Gasoline prices are running at their lowest level in years, a great boost for embattled consumers with the holiday season approaching. Unfortunately, the ruling class isn’t about to let that continue. The ruling class operates on the superstition that the world is getting hotter, that this is entirely due to human activity, and that regulatory zealotry in a single state is capable of stopping it. That comes through measures such as “cap and trade,” which supposedly burden only the captains of industry, but which as Dale Kasler shows in the Sacramento Bee, really means a punishing new tax on everybody who drives.
California’s two-year-old regulatory mechanism “puts a price on carbon spewed into the atmosphere,” and “the result will be higher gasoline and diesel prices.” California Air Resources Board (CARB) boss Mary Nichols explains that “the increase is likely to be less than 10 cents a gallon,” and consumers will probably barely notice the difference.” She says “the amount is small,” and “It does get hidden in the noise, in the other changes that are constantly taking place in the pricing of gasoline.” Nichols said “gasoline is cheap relative to other things you can buy and relative to overall inflation in the economy.” This bureaucratic boilerplate deserves a translation.
The increase is going to be not small, but significant, and everybody will notice, particularly those Californians who drive to work, such as the working poor. The increase does not “get hidden.” Rather, an axis of legislators and unelected regulatory zealots chose to delay the imposition on drivers, hoping to blunt the punishment, in the style of Obamacare, also sold with lies.
Jon Costantino, a former CARB climate-change planner, told the Bee that “the cost of the carbon allowance has to get passed through. That’s the whole point. The consumer feels the impact.” So listen up all drivers, especially those making a 60-plus-mile round trip to earn minimum wage. Politicians and unelected, highly paid regulatory zealots like Mary Nichols want you to feel the pain. But the problems do not stop there.
Mary Nichols also kept on CARB staff Hien Tran, who bought his statistics PhD in a New York City diploma mill and fudged air pollution figures. Trofim Lysenko truly lives on in the Golden State.
CNSNews’ Terence Jeffrey just happened to read the Daily Treasury Statement released by the U.S. Treasury Department on the day before Thanksgiving. Here’s what he found (we’ve added the notes in parentheses to make the very large numbers easier to express):
The Daily Treasury Statement that was released Wednesday afternoon as Americans were preparing to celebrate Thanksgiving revealed that the U.S. Treasury has been forced to issue $1,040,965,000,000 ($1.041 trillion) in new debt since fiscal 2015 started just eight weeks ago in order to raise the money to pay off Treasury securities that were maturing and to cover new deficit spending by the government.
During those eight weeks, Treasury took in $341,591,000,000 ($341.6 billion) in revenues. That was a record for the period between Oct. 1 and Nov. 25. But that record $341,591,000,000 ($341.6 billion) in revenues was not enough to finance ongoing government spending let alone pay off old debt that matured.
The Treasury also drew down its cash balance by $45.057 billion during the period, starting with $126,568,000,000 ($126.6 billion) in cash and ending with $81,511,000,000 ($81.5 billion).
The only way the Treasury could handle the $942,103,000,000 ($942.1 billion) in old debt that matured during the period plus finance the new deficit spending the government engaged in was to roll over the old debt into new debt and issue enough additional new debt to cover the new deficit spending.
During that same period of time, from the end of the federal government’s 2014 fiscal year on September 30, 2014 through the day before Thanksgiving, November 25, 2014, the total public debt outstanding for the U.S. government increased by $139,862,237,233.44 ($139.9 billion) to $17,963,753,617,957.26 (nearly $18 trillion), which represents the net new debt that the U.S. government has accumulated. Which is, of course, on top of the $942.1 billion worth of old debt that was rolled over.
We’ve projected that the total public debt outstanding of the U.S. government will grow to exceed $18 trillion sometime in the next two weeks.
Speaking of which, Jeffrey makes a special note about the way the U.S. government’s debt is structured, with very little set up to mature after 30 years, which is something that would be desirable considering how low interest rates are today. Instead, about 88% of all the marketable debt issued by the U.S. government is set to mature after much lower periods of time, with about 10% set to mature in less than one year, when almost all of it will be rolled over. Again.
