agreed that he’s ready to invest his own money in Detroit if he finds companies worth buying here. He urged his listeners to contact his organization Berkshire Hathaway with tips on which companies to buy.

Buy low, sell high. With Detroit at rock bottom prices, and its costs corralled by bankruptcy law, Buffett knows a good deal when he sees one. Not the city itself, to be sure, but the sparks of private enterprise that still glow in the ruins.

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Independence for Puerto Rico!

Nothing against Puerto Ricans, mind you. I’ve vacationed there several times, and even dated a lovely Puerto Rican woman in college. Back then, I didn’t mind picking up the occasional $30 dinner tab.

$70,000,000,000 is a little steep for me, however, unless I’m getting a little something-something in return, if you receive my meaning:

Boxes and wooden crates filled with household items bound for the U.S. mainland are stacked high in the Rosa del Monte moving company’s cavernous warehouse, evidence of the historic rush of people abandoning this beautiful island.

The economy here has been in recession for nearly eight years, crimping tax revenue and pushing the jobless rate to nearly 15 percent. Meanwhile, the government is burdened by staggering debt, spawning comparisons to bankrupt Detroit and forcing lawmakers to severely slash pensions, cut government jobs and raise taxes in a furious effort to avert default.

The implications are serious for Americans outside Puerto Rico both because a taxpayer bailout would be expensive and a default would be far more disruptive than Detroit’s record bankruptcy filing in July. Officials in San Juan and Washington are adamant that a federal bailout is not on the table, but the situation is being closely monitored by the White House, which recently named an advisory team to help Puerto Rican officials navigate the crisis.

Crisis? Catastrophe! We’d be better off encouraging the Puerto Ricans still there to huddle on one side of the island, causing it to capsize—as Congressman Congressman Hank Johnson (D-GA) once hilariously worried about Guam—and collecting the insurance.

I don’t know what’s Spanish for chutzpah, but they’ve got it a tope:

“Some people might say, ‘This is their problem.’ But Puerto Rico is part of the United States, you own this problem,” said Pedro Pierluisi (D), Puerto Rico’s nonvoting representative to Congress. “It is not like you can ignore it.”

Un momentito, Pedrito. Why can’t we ignore it? We didn’t run up your $70 billion debt (twenty thousand dollars for every man, woman, and child left behind). How did you manage that, by the way?

“You cannot pay daily expenses with your credit card, and that’s what Puerto Rico has been doing for years,” said Deepak Lamba-Nieves, research director of the Center for a New Economy, a San Juan think tank. “We borrowed just to keep the lights on.”

Puerto Rico’s expansive web of debt includes standard government bonds as well as those floated by public corporations, including authorities for water and sewer, highways and electric power. Together, those bills have nearly tripled since 2000, as successive administrations turned to the bond market to plug gaping budget deficits. In addition to the $70 billion in government debt, the government also faces $37 billion in unfunded pension obligations, according to Morningstar.

The old-fashioned way: issuing new debt to pay for old; underfunding overgenerous pensions—all the usual Democrat tricks to inflate a leaky lifeboat. (The dominant political party in Puerto Rico is the Popular Democratic Party, which is affiliated with the mainland party of the same name.)

But see, I’m way past tired of assuming the debts for Democratic fiefdoms too reckless and irresponsible to do it themselves—Detroit, California, Puerto Rico. As I said, I didn’t create your debt. If anything—with my visits, and my former infatuation with your native daughter—I’m due a refund.

What’s that? Reckless, irresponsible…and lazy?

“[Previously,] we were lazy and complacent,” said Alberto Baco, Puerto Rico’s secretary of economic development and commerce. “Now we have to act fast.”

You said it, amigo, not me.

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What Does Out Of Control Debt Do To Healthcare?

This

Fox 2 News Headlines

“It’s a complete loss of identity for me, to be in this position now and not amongst my peers, and seen as weak and feeble and handicapped and disabled. I hate all these words. I hate that they describe me.

“I always understood that death was a legitimate possibility; I’ve seen enough of my friends die. I can’t say Walter Harris’ name enough. I never considered being injured to the point where I wasn’t going to be who I was before, and having to live with the consequences. One would only assume that you make these kind of sacrifices at work, performing your job, that you’d be taken care of.

“I got a letter saying that my healthcare, through the city of Detroit, was going to be terminated as of January 1, 2014, and that, if I don’t have another plan purchased by December 15th of this year, that I’ll have a gap in coverage. And they’re offering a $200 a month stipend to supplement the cost of purchasing my own health insurance.

“I definitely feel discarded. It’s disheartening that guys like me put ourselves on the line everyday. These Detroit firemen, they put their lives, their bodies, on the line every day.

Seventeen trillion in debt is not a good thing for our collective future.

– Aggie

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Defeat ObamaCare—Ask Me How!

Make less money!

What President Obama has done to America’s standing in the world, he is also doing domestically. We finally have a president for our times: cutting America down to size.

People whose 2014 income will be a little too high to get subsidized health insurance from Covered California next year should start thinking now about ways to lower it to increase their odds of getting the valuable tax subsidy.

“If they can adjust (their income), they should,” says Karen Pollitz, a senior fellow with the Kaiser Family Foundation. “It’s not cheating, it’s allowed.”

Under the Affordable Care Act, if your 2014 income is between 138 and 400 percent of poverty level for your household size, you can purchase health insurance on a state-run exchange (such as Covered California) and receive a federal tax subsidy to offset all or part of your premium.

Allowed? It’s encouraged! Mandated, one might say!

