Why California Is Failing While Wisconsin Is Succeeding

Last week we compared the relative economic situations of three states: Florida, New Jersey, and California (http://www.loathemygovernment.blogspot.com/2012/07/state-level-economic-musings-california.html). Florida fared the best in our analysis, with unnecessary government costs being cut, funding for education being increased, no taxes being raised, but essential government functions still operating. This has resulted in Florida making some of the best improvements in its economy and unemployment rate in the country.

We concluded that New jersey Governor Chris Christie was making all of the right moves to get that state economy moving again but was facing a long tradition of the state overspending its tax stream and raising taxes to cover the shortfall. Its economy has been slow to recover but at least the governor is doing the right things.

The basket case of the three was California. Tax shortfalls, underperfoming schools, budget overruns, good sized cities declaring bankruptcy (San Bernadino and Stockton), an out migration of better off citizens and business, a general malaise throughout the state and its population. However, we did present a rather radical plan from famed economist Arthur Laffer to help pull the state's economy and state government out of the ditch. However, it is doubtful the state's political class is willing or able to accomplish such a feat.

If we had waited a few days, we could have included some other worthwhile advice on how to fix this broken state, courtesy of an article and analysis in the L.A. Times:

 (http://www.latimes.com/news/opinion/commentary/la-oe-malanga-wisconsin-california-bankruptcies-20120717,0,5879241.story).

It has been my experience that the L.A. Times is a left leaning, Democratic Party preferring publication. So when it sings high praise for the economic progress and approach of a REPUBLICAN governor from another state, I sit up and take notice since complimenting a Republican anything is rather rare in a main stream media publication like the Times.

The Republican being complimented is Governor Scott Walker of Wisconsin. As you may know, Walker just prevailed in a bitter recall election that was headed by state government unions in the state. The unions were against many of the changes that Walker had pushed through the state legislature that would have reduced the power of state government workers in the state.

The Times article, "California, Look To Wisconsin," made the following points:

• Walker argued that the biggest beneficiaries of his budget reform plans would be cities, towns and school districts, which would gain the ability to cut costs without having to negotiate every change in compensation or work rules with local unions.
• This legislation specifically eliminated collective bargaining by government workers for benefits and required greater contributions from them towards their pensions.
• Once his plan was enacted into law, Wisconsin citizens quickly found out that state employee unions had used its power to force local school districts to provide health care insurance coverage only through a nonprofit insurer affiliated with the union.
• Once the state allowed bargaining on health care contracts, school boards began competitively bidding out their health insurance, which hopefully would reduce costs.
• According to the Times' article, just two months after Walker's reforms took effect, 23 Wisconsin school districts had redone their insurance contracts, saving $16 million, or an average of $211 per student.
• The MacIver Institute in Wisconsin estimated that if all the state's districts were able to negotiate similar deals once their contracts with the union-affiliated insurer expired, schools, and Wisconsin taxpayers, could save $186 million.
• The Milwaukee Journal Sentinel reported that the city of Milwaukee would save as much as $36 million in its next budget by using the new bargaining leverage the Walker reforms provided.
• This flexibility allowed the city to avoid having to implement layoffs of city workers.
• However, the Milwaukee school system was not so lucky since it had agreed to a contract with its teachers' union just before the reforms took effect and thus, were locked into an existing contract. The school board asked for concessions from the union, the union refused, and the school board was forced to layoff 519 people which included 334 teachers. The Times article estimates that if the union had made the concessions, 200 teacher jobs could have been saved.

Great success story. Government employees still get a robust set of benefits, state and local governments and school districts get financial relief, teachers stay on the job, and the strain of ever increasing taxes on residents is eased. Walker has successfully bent the so-called "cost curve" downward with minimal pain and maximum benefits to a wide range of constituencies.

California, not so much. According to the Times' article:

• Average annual pay for a California local government employee rose 60% between 1999 and 2008, far higher than the inflation rate over that time.
• For a perspective, that rise is about 70% more than the increase in private sector pay levels in California over the same frame.
• The annual cost of funding pensions in California's 20 largest cities has gone from $1.3 billion in 1999 to $5.1 billion 2011, according to a study by Stanford University professor Joe Nathan, an annual growth rate of more than 11%.
• No city government's revenue stream is increasing anywhere near that much, meaning that at some point something in the current process has to snap.
• The article points out that cities like San Jose, California do not have the flexibility that Wisconsin local governments have. In San Jose, the average annual cost of employing a city worker, including benefits, has risen to an unbelievable cost of $142,000, resulting in San Jose laying off 2,000 employees and cutting back on parks, libraries and other services over the past three years.
• The city of Stockton, California has already declared bankruptcy, driven by the fact that for every wage dollar it spends, it now has to spend another dollar to cover city employee benefits. This has required the city to layoff 25% of its fire and police force over the past few years but even that was not enough to avoid going bankrupt.

The Times article concludes with this appraisal of California's budget problem: "Without pension reform in Sacramento, and with local contracts that make it impossible to cut costs without concessions from unions, cities and school districts in the Golden State are left with few good choices to balance their budgets." Not a good situation to be in because at some point, California local and city governments end up being little more than collection agencies for bad union contracts while schools, teachers, parks, and other important government functions get emasculated.


Florida figured it out, Wisconsin figured it out. Any human organization, whether it is a nonprofit, a small business, an international conglomerate, a family household, or a government entity, has to live within its budget and available resources. If it does not, the ever escalating cost curve and ever present economic reality and limits will eventually lead to the collapse of that human organization.


How soon will it take California, and more importantly Washington D.C., to understand that "economies cannot tax themselves to prosperity." At some point, and hopefully before it is too late, both California and Washington need to wake up to the fact that spending has to match up with revenue, that is simply a fact of life.




We invite all readers of this blog to visit our new website, "The United States Of Purple," at:


http://www.unitedstatesofpurple.com/


The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.


The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.


Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

State Level Economic Musings - California Vs. Florida Vs.New Jersey

I am a Florida resident, having moved to the Tampa Bay area from New Jersey in late 2005. My reasons for moving were varied but economic reasons were a driving force:

• In 2005, I was paying over $12,000 in New Jersey property taxes a year for a typical northeastern suburban house, or about $4.00 per square foot. I had a volunteer fire department, no local police coverage (state police covered our area), no municipal garbage pick up, and no local library.
• In 2012, I am paying about $3,600 in Florida property taxes a year for a typical southern suburban home, or about $1.80 per square foot. An absolute difference in dollars of at least $8,400 a year or about $700 a month vs. New Jersey. For those dollars I get county police coverage, full time fire protection and numerous local libraries.
• Since 2005, the property tax bill for that New Jersey house has probably gone up dramatically, far exceeding the ridiculously high $4.00 per square foot I was paying in 2005.
• Since moving to Florida in 2005, my annual property taxes have actually gone down every year and future property tax increases, if and when they come, are capped at no more than 3%.
• New Jersey politicians tried to tell us that our property tax rates were so high because the state invested so much money in  the public school system in order to create outstanding  schools. However, according to the latest Newsweek annual analysis of the top 100 high schools in the country, 13 were from the state of Florida and only one was from the state of New Jersey.
• New Jersey has six state income tax rates with the top rate being a very high 8.97%.
• Florida has only a single income tax rate, 0%, for all levels of income.

I talk about these two states because I have first hand economic experiences in both. With a fraction of the cost of property tax and no income tax, my family can live a great life in Florida just about on our tax savings alone. Year round golf, fishing, beaches, Disney World, and sunshine are not too bad either.

This is another way of stating that people are not stupid and will look for ways to maximize their life's experiences, which many times means optimizing their financial status. Based on the 2010 Census, we now know that the population of New Jersey grew about 4.5% over the past ten years. This is a growth rate that is only about half of the national growth rate and is so slow that the state will be losing a Congressional seat in the next election.

Based on the 2010 Census, the state of Florida's population grew 17.6% over the past ten years and will be gaining Congressional representation in the next Congress. This population growth rate is almost double the national population growth rate over the past ten years. I have to think that lower government cost of living, via lower property taxes, no income taxes, and a cap to future property tax increases has a lot to do with these numbers.

Florida recently closed a major state government budget gap by cutting unnecessary state government costs and NOT raising taxes, while still adding about $1 billion to the education systems throughout the state. Pretty impressive. We still have police protection, fire protection, the libraries are still open, and the roads are still in good shape, all of the major functions you want an efficient government to provide in a cost effective manner. Not sure New Jersey can make those same claims.

Now, it is not a secret that Florida got hit hard by the recession. It went from a low unemployment rate of 3.3% in August of 2006 to a high of 11.4% in February, 2010, a more than threefold increase. This disaster was mostly the result of a collapsing real estate market and a drop in tourism as a result of the recession, the two main industries in the state.

However, since February, 2010, the unemployment rate has dropped 2.8 percentage points from 11.4% to 8.6% (about a 25% decrease). The unemployment rate in New Jersey has come down only .5 percentage points from its high of 9.7% in April, 2010 to its current 9.2% (about a 5% decrease). Florida's economic improvement, without raising taxes but cutting unnecessary government costs, has also dramatically beaten the national economic picture which has seen the national unemployment rate drop only 1.8 percentage points, from 10.0% to 8.2% (about an 18% decrease).

I know these are a lot of numbers but the approach that the Florida political class has taken, to their credit, seems to be working quite well: cut unnecessary government spending, do not cover up wasteful spending with higher taxes, invest in education, and simplify government's involvement in citizens' lives. It seems to be working quite well, based on the  results cited above, numbers that will get considerably better when the real estate market turns around, a bread and butter staple of the Florida economy.

I have a high degree of respect for what New Jersey governor Chris Christie is trying to do in New Jersey. He gets it: minimize tax increases while reducing excessive and wasteful government spending. But he is battling decades of old political thinking where unnecessary, criminal, and wasteful government spending could always be covered up with higher and higher taxes. The fact that the state's unemployment rate has only come down half a percentage point relative to the nation and to states like Florida shows he has a long way to go.

At least he gets it. I am not sure if the political class in California gets it, based on some really sour economic data that has been coming out of that state over the past few months:

- According to a Bloomberg News report from May 12, 2012:

• The California budget deficit is worst than originally forecasted, expected then to be $16 billion.
• The original deficit was expected to be about 40% lower or $9.2 billion, an estimate from January, 2012.
• This new budget deficit is almost a full 20% of the proposed state government budget, indicating there will have to be a lot of action to close such a large gap.
• One of those actions is to place a tax question on the next ballot that would temporarily raise the state sales tax, already the highest in the U.S., to 7.5% from 7.25% and would also boost income tax rates on income starting at $250,000. The 10.3% levy on those making $1 million or more would rise to 13.3%, the most of any state.
• If the tax ballot initiative does not pass, the state will have to cut $4.8  billion more from state school budgets. 

Do we really think that raising already high tax rates will work in these hard economic times? I doubt it.

(Note: the Associated Press reported on June 15, 2012 that the state government legislature did eventually pass a budget of about $92 billion but did not include any plans on how to actually attain that budget number and their budget relies heavily on voters approving the mentioned tax hikes in November.)

- According to an article in the Orange County Register from May 10, 2012, only about 22% of California's eighth-graders tested on a national science test passed, ranking it among the worst states in the nation. California, home to Silicon Valley, tested better than only Alabama, Mississippi, and the District of Columbia. How embarrassing, such a low score but the one of the highest tax burdens in the ocuntry, and imagine how much worse it will get if another $4.8 billion comes out of the state government education budget.

-  According to a June 9, 2012 Associated Press article, voters in San Diego and San Jose, the eighth and tenth largest metro areas in the country, overwhelmingly voted to reduce benefits currently given to both retired and current municipal employees simply because these cities can no longer afford the burden.

In San Diego, the city's payments to its employees' retirement fund went from $43 million in 1999 to $231.2 million this year, almost a fourfold increase and equal to 20 percent of the city's operating budget. Concurrently, the 1.3 million San Diego residents have seen roads deteriorate and libraries reduce hours. For a while, fire stations had to share engines and trucks. The city has reduced its workforce 14% since 2005.

San Jose is not in much better shape. Its pension payments jumped from $73 million in 2001 to $245 million this year, or 27% of its operating budget. Four libraries and a police station that were built over the past decade have never even opened because the city cannot afford to operate them. The city of 960,000 reduced its workforce 27% percent over the past 10 years.

These growth rates in pension and benefit payments are unsustainable, at some point you either go bankrupt as a city or you end up just being a collection agency for government employee benefit programs as you cut other vital government services due to lack of funding. Something has to give at some point.

- Something did give in Stockton, California where they already have or are about declare bankruptcy. Their expenses have gotten so out of control that bankruptcy may be the only alternative to fix the situation.

- An Associated Press report from July 12, 2012 indicates that San Bernadino, California is also about to declare bankruptcy, having less than $200,000 cash on hand to cover millions of dollars of pending expenses and costs.

