The Bill For The Healthcare Bill...

MANDATORY MARCUS

In 1965 when the Medicare program was initially kicked off, Congress estimated Medicare's cost to be about $12 billion in 1990.

Meanwhile in the real world when 1990 rolled around, Medicare's cost was $107 billion.  Today it is rapidly approaching $500 billion.

Today's Congress (and President) are saying that the healthcare bill currently being debated will lower the budget deficit, reduce premiums and only cost the "wealthiest" of Americans any additional tax dollars. 

Wanna bet on whether the geniuses in today's Congress are any better at making these estimates than the ones we had in 1965...?

Winter Olympic Thought of the Day...

MANDATORY MARCUS

No amount of dramatic music with deep voiced narratives will make men's figure skating cool.

California Dreamin'

MANDATORY MARCUS


Here are all the reasons you can expect California to go bankrupt in our lifetime...compliments of the folks over at Global Economic Trend Analysis:

• California has the 3rd highest state income tax in the nation: 9.55% tax bracket at $47,055 and 10.55% at $1,000,000 - Tax Foundation 2010 State Business Tax Climate Table 2
• California has the highest state sales tax rate in the nation by far at 8.25%. Indiana is next highest at 7%. Table 15
• California corporate income tax rate is 3rd worst in the nation with a rate of 8.84%. - Table 2 and Table 8
• California ranks 13th in property taxes. Table 2
  
• California has the fourth highest capital gains tax 9.55%. - Capital Gains Tax Rates By State
• California has the highest gasoline tax as of January 2010, averaging 65 cents/gallon. The national average is 47.4% - API Motor Fuel Taxes
• California has one of the highest state vehicle license car taxes, 1.15% per year on value of vehicle, up from 0.65% in 2008. [expired link]

So where's the money going?

• 1 in 5 in LA County receiving public aid, nearly 2.2 million people as of February 2009. 20% in Los Angeles County receive public aid

• California has 12% of the nation’s population, but 36% of the country’s TANF (“Temporary” Assistance for Needy Families) welfare recipients – more than the next 8 states combined. Unlike other states, this “temporary” assistance becomes much more permanent in CA. July, 2009 California has more recipients in key welfare category than next eight states combined.
• California prison guards highest paid in the nation. The maximum pay of California's prison guards is nearly 40 percent higher than that of the highest-paid guards in 10 other states and the federal government, according to a study by the California Department of Personnel Administration. Cal-Taxletter
• California teachers easily the highest paid in the nation. National Education Association
• California now has the lowest bond ratings of any state, two steps above junk. The new rating affects about $72 billion of general obligation and lease-supported bonds. July 15 California bond rating cut again California ranks 44th worst in “2008 lawsuit climate.” Institute For Legal Reform
• California, a destitute state, still gives away college education at fire sale prices. California community college tuition is by far the lowest in the nation. Nationwide, the average community college tuition is 4.5 times higher than California CC’s. This ridiculously low tuition devalues education to students – resulting in a 30+% drop rate for class completion. Moreover, 2/3 of California CC students pay no tuition at all – filling out a simple unverified “hardship” form that exempts them from any tuition payment, or receiving grants and tax credits for their full tuition. [Expired Link]
• California offers thousands of absolutely free adult continuing education classes. In San Diego, over 1,400 classes for everything from baking pastries to ballroom dancing are offered totally at taxpayer expense. San Diego Continuing Education
• California residential electricity costs 13.81 cents per kilowatthour. The national average is 6.99-8.49. US Department of Energy
• It costs 38% more to build solar panels in California than in Tennessee – which is why European corporations have invested $2.3 billion in two Tennessee manufacturing plants to build solar panels for our state. March 5, 2009 More Solar Companies Producing Elsewhere to Sell to California

Oh the fun that's in store for all of us here in the once Golden State....

Letter To The Editor

MANDATORY MARCUS

In today's Los Angeles Times I saw this letter to the editor:

Re: New Northrop Gruman CEO shows why he got the job" Jan 7:
     My family works for aerospace companies in Southern California.  The news that Northrop Grumman Corp. is moving its headquarters to the Washington, D.C., area is a shock to us.
     Is it possible to motivate the mayor of Los Angeles or the governor of our state to stop the planned action of new Northrop Chief Executive Wesley G. Bush?  We strongly believe it will affect many companies along with Northrop.
     The CEO's of the financial companies are responsible for our present economy.  This CEO will destroy what is left of Southern California's economy.
     - Reba Palt, Irvine


My head is spinning.

Upon what body of evidence does one base the claim that "This CEO will destroy what is left of Southern California's economy."?  How exactly is any of this the fault of Northrop's CEO?

Given the nonstop barrage of media narratives that place the blame of our economic woes entirely on the back of "big business", while conveniently leaving out the government policies that allowed most of the bad behavior to take place, its no wonder that Ms. Palt is prone to blame the CEO.  He's the easy target...but he's the wrong target.

Ms. Palt draws some connection between Northrop's CEO moving the company out of California and the CEO's of financial institutions being the cause of our present economy.  I'm guessing the point there is that CEO's are bad...and our savior here might possibly be the Mayor of Los Angeles and the Governor of California???

The unintended irony in Ms. Palt's letter is that she is imploring the very people who actually are at fault here to do something to stop it.  The Mayor of Los Angeles and the Governor of California are part of the engine that is driving Northrop to leave the State.