The continual rolling over of these short-term, low-interest bills helped drive over the $1-trillion mark the new debt the Treasury had to issue in the first eight weeks of this fiscal year.
The Treasury has taken out what amounts to an adjustable-rate mortgage on our ever-growing national debt.
If the Treasury were forced to convert the $1.4 trillion in short-term bills (on which it now pays an average interest rate of 0.056 percent) into 30-year bonds at the average rate it is now paying on such bonds (4.919 percent) the interest on that $1.4 trillion in debt would increase 88-fold.
That is the stuff of which a national debt death spiral would be made!
It may not be baseball season, but outfielder Giancarlo Stanton of the Miami Marlins has signed a 13-year contract for $325 million, reportedly the richest deal in the history of sports, at least in North America. That contract reflects the willingness of baseball fans to plunk down their money to see Stanton play. But as Eben Novy-Williams of Bloomberg news observes, there will be less to the contract than meets the eye.
Federal, state, city and payroll taxes will grab $141 million, a full 43.3 percent of the total, nearly half. Giancarlo Stanton will also pay $8.5 million due to the “jock tax” some states levy on visiting professionals. One of those states is California, which shakes down out-of-state athletes for their “duty days” in the Golden State. Taxing out-of-state athletes like residents reportedly brings in some $100 million a year, including $163,000 alone from a three-day trip by the New York Knicks and $106,000 from the 2006 sojourns of Yankee infielder Alex Rodriguez. This confiscatory activity is not limited to athletes.
The California tax also applies to a blues singer from Chicago, a home-care nurse from Nevada, and a novelist from Montana. An out-of-state salesman earning $50,000 a year, about $200 a day, would owe about 9 percent of that, some $18 a day, to California. These types are not as easy to track as Giancarlo Stanton, but all should be clear that the Pillage People are out to grab as much as they can.
As Dan Walters notes in the Sacramento Bee, some years ago Californian Gilbert Hyatt patented a microchip and moved to Nevada, which has no state income tax, before any royalties came in. California’s Franchise Tax Board pursued Hyatt relentlessly and he sued for harassment, winning a judgment of nearly $500 million. Now 76, he charges that California is taking aim at his estate. So the Pillage People are after everybody, for as much as they can grab, and their quest doesn’t end when the taxpayer dies. Government greed is eternal.
Sometime in the next two to three weeks, the total public debt outstanding for the U.S. government will exceed 18 trillion dollars. If you were to ask us to pin down a precise date, we would say sometime around December 9, 2014, given the rate at which the national debt has been increasing during the federal government’s current fiscal year:
Since the start of the U.S. federal government’s 2015 fiscal year on October 1, 2014, the national debt has grown at an average rate of $2.08 billion per day.
If it helps put these very large numbers into a more human scale, when the U.S. national debt reaches $18 trillion, that will work out to be about $124,275 per U.S. household, which is up from $81,984 per U.S. household at the end of the 2008 fiscal year. And the new figure would be on top of your mortgage, car loans, student loans, credit cards, et cetera that you might also have.
But unlike those tangible things, where you can at least point to your house, your car, your education, or even the Christmas presents you might be buying this upcoming Black Friday, can you point to what you personally got in return for that $42,291 worth of additional debt per household that the federal government accumulated during the last six years?
If you cannot, is it really worth it?
The Internet is a flywheel of innovation, changing virtually every aspect of life in the nation, from commerce through entertainment and certainly journalism. The Internet was not invented by Al Gore, vice-president of the United States under Bill Clinton. But now president Barack Obama, in the wake of a mid-term election defeat, wants to make the Internet look like something that Al Gore might indeed have designed. In typical style, government is disguising this regulatory surge with a misleading label.