- A comprehensive study by the Mercatus Center at George Mason University measured the degree of personal and economic freedom state-by-state along a whole host of variables and measurements. California ranked 48th worst in the latest edition of the study (New Jersey was 49th) while Florida was 11th. Given these three state options, where will freedom loving and tax averse people be most likely to want to live, on average, in the long term? 

- A survey study by the Chief Executive Group found similar results when it asked chief executives which states had the best environment for business. California ranked 50th, New Jersey ranked 49th, while Florida ranked 11th. Most of the states that were viewed favorably in the survey cited low state tax levels and friendly business regulation environments (i.e. the government and political class get out of the way of business operations and growth) for their high ranking of the winning states.

Again, similar question: where will freedom loving businesses and tax averse people be most likely to locate their businesses in the long term?

The study results were especially critical of the politicians running California:

"California, once a business friendly state, continues to conduct a war on its own economy. According to the Pacific Research Institute, it has the fourth largest government of all U.S. states, with spending equal to 18.3 percent of GDP. The comparable figure for Texas is 12.1 percent. Survey respondents uniformly say the state’s regulators are hostile. “No one in his right mind would start a new manufacturing concern here,” said one California CEO.

Although California is not unique in pursuing policies that prompt wealth and job creators to expand elsewhere, (New York being a good example), the Golden State seems uniquely oblivious to the effect its labor and other regulations are having on its innovative and growth-oriented Silicon Valley. Job growth in the Valley has flatlined. Firms keep their HQs there, but pursue growth in friendlier states. Google, Intel, Cisco and other companies locate new plants in states such as Arizona, Utah, Texas, Virginia or North Dakota.

Sacramento seems to take perverse delight in job-killing legislation, of which the pair of bills known as California’s “Green Chemistry Initiative” that former Gov. Arnold Schwarzenegger signed into law in September 2008 serve as an example. The regulations mandated that “manufacturers seek safer alternatives to toxic chemicals in their products, and create tough governmental responses for lack of compliance.” When the 92-page final set of commands was issued, the “green community” demanded a rewrite with even tougher requirements. Writing in the Washington Examiner, Chapman University Law professor Hugh Hewitt said that the new rules will mandate testing and labeling changes on tens of thousands of products, likely triggering product recalls. “Take whatever you think is the worst regulatory regime out there, and expand it exponentially.”

Then there is the state’s carbon emission law (AB 32), which the Small Business Roundtable and PRI say will cost half a million in foregone jobs in 2011 and up to 1.3 million jobs by 2020. What’s more, it is by no means certain the law will reduce carbon emissions since it only applies to California."

Is it any surprise that people and businesses are leaving states where it is so difficult to do business.

- Consider some insights from Eric Laffer, author of the book, "Eureka! How To Fix California:"

"Firms, people, investments, and tax revenues are fleeing California, repelled by the most onerous antigrowth business environment in the United States. California’s after-tax rate of return for doing business lags so far behind other states’ (especially zero-income-tax competitors such as Texas, Tennessee, and Florida) that the exodus shouldn’t surprise anyone. Yet the state’s Democratic leadership is pushing a November ballot measure aimed at raising income and sales taxes in order to make up for lost revenue. Tax hikes, especially during trying economic times like these, make no sense. Economies don’t tax themselves into prosperity."

In the article I read online (http://www.city-journal.org/2012/22_2_california-taxes.html), Laffer explains in his book how the California political class can save their state by simplifying everything they do, from their tax code to business regulations to streamlining government.

I particularly love his line, "Economies don't tax themselves into prosperity." This is true at the state and national level. At the state level, people move, taking their wealth, families, and businesses with them to seek out the best financial and economic conditions, conditions that usually include minimal taxation and minimal intrusive government regulation. Usually, those moving are the wealthier families and the better run businesses.

At the national level, the Obama administration has added thousands of regulations to the U.S. business environment since it took office. It has come up with dozens of new taxes for both businesses and families. National economies also don't tax themselves into prosperity.

Maybe that is why the unemployment rate has been over 8% for a record 40 straight months, maybe that is why over 35,000 small businesses shut down last year, maybe that is why we have suffered our first national debt credit downgrade ever.

The California migration trend, leaving the state for a better live, may be starting to find its way into a broader United States migration trend. According to recent IRS reports:

• Last year, 1,800 Americans renounced their citizenship and moved out of the country.
• That's a record number since the Internal Revenue Service began publishing a list of those who renounced in 1998.
• It's also almost eight times more than the number of citizens who renounced in 2008 and more than the total for 2007, 2008 and 2009 combined.

Not a good sign. High taxes and unnecessary and burdensome government intrusions and regulations have no place in a democracy. New Jersey and California are finding out the hard way. Florida already gets it. Will the Washington political class get it before our best citizens, our most promising entrepreneurs, and other successful U.S. businesses decide that elsewhere is better? Muse on that for a while.




We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.
Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

Mining The Federal Treasury - Corporate Welfare For The Wealthy

Most Democrats, including the President, and their left wing, Keynesian economists cringe at the thought of the Federal government cutting spending. They hold onto the failed theory that government spending is essential to the functioning of our economy. They never seem to care, investigate, or understand how much of Federal government spending is totally wasteful and fulfills no positive impacts on the economy.

Consider the following wasteful spending, from a wide range of government departments, we have covered many times in this blog:

• Social Security, Medicare, Medicaid, Federal food stamp programs, and Federal unemployment programs waste well over $200 billion a year due to inefficiencies, criminal fraud, and just plan waste.
• The IRS fails to collect almost $400 billion in taxes due to the Federal government from tax evaders.
• The Navy built two ships for $300 million that it recently scrapped without ever using.
• The State Department spent $80 million to build a consulate in Afghanistan, only to abandon it before it was ever used.
• GSA employees treated themselves to a lavish Las Vegas convention, costing $832,000, where they put on skits about wasting taxpayer money.
• The National Sciences Foundation wastes millions of dollars a year working on projects that serve no national or taxpayer interests such as when did dog become man's best friend, why do boys play with trucks and girls play with dolls, how to ride a bike, etc.

This is just a small sample of waste, spending that could be taken out of the Federal budget, reduce the growth in our national debt, and return some taxpayer wealth to the American taxpayer and the American economy, all without affecting social safety net benefits, without making people homeless or hungry, etc.

If the President and others ever decided to take some excessive and unnecessary spending out of the Federal government, spending that fulfills no positive purpose for the average American, they may want to start with a recent publication from Senator Tom Coburn entitled: "Treasure Map - The Market Access Program's Bounty of Waste, Loot, and Spoils Plundered From Taxpayers."