Northrop's CEO is responding in a profoundly rational way to the incentives that the State of California is providing; as well as to the incentives that other states are providing.  States compete to attract business and on that count California just got its ass kicked.

California is no friend to business and hasn't been for a very, very long time (think gold rush days).  According to the Tax Foundation's most recent State Business Climate Index for 2010, California ranked 48th in 2007, 49th in 2008, 48th in 2009, and is again ranked 48th in 2010.  Not exactly the kind of environment that is going to endear your business community to want to stick around.

A similar survey asked CEO's to rate the best and worst states for job growth and business.  California has been the picture of consistency...ranking 51st (last place) from 2006 through 2009.  Rankings for 2010 won't come out until later in the year.  Care to wager how California will finish this year...???  

Northrop is looking to move to a Virginia suburb.  If you're wondering whether Virginia has a friendlier business climate than California...Virginia ranks 15th on the State Business Climate Index and 7th in the CEO survey; California is 48th and 51st respectively.

Consider some of the other differences between California and Virginia as of July 1st 2009:

• Sales tax in California = 8.25% (actually exceeds 10% in L.A. County)...Virginia = 5.0%.
• Gas tax in California = $0.399/gal...Virginia = $0.32/gal
• California state income tax rate @ $47,055 up to $1M = 9.55%...Virginia, max state income tax rate = 5.75%

 
I'm no expert in policy matters but I do know that the CEO of Northrop did not legislate the California state policies that make California less competitive.

While I agree that it will be bad (possibly very bad) for the Southern California economy if/when Northrop moves away...the fault isn't with Northrop's CEO...it's with a political machine in dire need of being put down altogether and reworked from scratch.

But until then....congratulations to the California political machine that continues to amaze with record deficits, anti-business politics and an overwhelming, other-worldly ability to continuously make one bad decision after the next.

And most impressively...still being able to get folks like Ms. Palt to blame someone else.

I Love it When A Good Plan Comes Together...

MANDATORY MARCUS


"Now, let me get this straight...we are going to pass a health care plan written by a committee whose chairman says he doesn't understand it, passed by a Congress that hasn't read it but exempts themselves from it, to be signed by a President that also hasn't read it and who smokes, with funding administered by a treasury chief who didn't pay his taxes...all to be overseen by a surgeon general who is obese, and financed by a country that's nearly broke. What could possibly go wrong?"

- An Anonymous Quote From a Very Astute Observer

When Knowledge Isn't Power

MANDATORY MARCUS

"knowledge is becoming more diffuse, while political power is becoming more concentrated."

- Unchecked & Unbalanced by Arnold Kling

True...so it looks like we should expect lots and lots of really bad decisions headed our way...

Blog Envy II - Limits on Pay Edition

MANDATORY MARCUS

I find myself once again suffering from blog envy.  Oh, to have authored this:

"Yes, it is high time that pay and investment guidelines be mandated for all top level executives who may in the normal course their daily work push the entire economy too close to or even over the edge of systemic risk falls. If nothing else, this Great Recession has taught us that top executives can practically capsize the economy.

But the chief concern is not with presidents and vice presidents of too-big-to-fail banks and other bailed-out enterprises. As large as they are, they are small potatoes relative to the big generators of systemic risk. The critical concern is with top government executives who can create national and international panic, lay the groundwork for international inflation or deflation, and just by voting and writing regulations can change the risk profile of entire industries.

We taxpayer/investors demand a set of risk-sensitive compensation guidelines that will mandate pay and wealth-management rules for all federal government top executives starting with the president of the United States and all cabinet members and their deputies. While we’re at it let’s include all members of Congress and every member of the commissions and boards that manage the nation’s independent agencies, including, of course, the board of governors and chairman of the Federal Reserve System.

To properly align incentives of these elected and appointed executives (and others), we demand that each and every one be paid a base pay — some 75 percent of the current salary — plus incentive pay — the remaining 25 percent — based on improvements in real GDP growth over a five-year period that begins the day of their appointment or election. The base pay would be provided on the normal Office of Personnel Management pay schedule. The incentive pay, with recommended details worked out by Feinberg, would be provided on the basis of a three-year rolling average gain in real GDP, which means that the first incentive payment would be received three years after an executive’s first day of office.

But this deals with just part of the incentive misalignment. We must align incentives associated with government executive wealth.

Elected and appointed government executives routinely place their personal investment portfolios into management by a blind trust. While this action satisfies those who may be concerned primarily with ethics
and upright behavior, simply being blindfolded as to capital gains and losses does not get to the systemic risk problem, which of course, is our chief concern here.

All high government officials described earlier must have their personal portfolios invested in a visible S&P 500 index funds, not to be redeemed until one year after leaving office. We taxpayer/investors do not want our executives blindfolded as to gains and losses. We want them to know exactly what is happening to the Great American Bread Machine, our economy, while they are in office. We want them to feel our pain and our gain.Feinberg and Bernanke should focus efforts on those whose actions can capsize the economy—the top executives and elected officials in Washington. The others are small potatoes."


You can read the entire article from which this excerpt comes right here; written by Bruce Yandle.

My only comment is that paying the elected officials noted above 75% of their existing salaries is still too generous.  All elected officials should be paid a base salary equivalent to the median US family income (currently just a bit over $50,000/year).  Base salaries would rise and fall accordingly as would the above noted incentive pay. 

Our elected officials have for too long been throwing their stones from an ivory tower...it's time they moved into glass houses of their very own.