As Jim Puzzanghera of the Los Angeles Times puts it, President Obama has “called on federal regulators to toughen proposed net-neutrality rules for Internet traffic, including taking the controversial step of changing the way the law treats broadband providers so they are subject to stricter utility-like regulation.” So it’s a regulatory issue, but government spins it as “net neutrality” though it’s anything but. If government were to be truly neutral, it would leave the Internet alone in the marketplace and let consumers decide. Through the Federal Communications Commission, it wants to impose regulations more suited to the telephone industry, making the Internet, in effect, a public utility.
“Nothing is neutral in a free market economy,” explains Gene Marks in Forbes, “which is why ‘net neutrality’ is a dumb idea.” As Marks notes, demanding that Internet access be provided at the same cost to everyone “is like demanding to pay the same for a room at the Hampton Inn or the Ritz Carlton.” Therefore, “If people want a better location they have to pay more. Why would the Internet be any different? There’s no such thing as neutral.” Marks is right, but government regulators don’t see it that way.
FCC boss Tom Wheeler welcomes the Obama regulatory surge and told reporters, “We must take the time to get the job done correctly, once and for all, in order to successfully protect consumers and innovators online.” Imposing more federal government regulation will protect only federal regulators. Regulation disguised as neutrality will neuter innovation, impose higher costs, and generally abuse Americans.
How much has government spending for things like Medicaid, Medicare, Social Security, Affordable Care Act subsidies, unemployment benefits, and other welfare programs grown since today’s Social Security recipients were born?
The National Interest‘s Milton Ezrati has the numbers:
These constraints are crystal clear in existing budget data. Entitlements have grown relentlessly over the decades, from 30 percent of all government spending in 1950 to fully 70 percent today. They amount to 15 percent of the gross domestic product (GDP). More than one dollar in seven, then, of everything this country produces now gets paid out in one or the other of these programs. Since the full implementation of the Affordable Care Act promises only to increase those proportions, and voters clearly show no desire to fork over still more economic resources to Washington, the rest of the budget, everything else that Washington does, faces a relentless financial squeeze.
Ezrati describes where this is all going:
The arithmetic is irrefutable, whatever some people would like to believe. There simply is no room in the budget for much else but entitlements. Washington will either reverse sixty-plus years of practice and turn to serious entitlements reform, or it will have to give up on most of its other priorities. The only remaining question is this: can the White House, the Senate and the House do the math?
We suspect that the politicians and bureaucrats who occupy each of these institutions can indeed do the math, but won’t, until the time when their pay, benefits, and power are negatively impacted, since those are the only priorities that they really care about.
Until then, the entitlement squeeze will be on!
At the end of our recent piece on the Great Crane Giveaway, we observed that “when it comes to big government and bureaucracy, things are always worse than they seem.” As it turns out, the crane giveaway wasn’t the end of it, as San Francisco Chronicle columnists Phillip Matier and Andrew Ross point out.
The new bridge is in place, but the old bridge needs to be torn down. As that proceeds, “the double-crested cormorants and other birds that call the old Bay Bridge home are fast becoming a $30 million-plus headache.” But the birds are not the problem. “As crews demolish the 10,000-foot-long steel structure where the birds roost, they’ve had to navigate around broadly interpreted state and federal environmental laws designed to protect the feathered critters.” Bay Area Toll Authority mouthpiece Randy Rentschler told the columnists that the bridge has “suffered tens of millions of cost overruns and months of delays” from regulation enforcement.
Caltrans is spending $709,000 on nesting “condos” on the underside of the new bridge, hoping the birds will move. Caltrans also spent $1 million on decoys and such for the same purpose, but the birds haven’t moved. Caltrans is now speeding up the work, at a cost of additional $12.5 million. By Matier and Ross’s count, transportation bosses will need $17 million more, bringing the regulatory-driven spending on birds to more than $33 million, “which ain’t chicken feed.” So with government regulation and bureaucracy, things are always much worse than they seem, and don’t forget the new eastern span of the San Francisco–Oakland Bay Bridge.
It came in $5 billion over budget and ten years late, with more than a reasonable doubt about its safety. Defective welds and other problems prompted insiders to call for a criminal investigation, but no surprise that nothing of the kind took place. Misconduct, incompetence, and waste all enjoy special protection in California government.