The Market Access Program (MAP) is a Department of Agriculture program that hands out taxpayer money to a variety of trade organizations and companies to promote their own products in the marketplace. The purpose of MAP is to: “improve foreign market access for U.S. products, build new markets, increase competitiveness for U.S. agriculture in the global marketplace, and [provide] assistance to developing foreign countries.”

It is only one of many Ag Department programs that grant taxpayer money to these types of organizations. One would have thought that the recipients of MAP funding would and should do this marketing work with their own shareholders' wealth, not taxpayers' wealth. The Senator's analysis and publication uncovered some of the waste:

• American Peanut Council, headquartered in the Washington suburb of Alexandria, Virginia, receives over $2 million annually from taxpayers for international market development.

• American Forest and Paper Association based in Washington, DC, receives over $9 million from taxpayers to promote industry products outside the United States.

• American Hardwood Export Council based in Reston, Virginia receives $8.4 million annually.

• American Seed Trade Association receives more than $50,000 annually and is based in Alexandria, Virginia.

• Cotton Council International, based in Washington, DC, receives over $18 million.

• Distilled Spirits Council, based in Washington, DC, receives nearly $250,000 annually.

• National Confectioners Association, based in Washington, DC, receives $1.3 million annually.

• National Renderers Association, based in Alexandria, Virginia received nearly $1 million annually.

• Pet Food Institute, based in Washington, DC, receives $1.3 million each year.

• U.S. Dairy Export Council, based in Arlington, Virginia, receives $4 million annually.


• U.S. Dry Bean Council based in Washington, DC, receives $1 million.

• U.S. Grains Council, Washington, D.C, receives over $7 million.

• U.S Hide, Skin, and Leather Association, Washington, DC, receives $76,000.

• US Wheat Associates, Arlington, Virginia, receives $6 million.

• USA Rice Federation, Arlington, Virginia, receives $2.8 million.

• American Sheep Industry Association based in Eagleton, Colorado receives $410,300.

• National Potato Promotion Board based in Denver, Colorado $5.2 million.

• America Soybean Association based in St. Louis, Missouri receives $5.8 million.

• Florida Department of Citrus based in Lake Alfred, Florida receives $5.3 million.

• Western United States Agricultural Trade Association based in Vancouver, Washington receives $9.7 million.

A few obvious questions come to mind:

1. Where in the Constitution does it say that the American taxpayer should work and pay taxes in order for the political class to redistribute it to private industry companies and trade groups?
2. Of those organizations listed above, how many of them made election and reelection campaign contributions to the politicians in Washington in order to get this free treasure, courtesy of the American taxpayer?
3. Did you notice how many of these entities receiving free taxpayer money are located where the treasure is, the greater Washington DC area?

Disgusting, wasteful, and unnecessary corporate welfare that renders no benefits to most Americans. The Senator's report also goes into some degree of detail regarding the largest recipients of this treasure:

Black Diamond Growers

• Blue Diamond Growers is the “world's largest tree nut processing and marketing company.”
• Since 1999, the company has received more than $28 million from the Market Access Program to market its almonds overseas.
• Blue Diamond’s trademarked products are the dominant almond products brand in the United States, found in 93% of all American grocery stores.
• Blue Diamond reported $3.3 billion in sales over the past five years, $709 million in 2009 alone.
• Blue Diamond Grower is a prolific advertiser, with recent ads featuring major league baseball and football themes.
• Blue Diamond annual sales are almost three times the amount USDA spends each year on the entire MAP program.

Despite the wealth, profitability, reach, and success of Blue Diamond, the company received $3.3 million this year, its highest taxpayer treasure take in a decade.

California Wine Institute

• California’s Wine Institute is the one of the single largest recipients of MAP taxpayer funds, having received $6.9 million in 2012.
• The Wine Institute has received nearly $60 million from MAP in the past decade.
• The Wine Institute has a membership list that includes some of the world’s most prominent and wealthiest wine makers.
• California winery owners travel around the world to promote their products with MAP funds.
• MAP provides reimbursement for half of all eligible expenses related to marketing junkets overseas including travel, international wine tasting events, trade shows, and consumer advertising, and 100% reimbursement of all eligible expenses for regional or “wine-style associations."
• Past trips financed with taxpayer MAP funds have included wine festivals and tastings in London, Denmark, Mexico, and Dublin.

Rich people and rich companies traveling around the world, drinking wine on the taxpayer dime. Whoever thought this was a good idea and good use of taxpayer funds? The really insulting aspect about these expenses is how do citizens in other wine producing states feel about their tax dollars being sent to California wineries, the competitors of wineries in these other states?

Sunkist

• Sunkist Growers, with sales exceeding $1.2 billion annually, is considered one of the biggest sellers of fresh fruit internationally.
• According to the Sunkist website, Sunkist claims their brand is among the most recognized and respected in the world.
• The company has had a century of successful advertising campaigns, and has long been associated with prominent, and likely expensive, advertising firm, DraftFCB, whose clients also includes Boeing, Kraft, KFC, Motorola, and Hilton.
• Despite its long and successful business and marketing history, Sunkist receives $3-4 million annually from U.S. Department of Agriculture to promote its products worldwide and to perform market research.
• In total, $34.1 million in taxpayer funds have been collected by Sunkist since 1999.
• Recent MAP funded activities have included advertising Sunkist lemons in Japan, China, and Hong Kong, and Sunkist oranges in Singapore.

Looks like Sunkist can squeeze the American taxpayer as well as it squeezes oranges and lemons.

You get the idea, I could go on, pulling the research out of the Senator's report on other companies being served by MAP but nothing would change the fact that the political class has a long, pathetic history of giving taxpayer money to companies and trade associations that should be using their own wealth for their own marketing activities.

The really sad part of this giveaway and treasure hunt is that MAP is not the only government organ handing out the free money. Just within the Department of Agriculture there are four other entities, besides MAP, that regularly give away millions and millions of taxpayer dollars to companies to promote their own products. There are at least nine Federal agencies or departments operating dozens of market development assistance programs including the following Federal organizations:

• International Trade Administration
• Economic Development Administration
• Small Business Administration 
• United States Trade and Development Agency
• Overseas Private Investment Corporation
• The Bureau of Economic, Energy, and Business Affairs 
• Senior Visitor Business Liaison
•  USDA has Foreign Agricultural Service employees stationed around the world.
• Export-Import Bank of the United States

Such redundancy and waste. Spending money on functions it should not be spending money on and dong it over and over from different government organizations.