I’m as serious as death here. folks. Everything President Obama touches shrinks in stature. The economy, our national standing, our heritage—everything. Except our national debt, of course. What presidents one through 43 took nearly two and a quarter centuries to accumulate, president 44 will have matched in eight short years. (They just seem long.)

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Uh-Oh

It’s all fun and games until China threatens. Play time’s over:

China publicly intervened for the first time in America’s looming debt crisis yesterday, demanding the US take ‘concrete measures’ to prevent a default on government debt that could be globally catastrophic.

China is the U.S’s biggest foreign creditor, holding at least £794 billion in US Treasury bonds, and its leaders warned Washington against jeopardising its huge stake in the American economy.

Expressing concern over the continuing deadlock in Washington about raising the government’s debt ceiling, China’s vice finance minister, Zhu Guangyao, said the ‘clock was ticking’ for the U.S.

As the world’s two biggest economies, ‘China and the US are inseparable,’ he said.

Referring to a similar Washington impasse in 2011 that led to the humiliating downgrading of America’s credit rating, Mr Zhu said: ‘We hope the United States fully understands the lessons of history.’

“China and the US are inseparable.” Translation: “we own your ass.” With the subtle connotation of “nice country ya got here, shame if something happened to it”.

PS: Little doubt whom China blames:

“The executive branch of the US government has to take decisive and credible steps to avoid a default on its Treasury bonds,” he said.

In the words of the First Lady, let’s move!

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The Facts of Life Are Conservative

Even in—especially in—Detroit:

Detroit is broke, but it didn’t have to be. An in-depth Free Press analysis of the city’s financial history back to the 1950s shows that its elected officials and others charged with managing its finances repeatedly failed — or refused — to make the tough economic and political decisions that might have saved the city from financial ruin.

Instead, amid a huge exodus of residents, plummeting tax revenues and skyrocketing home abandonment, Detroit’s leaders engaged in a billion-dollar borrowing binge, created new taxes and failed to cut expenses when they needed to. Simultaneously, they gifted workers and retirees with generous bonuses. And under pressure from unions and, sometimes, arbitrators, they failed to cut health care benefits — saddling the city with staggering costs that today threaten the safety and quality of life of people who live here.

Decades of mismanagement added to Detroit’s fiscal woes. The city notoriously bungled multiple federal aid programs and overpaid outrageously to incentivize projects such as the Chrysler Jefferson North plant. Bureaucracy bogged down even the simplest deals and contracts. In a city that needed urgency, major city functions often seemed rudderless.

When all the numbers are crunched, one fact is crystal clear: Yes, a disaster was looming for Detroit. But there were ample opportunities when decisive action by city leaders might have fended off bankruptcy.

The piece finds some new targets for blame beyond the usual Coleman Young and Kwame Kilpatrick, and we’ll accept their charges. But Detroit saw this coming. It just chose to blink:

“Detroit got into a trap of doing a lot of borrowing for cash flow purposes and then trying to figure out how to push costs (out) as much as possible,” said Bettie Buss, a former city budget staffer who spent years analyzing city finances for the nonpartisan Citizens Research Council of Michigan. “That was the whole culture — how do we get what we want and not pay for it until tomorrow and tomorrow and tomorrow?”

Ultimately, Detroit ended up with $18 billion to $20 billion in debt and unfunded pension and health care liabilities. Gov. Rick Snyder appointed bankruptcy attorney Kevyn Orr as the city’s emergency manager, and Orr filed for Chapter 9 on July 18.

The Freep provides a chart of revenue and debt. The chart shows that it was in 1990—23 years ago—that debt rocketed while revenue sagged. For the first roughly 40 yeas of its decline, including much of Coleman Young’s tenure, Detroit was managing its shrinking finances. Late in Mayor Young’s term, however, and ever after, debt took off.

And what was once America’s fourth largest city is now a ghost town. Anyone think it can’t happen to the country as a whole? Me neither.

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Detroit Lyin’

I don’t know, man, how is this our responsibility?

“Pension funds are supposed to be your grandmother’s life savings; you handle this money better than you would handle your own,” Kevyn Orr, the state-appointed manager running Detroit, said last month. “That just wasn’t done for a long, long time.”

Significant investment losses can be chalked up to the recession that ravaged the portfolios of most investors.

But some losses are the result of questionable and risky investment decisions, such as the funds’ $30 million loan to a cargo airline that filed for bankruptcy months later, according to court records.

And in some cases, outright fraud was at play. FBI investigations led to the conviction this year of former Mayor Kwame Kilpatrick on a variety of charges, including some related to the pensions. In addition, $84 million of the funds’ losses have been tied to a corruption scheme.

According to FBI and court documents, city and pension fund officials allegedly accepted bribes and kickbacks — ranging from cash payments to lavish trips, entertainment and private plane flights — in exchange for steering more than $200 million in pension fund investments.

But many current workers and retirees worry that it may be too late if proposed benefits cuts are approved.

“I was promised a full retirement package for my loyalty and my hard working services,” retired city employee Charles Chatman wrote in a letter filed with the court objecting to the bankruptcy proceedings. “If my benefits are relinquished, it will be very hard for me to survive.”

Dude, the money’s not there. It’s like Social Security—it’s gone. To give it to you they’ll have to take it from someone else.

I suggest you send a bill for the difference to the Michigan State Democratic Party—and I am completely serious. That’s who burned through your pension. That’s where you should go to get what’s coming to you (though you already got what’s coming to you by voting Democrat for decades). Sorry, but Democrats suck. At least you know now.

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