Tom Slear retired from the U.S. Army in 2001 after reaching the rank of lieutenant colonel in a career spanning 28 years, 23 as a reservist, where he specialized in logistics and never faced combat. He recently wrote an opinion piece in the Washington Post, in which he described veterans benefits as “too generous.” Here are excerpts:
Once I joined the Reserves, I started out receiving what today would be $11,000 annually for two days of drill per month and 13 days of active duty per year. That increased to $17,600 when I retired in 2001.
Even though I spent 80 percent of my time in uniform as a reservist, I received an annual pension in 2013 of $24,990, to which I contributed no money while serving. (Reserve retirement pay does not start until you turn 60. For those who remain on active duty for at least 20 years, payments start the month they leave service. Those who enlist at 18, right out of high school, can retire at 38 and receive $26,000 a year for the rest of their lives.)
My family and I have access to U.S. military bases worldwide, where we can use the fitness facilities at no charge and take advantage of the tax-free prices at the commissaries and post exchanges. The most generous benefit of all is Tricare. This year I paid just $550 for family medical insurance. In the civilian sector, the average family contribution for health care in 2013 was $4,565, according to the Kaiser Family Foundation.
Simply put, I’m getting more than I gave. Tricare for military retirees and their families is so underpriced that it’s more of a gift than a benefit.
It’s said that government workers now make, on average, 30% more than private-sector workers. Put that fantasy aside. It far underestimates the real figures. By my calculations government workers make more than twice as much. They are America’s fastest-growing group of millionaires.
Doubt it? Then ask yourself: What is the net present value of an $80,000 annual pension payout with additional full health benefits? Working backward the total NPV would depend on expected returns of a basket of safe investments–blue-chip stocks, dividends and U.S. Treasury bonds.
Investment pros such as my friend Barry Glassman of Glassman Wealth Services say 4% is a good, safe return today. But that’s a pitiful yield, isn’t it? It’s sure to disappoint the millions of baby boomers who will soon enter retirement with nothing more than their desiccated 401(k)s–down 30% on average from 30 months ago–and a bit of Social Security.
Based on this small but unfortunately realistic 4% return, an $80,000 annual pension payout implies a rather large pot of money behind it–$2 million, to be precise. That’s a lot. One might guess that a $2 million stash would be in the 95th percentile for the 77 million baby boomers who will soon face retirement.
That $2 million also happens to be the implied booty of your average California policeman who retires at age 55.
By comparison, we find that military benefits are far less generous than those enjoyed by “civilian” government employees.
In the grander scheme of things, it’s the overly generous pensions of civilian government employees that present a greater threat to the fiscal stability of the communities they serve. Such benefit plans have forced a number of local governments across the United States into bankruptcy proceedings.
To deal with that bigger picture, we propose that state and local governments bring their benefits to be in line with what military reservists receive after similar periods of public service.
Although Lieutenant Colonel Slear describes reservists’ benefits as excessively generous, a reduction of the benefits of state and local government employees to the level enjoyed by reservists would least lower the risk that the federal government would bail out state and local governments, and thus would save money at the federal level as well.
California’s $3 billion Stem Cell Research and Cures Act, Proposition 71, promised life-saving cures and therapies for a host of afflictions. In 2004 voters approved the measure, which created the California Institute for Regenerative Medicine (CIRM). Ten years later, David Jensen of the California Stem Cell Report shows how that is working out for patients and taxpayers alike.
“No California-financed cures or therapies have reached the clinic and none are likely to do so for years, if then,” says Jensen, who has been watching CIRM since 2005. So a ballpark figure for the number of actual cures and therapies emerging from CIRM is zero, and likely to stay that way. But as Jensen shows, CIRM is productive on another front: “The agency is spending money at a rate of $21,000 an hour, 24 hours a day, seven days a week.” So these folks are very good at spending other people’s money. By Jensen’s count, “more than $1.8 billion has been awarded,” and it has not been spent in a haphazard manner. A full 88 percent of the money, almost all of it, is “going to institutions linked to persons who are or have been on the agency’s board of governors.” UC Davis, which has a seat on the board, has received $125.8 million, ranking fifth among recipients. And as Jensen notes, former CIRM boss Alan Trounson is now with StemCells Inc. in New Jersey, which received $19.4 million from CIRM. None of this should come as a surprise.