But are these programs successful and worth the expense? According to the Senator's analysis and report, they are probably not successful. The Senator points to various studies over the years that tend to conclude the programs are not worth their expenses. Even if they were worthwhile investments, they still should not be done. These are  only thinly disguised corporate welfare programs which highlights the high level relationships between large private market entities and the Washington political class.

None of this waste would occur if Step 45 from "Love My Country, Loathe My Government" was in place. Step 45 would prohibit the spending of Federal taxpayer wealth unless that expenditure would materially affect a significant number of citizens in at least five states. If California wants to promote its wine industry, let California citizens pay for the promotion efforts. If Sunkist wants to promote its products, let Sunkist and its shareholders pay for the the promotion efforts.

How Democrats and the President can be so against reducing these types of unnecessary expenses is beyond me. Is it because they love almonds, California wine, and fresh fruit? Or is it because they like the campaign money that comes from nuts, wine, and fresh fruit? This seems to be the more logical reason and has nothing to do economics and our dire national fiscal crisis, regardless of how it runs up our national debt.


We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

Business Friendly States Vs. Unfriendly State Politicians

Through no effort of my own, I somehow got on Florida Governor Rick Scott's email mailing list. I usually just dump it immediately but an email I received today caught my eye. The email claimed that Florida was voted the second best state to do business in (Texas was first). I went on explore this claim and came across the following interesting statistics and situations from a variety of sources:

- Chief Executive Magazine did indeed rank Florida as the second best state to do business in. They attributed this business friendly status to business and tax reforms put forth by the state.

- Scott attributes this friendly business atmosphere identified by the magazine as helping Florida add 140,000 private sector jobs to its state economy over the past year.

- The ten best states for business are:

1. Texas
2. Florida
3. North Carolina
4. Tennessee
5. Indiana
6. Virginia
7. South Carolina
8. Georgia
9. Utah
10. Arizona

Nine out of the ten of these states have Republican governors.

The ten worst states for business are:

1. California
2. New York
3. Illinois
4. Massachusetts
5. Michigan
6. New Jersey
7. Connecticut
8. Pennsylvania
9. Oregon
10. Hawaii

Seven of these ten have Democratic governors and I know from personal experience that New Jersey politics have long been dominated by Democrats in the state government.

- If I look at Bureau Of Labor Statistics results and take the arithmetic average of the ten best states to do business in, the latest average unemployment rate is 7.97%, below the national average.

- If I take the arithmetic average of the ten worst states to do business in, the latest average unemployment rate is 8.25%, above the national average.

- According to the Chief Executive Magazine findings, Texas and Florida had the largest net population migration into their states over the past ten years or so while New York and California combined had a net migration out of their states of over three million people in the same time frame.

- Florida's unemployment rate has come down by over two percentage points in the past year, better than just about every other state and better than the national average while the Texas unemployment rate has consistently remained below the national average throughout the past five years.

- Scott points out in this email, information that has been published in other, non-biased communications vehicles, that the last Florida state budget that was approved was balanced by not raising taxes but was also able to increase k-12 education funding by $1 billion.

- As a Florida resident, I pay no income tax at all, the state sales tax is 7% which is the same rate I paid in my former state (New Jersey) and my Florida property taxes have come down every year for the past five years.

- Despite all of this good tax news, Florida schools have improved considerably over the past five years even though historically they were among the worst. Florida has 13 of the top ranked 100 U.S. high schools as measured by U.S. News and World Report and other sources have also reported how much the schools have improved 
(http://www.tampabay.com/news/education/article960721.ece), the state government increased school funding by a billion dollars in the latest budget, and state crime levels are at their lowest rate since statistics first started being kept in 1971 (http://www.clickorlando.com/news/FDLE-Florida-crime-rate-dipped-slightly-in-2011/-/1637132/12244340/-/k3jfsy/-/index.html).

So what have learned from all of these statistics:

1. The cost of government, and the associated taxes, has gone down in Florida while the quality of life and government services (e.g. education, law enforcement, etc.) has improved.
2. Republican led states tend to have better environments for business, which should lead to better lives and employment opportunities for state citizens.
3. Democratic led states tend to have worse environments for business, which should lead to lesser lives and employment opportunities for state citizens.
4. The best states for business have an average unemployment rate that is less than the unemployment rate in the worst states for businesses.
5. Republican led states tend to grow in population while Democratic led states tend to shrink in population.

Seems like some states have figured out how to oversee an economy that grows the population, keeps the tax burden under control, implements efficient and effective basic government services, and provides a business environment that grow the private sector of the economy. Unfortunately, Obama and the rest of the Washington political class have been unable to learn these simple lessons.

Where well run states keep taxes under control, Washington wants to constantly raise taxes and fees.

Where well run states support a productive business environment, Washington keeps generating hundreds and hundreds of new and unneeded regulations every year, which inhibit economic growth and add to the uncertainty of business planning and expansion.

Where well run states provide valued services to its citizens in an economic manner, Washington programs never seem to attain their goals while wasting trillions of dollars of wealth in the process.

Many states could teach Washington how to operate effectively and efficiently. Unfortunately, it appears most of the politicians in Washington are drop outs when it comes to being schooled by the top state governments.


We invite all readers of this blog to visit our new website, "The United States Of Purple," at

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

California Mass Transit and Politicians' Deficient Math Skills

We have discussed the severe math deficiencies of our politicians many times in this blog:

- When the Federal government offered the state of New Jersey several billion dollars to build a new mass transit rail tunnel from New Jersey to Manhattan, the deal looked too good to be true. The construction of such a tunnel would create many short term construction jobs, long term tunnel-related jobs, and facilitate the local New York/New Jersey economy. Since the original cost of the entire construction job was only about $5 billion, with more than half of that being paid for by all American taxpayers via the Federal government, it looked like a great opportunity.

However, very shortly, that $5 billion estimate became an $8 billion estimate. That $8 billion estimate shortly became a $10 billion estimate. The current governor of New Jersey, Chris Christie, then pulled the plug on the project when his staff estimated the cost could be between $11 billion and $14 billion, with all of that expanded cost being picked up by the New Jersey taxpayer. Given that New Jersey has been hard hit by the recession, like most of the rest of the county, the Governor correctly realized that limited state funding should not be wasted on a tunnel whose cost continued to escalate, even before significant construction had begun.

Obviously, someone in the Federal political class and the government the political class operates had some pretty poor math skills if the original estimate was off by an order of magnitude between two and three times as much within five short years, going from $5 billion to over $10 billion.

