Recently in It's The Spending, Stupid! Category

It is quite obvious the one course University of California students protesting against tuition hikes have not taken but desperately need is Economics 101. The UC system-wide protests highlight the financial crisis facing California, a state verging on being forced into federal receivership because every effort to resolve the its financial problems has failed.

Taxes are sky high and getting higher. Revenues are falling off. Unemployment is over 12%. Taxpayers and businesses are leaving in growing numbers. Union compensation and pensions have reached unsustainable levels and are still climbing. Is it any wonder California has become a financial basket case? How can the students of the UC system expect the state to be able to fund the system when they don't have the money to do so? Do they really believe that just by making demands and throwing mass temper tantrums the state will somehow find a source of funding they haven't already taxed to death? Obviously they do. And by doing so they have displayed their economic ignorance. They don't understand: Their politicians have sold them a bill of goods and the time to 'settle up' has finally come.

I have to say the opening statements of the President's State of the Union address were on target, talking about the problems that we, as a nation and as individuals, are facing. But once he started addressing the main issue we face - the economy - he lost me.

He talked about tax cuts, but only the temporary tax cuts. The somewhat more long term cuts, the Bush tax cuts, expire next year, meaning everyone will see a tax increase once they're gone.

On the stimulus bill - blah blah blah blah blah blah. (At least that's what I heard.)

As much as I agree that jobs are an issue, I have to disagree with the president that somehow it's up to the government to stimulate them with our money. Better that government get the heck out of the way. We don't need it to take $30 billion of the repaid TARP funds and spend it again.

I agree with Obama that we need to upgrade our infrastructure to help American businesses compete in the global marketplace. But what do high-speed trains have to do with that? Better that electrical systems and broadband communications networks be built, which will do far more to support American businesses than trains.

And while the president says he "won't accept second place for America", he's been doing what he can to make sure that's where we'll end up, if not third or fourth place.

After that I started nodding off as he started mouthing the same old platitudes but in different wrappers. (Make energy less expensive by taxing the hell out of it. Punish all the banks for the actions of a few. Spend billions more on education even though study after study after study shows more money doesn't equate to better education. Destroy our health care system in order to save it. And so on and so on.)

I. GOT. BORED.

ZZZZZZZzzzzzzzzzzz........

UPDATE 1/28/10: Going back and watching the address again, I saw that as time passed he shifted more and more blame for all our troubles on to others. He laid all the blame for the failure of health care reform and cap-and-tax squarely on the Republicans, saying they now owned the blame. Senator John Kyl rebutted that allegation today on NPR, stating the Senate Republicans were following the will of their constituents, blocking bad legislation that would do little more than cost the American people untold hundreds of billions of dollars with nothing to show for it.

I've seen all kinds of reports and so-called exposés about the TEA party movement in MSM. Many were derisive, a few tried hard to be neutral, a few more were big supporters, and some were outright hostile.

But then, out of nowhere, comes a piece that even a cynic like me has to admit was pretty well balanced, and from a source I never would have thought of as fair.

Ben McGrath does a pretty good job covering the rise of TEA party activism for the New Yorker, resisting the urge to paint everyone involved with the TEA party activities as inbred right-wing rednecks beholden to Big Oil, Big Finance, and Big (place name of latest scapegoat du jour here).

My first immersion in the social movement that helped take Ted Kennedy's Massachusetts Senate seat away from the Democrats, and may have derailed the President's chief domestic initiative, occurred last fall, in Burlington, Kentucky, at a Take Back America rally.

About a thousand people had turned up at the rally, most of them old enough to remember a time when the threats to the nation's long-term security, at home and abroad, were more easily defined and acknowledged. Suspicious of decadent élites and concerned about a central government whose ambitions had grown unmanageably large, they sounded, at least in broad strokes, a little like the left-wing secessionists I'd met at a rally in Vermont in the waning days of the Bush Administration.

If there was a central theme to the proceedings, it was probably best expressed in the refrain "Can you hear us now?," conveying a long-standing grievance that the political class in Washington is unresponsive to the needs and worries of ordinary Americans. Republicans and Democrats alike were targets of derision.

Addressing McGrath's last point, more than a few Republicans have made the mistake of thinking the TEA party movement is a phenomenon automatically supportive of the GOP. They're wrong. Most Americans are sick and tired of being ignored or marginalized by both political parties. TEA party activists like me see both the Democrats and Republicans as being part of the problem, so GOP congresscritters, governors, and state legislators are no more immune from our displeasure than Democrats. (It's just that there are so many more Democrats in office these days that they're taking the brunt of our pushback.)