In practice, CIRM has always stood for California Institute for the Redistribution of Money. Real estate tycoon Robert Klein cleverly wrote Prop. 71 to install himself as the institute’s chairman, and he protected it from almost all legislative oversight by requiring a 70 percent supermajority of both houses to make any structural or policy changes. He awarded huge salaries, such as president Alan Trounson’s $490,000, and provided a comfortable landing spot for politicians, such as former state senator and ex-Democratic Party boss Art Torres, immediately tripling the lawyer’s salary to $225,000. Klein grabbed $150,000 a year for himself, and the CIRM board gave money to a for-profit company for which Klein had lobbied, even though the institute’s own scientific reviewers twice rejected the proposal.
With this kind of insider trading, and no cures, CIRM is a complete bust. California should shut it down and beware of any initiative that comes wearing a white coat.
Since 2008, roughly $1 out of every $10 new dollars borrowed by the U.S. government through the end of its 2014 fiscal year has gone to fund the Federal Direct Student Loan program, which lends the money borrowed by Uncle Sam to college students at over double the interest rate that the U.S. government is charged by its lenders.
Federal borrowing for the sake of making student loans accounts for over $700 billion of the more than $7 trillion increase in the total public debt outstanding over that time. How much money do you think that the U.S. federal government is making from running that racket?
Earlier this year, the General Accounting Office (GAO) looked at the income that the U.S. Treasury was raking in as a result of its Direct Loans program for students for the federal government’s 2007 through 2012 fiscal years, when it originated a reported $454 billion in student loans. The GAO found that the U.S. federal government netted a profit of $66 billion.
We should note that well over 95% of this activity occurred after 2008, corresponding to President Obama’s tenure in office and the federal government’s effective takeover of the student loan industry from the private sector during that time.
Personal finance guru Suze Orman has some thoughts about the federal government’s profiteering:
If one were to ask me what I think is the most dangerous threat to our economy, the answer is very simple: student loans.
As I write this, we have more than $1.2 trillion of student loan debt. About 10 million federal students loans are taken out annually, and then there are the insanely dangerous private student loans on top of that staggering number.
And while 6.7 million borrowers in repayment mode are delinquent, the sad fact is that many lenders aren’t exactly incentivized to work with borrowers. Unlike all other forms of debt, student loans can’t be discharged in bankruptcy. Moreover, lenders can garnish wages and even Social Security benefits to get repaid. A new report by the Consumer Finance Protection Bureau details just how bad the situation is for private loan borrowers. (From Oct. 1, 2013, through Sept. 30, the agency handled about 5,300 private student loan complaints, an increase of nearly 38 percent from the previous year.)
And private student loans aren’t the only problem. Do you know that from 2007 to 2012, the government made $66 billion in profit on federal student loans? We can all debate how our government should generate revenue to support federal spending programs, but doing it on the backs of young adults who need an education to compete in the increasingly competitive global workforce is just appalling.
Orman doesn’t make the connection that borrowers who owe money to the federal government for student loans are even more disadvantaged than those who took out loans with private lenders, because the federal government is even less responsive. And because there is no limit on how long a debt owed to the federal government can be collected, it has even less incentive to work with borrowers.
Perhaps the most effective way to resolve this issue would be simply to make all student loans fully dischargeable in bankruptcy proceedings once more, whether originated by private lenders or by the federal government. That way, the people who need real and permanent relief from their student debts, regardless of who their lender might be, could get it.
Faced with the risk of losing massive amounts of money because of the bad decisions it made in getting into the business of making direct student loans in the first place, the federal government might then have an adequate incentive to adopt a more fiscally sound approach to its direct lending racket by getting out of it.
And that would go a very long way toward eliminating the federal government’s hidden budget deficit.