- Governor Christie may have been drawing on the horrendous experiences of the Boston and Massachusetts taxpayers relative to the infamous "Big Dig" tunnel program in Boston. The objective of the Big Dig was to take down an ugly elevated highway through the center of Boston and reroute the roadway under the city via the digging of traffic tunnels.

The original cost estimate was supposed to be around $2 billion if my memory is correct. However, many years past the deadline, the final cost was well over $20 billion, for an end piece of construction that is shoddy and fatal, given the infamous event when one of the faulty ceiling panels came lose and crushed a passing motorist to death.

In this case, the political class's original math estimate was off by a factor of tenfold relative to the final cost. You wonder if the voters in Massachusetts would have tolerated a $20 billion construction burden if the politicians' math skills had been a little sharper at the start of the project?

- Two years ago, the political class, namely the Democrats and President Obama, told us that the gross cost of Obama Care in the first ten years would be $940 billion, no Americans would lose their current health care insurance from their employer if they chose not to, and the national debt would be reduced by about $130 billion in the first ten years.

Last week, we found out the the ten year gross cost is really closer to $1.76 TRILLION (about double what the estimate was just two years ago), between three and five million Americans will likely lose their current health care insurance from their employer (about three to five million more than the zero estimate from just two years ago), and that Obama Care will likely increase the national debt by over $300 billion in the first ten years (versus reducing it by about $130 billion, a missed forecast of $430 billion, about $4,000 more for every American household).

Talk about bad math skills. From $940 billion to $1.76 TRILLION in just two years. From zero to possibly five million in just two years. From a gain of $130 billion to a loss of over $300 billion in just two years. Bad political class math skills do not get any worse than this.

- A couple of years ago,  Hillsborough County and its Tampa metro area were considering putting in a light rail system to serve the area. Such a system would require additional taxation and voter approval. It was looking like it might get approved under the original estimate which said it would cost about $70 million a mile to construct the rail line. However, as the vote got closer, the original estimate was revised upwards to $85 to $120 million per mile, a 21% to 72% potential increase in cost.

Fortunately, for the Tampa area voters, unlike the Boston and Massachusetts voters, this bad political class estimation process was brought forth before the vote, which was defeated in light of the more realistic math estimates.

Which brings us to the latest example of politicians' bad math skills, which in this case, is combined with pure stubbornness. A short article in the latest edition of Reason magazine, lays out the problems that the California High Speed Rail Authority is having, of which bad math is a major part:

• California is rushing to start building in-state high speed rail route in order to qualify for Federal funding to support the construction.
• In January, 2012, its CEO resigned.
• Then the Chairman of the Board resigned.
• The local newspapers are calling the project the "train to nowhere."
• The California state government auditor and the Authority's own inspector general have concluded that the project has unrealistic cost estimates (sound familiar?), has a lack of oversight, and inadequate research on eventual ridership, i.e. they really do not know how many people would actually ride this train to nowhere.
• All of the analyses from the state and the Authority recommended that the project not go forward until it was substantially revised.
• What has already been substantially revised is the original cost estimate of $40 billion, which is now obsolete with current cost estimates ranging between $98 billion and $118 billion (i.e. off by a factor of up to three times as much).
• A recent opinion poll showed that 64% of Californians would vote against the project now, probably given it out of control costs, 11 percentage point higher than the number of citizens that voted for the project just four years ago.

But this is where bad math and stubbornness get really dangerous. Governor Jerry Brown wants to forge ahead with a project that is behind schedule, poorly managed, without veteran leadership, and most importantly, has a set of underlying math that is slippery at best, deceitful at worst.

An interesting, philosophical question that should be answered is: "Are the math skills of the political class and those in government really that bad that they can be off a factor of two, three, or ten in their original estimates vs. the final costs or is there some deliberate deceit going on in their dealing with us, the American taxpayer?"

If they are really that bad in math, they should not be in office. The inability to develop credible and realistic estimates of any government project should be a prerequisite for being in office. Otherwise, the taxpayer gets screwed for actually believing in politicians' math skills, we never get the value for the money that was promised, and we end up with over $15 TRILLION worth of national debt.

If the answer to the philosophical question is that they are good at math but intentionally lie to get their ways and get their favorite projects approved, than they should not be in office either. Lying to one's constituents should not be a prerequisite or a characteristic of holding elected office. It is destructive to taxpayer wealth and weakens the foundations of our democracy when the leadership of our government becomes a lying sham.

Three steps form "Love my Country, Loathe My Government," would help address this bad math syndrome, whatever the underlying causes are (i.e. they are actually bad at math or they lie):

• Step 34 would hold members of Congressional committees accountable for their math estimates and performance, removing them from their committee posts for bad math skills. For example, any Congressional member who sat on the committees and subcommittees that developed and approved the Obama Care numbers would be removed from those committee posts for incompetence. You cannot say you are doing your job when your math estimates are so wrong so soon after you espoused them.
• Step 38 would require all elected officials to sign a shared values oath every year of which integrity was a primary part of that oath. At least if they have to think of the word "integrity" every year they might finally have some in their math skills and estimates.
• Step 39 would impose term limits on all politicians so that the focus is only on finally getting good, high potential problem solvers in office that will develop some long term strategies with solid math underpinnings rather than short term vanity projects with no math underpinnings.

Without these steps, the bad political math and the heavy waste of taxpayer wealth will continue. Its as simple as 1-2-3.




We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

Talk About Bad Priorities - State Level Political Class Insanity

It is no secret that state governments in this country are mostly in very bad financial shape. Revenue shortfalls, outsized pension and health benefit expenses for state government retirees, higher than merited state government employee wages, etc. have caused state governments and the politicians that operate them to cut back on essential services including medical, educational, and other social programs. One would hope that in the face of such economic straits, that all state level politicians were focused on solving the financial problems and finding ways to do more with less.

However, hope is never a good assumption to use when discussing the American political class. Today's post proves that again. It is an easy post to write since the bulk of it comes from an outstanding article by Esme E. Deprez, writing in the May 30, 2011 issue of Business Week. The article went through some recent state government actions which I have compared to the current financial crisis situation within that state:

• Arizona is facing a $1 billion budget shortfall, which is about 11.5% of its entire budget, but recently passed legislation that named the Colt single action revolver as the official state firearm. This was after conducting debate on the Colt vs. other weapons.
• Maine is about 16% short in its budget needs in fiscal 2012 but recently passed legislation that named the whoopie pie as the official state treat. This was a compromise name since the same legislators also wanted to make the wild Maine blueberry pie the official state dessert.
• New York is in really bad shape with a $10 billion and 19% budget deficit but is working hard in debating whether sweet corn or the onion should be the state's official state vegetable.
• North Carolina has a $2.4 billion and 13% budget deficit but the state government has been busy making NASCAR the official state sport and gold the official state mineral.
• Not to be outdone, Texas, with a $13.4 billion and 31% deficit, has been really busy, naming western swing as the state's official music, the Mexican three tailed bat as the official state flying mammal, and the Dutch oven as the state's official cooking implement (you cannot make this stuff up!). By the way, the Dutch oven is also popular in Utah where the state legislature took time to make it the official state cooking pot.
• Oklahoma has a half a billion dollar shortfall but has busy making "Swing Low, Sweet Chariot" the state's official gospel song.
• Wisconsin has a budget deficit of $1.8 billion and 13% deficit but is weighing the legislative option of naming the cream puff as the official state dessert.

Unbelievable but not unexpected. We have reviewed the bad priorities of the Federal political class many times. We have discussed how Federal taxpayer money has been spent to study when dogs became man's best friend, to replace windows in a visitor's center at Mount St. Helen's that has been closed for years and is unlikely to ever reopen, to study bugs on an island off the coast of Africa, etc. despite record levels of national debt. Expecting the state level political class to have the right priorities is just to much to expect.

The ship is sinking, financially speaking, but the politicians in state office either do not have the ability or stomach to fix the leaks. They would rather focus on the trivial rather than the traumatic. Pathetic. These are just another set of examples of why the political process changes proposed in "Love My Country, Loathe My Government" are so important to implement. Those currently serving need to be replaced by people that will focus on what is important and pressing, even if it means the state has to go without an official flying mammal, an official dessert, an official song or a an official mineral.

Which leaves just on unanswered question: why are state level politicians so concerned about honoring Dutch ovens?


Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.


Please visit the following sites for freedom:

http://www.loathemygovernment.com/
http://www.cato.org/
http://www.robertringer.com
http://realpolichick.blogspot.com
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment.com

Where Did Our Nation's Wealth Go?

I got to wondering the other day about what happened to all of our wealth. It is true that the United States still has the largest economy in the world. Our citizens, on average, are some of the wealthiest in the world. At one time, our wealth allowed us to dominate the world in so may areas include militarily, politically, diplomatically, economically, athletically, and culturally.


I am not sure I can make that statement of dominance today. One reason we may not be able to do that is we are much less wealthy, relative to our past, than we have been. Consider the many ways the government and the political class that operates it have allowed our nation's wealth to leak out of the country over time:


- Probably the biggest drain on our nation's wealth has been the political class' inability to develop and implement a coherent and strategic energy policy for the country. Despite the OPEC oi shocks from the 1970s that rocked the country and the economy, in 2011 we still have no energy policy that protects and retains the nation's wealth.


According to the U.S. Energy Information Administration, in 2010 the United States imported about 4.3 billion barrels of oil and petroleum products from other countries. These imports are needed because the U.S. economy goes through over 7 billion barrels a year. 

The political class has not found a way, or even tried to find a way, to close that gap over the decades, by either diversifying our energy sources away from petroleum or increasing domestic production to close or eliminate that gap of three billion barrels of oil. In fact, the gap has likely gotten larger since the 4.3 billion barrels of imported barrels is about twice what it was in 1980, according to the Federal government.


At $90 a barrel, 4.3 billion barrels a year roughly results in about $386 billion dollars of our wealth leaving our domestic economy annually. These hundreds of billions of dollars end up building the economies of other nations that feed our energy addiction, nations that are not always friendly to our interests or our safety.


- Another major wealth drain is due to the illegal drug market, primarily the Mexican drug cartels. According to a January 26, 2011 research paper developed by the Law and Public Policy group at the Wharton School at the University of  Pennsylvania, the Mexican drug cartels' revenue from the United States is between $35 and $45 billion a year. The majority of the revenue, according to several other sources, comes from marijuana but also includes amphetamines, cocaine and other illegal drugs.

We have seen Mexicans die by the thousands every year due to drug cartel violence. We have seen the police, judges, and government officials in Mexico corrupted by cartel money. And as a result of our politicians' forty year failed war on drugs, we have seen hundreds of billions of dollars diverted from this country into foreign gangs, who much like the oil exporting nations above, do not always have our best interests and safety in mind.

- While we have seen trillions of our wealth leak out over time because the political class has not acted and has not developed coherent strategies and plans for energy and drug addiction, the third major wealth drain has been the political class actually acting but acting poorly when it comes to military matters. We have deployed hundreds of thousands of U.S. troops around the world over the past decades, most often in ill-defined and ill-executed wars or in places where there was no need to deploy them.

We have likely spent over a trillion dollars already in Iraq and Afghanistan with no clear, concise, and defined benefit in return. Between Europe, Japan, and South Korea, we have well over 120,000 U.S. troops deployed overseas or no reason at all, at a cost of probably over $50 billion a year. In return, the economy and the American public gets no tangible benefit, another leak of our wealth pool.

- According to the Cato Institute's government downsizing analysis, the American taxpayer would save over $100 billion a year of the U.S. Department of Education was eliminated. Why should it be eliminated? Consider the following "accomplishments" of the Department:

• A recent Associated Press article indicated that almost 25% of U.S. armed forces recruits could not fulfill basic language and math skills needed to enter the armed forces.
• Another recent Associated Press report showed that upwards of 40% of community college freshmen in this country need to take remedial courses in basic subjects before they can begin their college work even though most of them had high school diplomas.
• A whole host of international student testing initiatives show that U.S. students almost always trail dozens of other countries' kids when it comes to math, language, and science skills.
• And the latest bad news, a June 14, 2011 Associated Press report showed that only 13% of U.S. high school seniors have a solid understanding and knowledge of American history.

All of which raises the important question: couldn't the nation do just as poorly and not spend $100 billion every year to do so badly? Cato has done its investigative analysis and has shown that yes, the country can change and dramatically improve its educational policies and approaches without having a Department of Education, resulting in $100 billion a year in taxpayer savings.

If we add in additional waste that we have documented, waste that exists in Medicare, Medicaid, and Social Security, we easily can see where over $200 billion a year leaks out of the productive area of the economy into the unproductive and often criminal areas of the economy.

So let's review:

- We allow about $386 billion a year to leak out to foreign oil exporters because the political class has not deployed an effective energy strategy.
- We allow about $40 billion a year to leak out to criminal drug gangs in Mexico because the political class has not deployed an effective drug addiction policy.
- We allow about $50 billion a year to leak out of the productive area of our economy because we continue to unnecessarily deploy U.S. troops around the world.
- We allow over $200 billion a year to leak out of the productive area of the economy due to an ill performing Department of Education and waste and fraud in our Federal social services programs.

If we add up these various wealth leaks out of the U.S. economy, we end up with a grand total of leaks worth about $679 billion a year. This figure does not include the more than trillion of dollars we have allowed to leak down the military drain that is Afghanistan and Iraq. It does not include the tax breaks we give U.S. companies to close domestic factories and move production to other countries. It does not include the tens of billions of dollars that illegal immigrants send back home to their countries, dollars that are not retained and spent in this country.

Thus, the $679 billion is probably a conservative estimate of how much our government and the politicians that run it allow these leaks to deplete our world and our economy every year. $679 billion is equivalent to an annual tax break for every American household of about $5,900, at a minimum. I believe that we would be much wealthier as a country if every household had at least another $5,900 a year in disposable income to spend as they see fit.

And the good news is that we would be just as safe as a nation, more economically independent, and probably raising smarter kids in the process. The steps to accomplish this wealth retention are laid out in "Love My Country, Loathe My Government," steps that address energy independence, education reform, military consolidation, and the changing of our political processes so that these processes eventually would produce elected officials that know how to fix a leak.

Until we take these steps, our wealth and our economy will die a little bit more each day, death by a thousand cuts. The problem with a thousand cuts is that eventually the leaks stop, not because they have been fixed, but because there is nothing left to leak out.




Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.
Please visit the following sites for freedom:

http://www.loathemygovernment.com/
http://www.cato.org/
http://www.robertringer.com
http://realpolichick.blogspot.com
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment.com

The Rube Goldberg Approach To Taxation In Illlinois

Rube Goldberg was an American cartoonist, sculptor, author, engineer, and inventor who lived in the second half of the 1800s and well into the 1900s. While he apparently had many talents, he is most famous for his cartoons that depicted very complex machines and gadgets which he had invented that would take the simplest tasks and make them into a very, very complicated and convoluted  process. For example, his machines would take the simple task of making tea and turn into a multi-step process involving gears and belts and other mechanical operations.

The problem with Rube Goldberg type machines is twofold. First, much energy, thought, and resources are wasted coming up with complicated solutions to simple problems. Those resources could theoretically be better spent more productively on other tasks. Second, the more complicated and convoluted you make a process, the easier it is for things to go wrong and it is more difficult to anticipate what might go wrong.

Mr. Goldberg came to mind recently when I revisited the tax and budget fiasco that is the Illinois state government. Earlier this year we discussed how the state government's expenses were so much higher than its revenue that the solvency of the state government was in question. However, rather than attack the root cause of their problem, out of control government spending, the political class in Illinois decided to raise taxes to cover the revenue to expense shortfall without fixing the underlying problem.

Their tax increases were not insignificant. Personal income tax rates rose 66%, from 3% to 5%. My research indicates that they also raised the business income tax from 4.8% to 7%, with some companies also being subjected to a 2.5% tax surcharge. These tax changes changed Illinois' status from being the 21st most heavily taxed state to one of the top five most heavily taxed states.

Well, guess what happened? According to the the Associated Press and its writer, David Mercer, who wrote on May 20, 2011:

• In 2010, Illinois' state government agreed to give $272.7 million in tax breaks to 67 Illinois companies who threatened to leave the state and move their company's jobs elsewhere.
• That is more than four times what the state promised 44 companies in 2006 and more than double what it promised companies in 2009.
• Since the state government has already promised $230 million in tax breaks in 2011, the 2010 level of $272.2 million is likely to be reached and exceeded long before the year is out.
• Most of the incentive packages given to companies threatening to leave Illinois end up being strictly job retention programs, in most cases they rarely require the companies to increase employment as a cost of getting the incentives.
• In 2010, the state paid about $17,000 for EACH job retained in the state of Illinois, a number that should be much higher in 2011.

So let's review this Rube Goldberg approach to running a state government and its current tax policy. Rather than fixing the spending problem (the easy, common sense, simple solution), we raised taxes to cover the revenue/tax shortfall which caused companies to blackmail us if we do  not give them tax breaks to offset the higher tax rates we just passed which reduces the amount of revenue we have to cover the revenue shortfall, leaving us with the same existing problem that we spend too much as a government which just placed a heavier burden on the households and made it more unattractive for out of state companies to move in state since our tax rates are so high except for existing companies who we get blackmailed by. That about sums it up. Rube would be so proud.

Let's do a little math and figure out how crazy and unproductive this Rube Goldberg approach is. If it costs $17,000 to keep a job in Illinois, at an individual state income tax rate of 5%, each job would have to earn $340,000 in wages just to break even from a personal income tax perspective. Highly unlikely.

This is obviously a worst case but it does not get much better if you assume that half of the $17,000 tax break is picked up by corporate income taxes. In this what-if scenario, $8,500 or half of the $17,000 cost of retention, each retained job would have to earn $170,000 to cover the $8,500 cost via personal income taxes. No matter how you cut it, this Rube Goldberg approach to taxation makes no sense.

All of this nonsense happens because the Illinois political class either did not know how to fix the root causes of their problem or did not want to address the root causes. The state government spends too much. Any other solution creates unforeseen consequences that require additional actions that make a bad situation worse.

What should they have done in Illinois? According to experts quoted in the article, the following might have been a better approach:

• These kinds of programs, that just retain existing jobs without having conditions for job growth, are rarely successful
• The state needs a stable tax environment so that companies can plan around this stability.
• Beyond a stable tax environment, the state government needs to provide a modern infrastructure, good schools, and effective, basic government services so that companies want to stay in a state for more than cold cash. 

Good, simple, common sense approaches to employment. No crazy tax schemes where you raises taxes in January and almost immediately begin giving back some of the fruits of the tax increase to companies who just had their taxes raised.

One of the problem of dealing with blackmail type environments is that until you fix the core problems, the blackmailing never stops. Although the state government has already paid "incentives" to Motorola (3,000 jobs), Chrysler (2,300 jobs), Navistar (2,200 jobs), and U.S. Cellular (1,075 jobs), it is not over. Sears Holdings Corp., which has 6,200 employees in the state and is already getting incentive packages from the state government, is more than likely to look to sweeten its package when the current incentive arrangement expires.

Thus, $17,000 per retained job, quarter of a billion of dollars a year in incentives, and the core problem not fixed may look like the good old days before Sears is done. Just like a Rube Goldberg process, it never seems to end.




Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:


http://www.loathemygovernment.com/
http://www.cato.org/
http://www.robertringer.com
http://realpolichick.blogspot.com
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment.com