McGrath credits Rick Santelli, a CNBC reporter, as being the spark that started the TEA party fire with his rant on the floor of the Chicago Mercantile Exchange last February. The rant, reminiscent of Peter Finch's portrayal of Howard Beale in the movie Network, expressed the frustration so many of us were feeling at being ignored by the very people we put in office to serve us. Instead, they decided that we served them, and as such, all that was ours was theirs to use or misuse as they saw fit.

They were wrong.

And so the movement grows, as McGrath has shown.

I have to agree with Eric the Viking on this one: Who's writing Nancy Pelosi's material these days?

"The American people have an anger about the growth of the deficit because they're not getting anything for it. ... If somebody has the idea that the percentage of GDP of what our national debt is will go up a bit, but they will now -- and their neighbors and their children -- will have jobs, I think they could absorb that, and then we ride it out and bring money in," she said.

She's kidding, right? (Unfortunately, she's not.)

This statement and the others in Eric's post and link shows me three things about our Speaker of the House:

a) She really has little understanding of economics.

b) She really has no idea what motivates average Americans, particularly when it comes to matters economic.

c) She really doesn't care because she knows better than everyone else in the nation, including the very folks she claims she wants to 'help'.

The angry American taxpayers don't want Congress to spend even more money we don't have on more stimulus, health care reform that will reform nothing, or any other dubious and expensive government programs.

Sucking over $1.4 trillion out of the economy (the present budget deficit figure) is not helping the economy in any way, shape, or form. Pulling even more out of the economy with higher deficits and higher taxes in a second effort to 'stimulate' the economy will only make the recession worse. This is something Pelosi, as well as Reid and Obama, do not understand. I find that difficult to believe considering there's plenty of history to show previous attempts to do just that have failed miserably and, in fact, made things worse.

Watching what's happening to our economy today it's easy to forget that this isn't the first time we've been through this, with government trying to spend its way out of a recession. The effort back in the 1930's failed miserably, extending the Great Depression for years, as did the 'stimulus' of 1962, which prompted Ayn Rand to comment on the error on the part of government in thinking such spending would do anything but have negative effect, that our economic IQ was sadly deficient. From her column in the L.A Times back in 1962:

Since "economic growth" is today's great problem, and our present Administration is promising to "stimulate" it--to achieve general prosperity by ever wider government controls, while spending an unproduced wealth--I wonder how many people know the origin of the term laissez-faire?

France, in the seventeenth century, was an absolute monarchy. Her system has been described as "absolutism limited by chaos." The king held total power over everyone's life, work, and property--and only the corruption of government officials gave people an unofficial margin of freedom.

Louis XIV was an archetypical despot: a pretentious mediocrity with grandiose ambitions. His reign is regarded as one of the brilliant periods of French history: he provided the country with a "national goal," in the form of long and successful wars; he established France as the leading power and the cultural center of Europe. But "national goals" cost money. The fiscal policies of his government led to a chronic state of crisis, solved by the immemorial expedient of draining the country through ever-increasing taxation.

Colbert, chief adviser of Louis XIV, was one of the early modern statists. He believed that government regulations can create national prosperity and that higher tax revenues can be obtained only from the country's "economic growth"; so he devoted himself to seeking "a general increase in wealth by the encouragement of industry." The encouragement consisted of imposing countless government controls and minute regulations that choked business activity; the result was dismal failure.

Colbert was not an enemy of business; no more than is our present Administration. Colbert was eager to help fatten the sacrificial victims--and on one historic occasion, he asked a group of manufacturers what he could do for industry. A manufacturer named Legendre answered: "Laissez-nous faire!" ("Let us alone!")

Apparently, the French businessmen of the seventeenth century had more courage than their American counterparts of the twentieth, and a better understanding of economics. They knew that government "help" to business is just as disastrous as government persecution, and that the only way a government can be of service to national prosperity is by keeping its hands off.

Regardless of the purpose for which one intends to use it, wealth must first be produced. As far as economics is concerned, there is no difference between the motives of Colbert and of President Johnson. Both wanted to achieve national prosperity. Whether the wealth extorted by taxation is drained for the unearned benefit of Louis XIV or for the unearned benefit of the "underprivileged" makes no difference to the economic productivity of a nation. Whether one is chained for a "noble" purpose or an ignoble one, for the benefit of the poor or the rich, for the sake of somebody's "need" or somebody's "greed"--when one is chained, one cannot produce.

There is no difference in the ultimate fate of all chained economies, regardless of any alleged justifications for the chains.

It seems that we still haven't learned that lesson four decades or four centuries later. As the late Ronald Reagan said more than once, "Government isn't the answer. Government is the problem." It was true back during Louis XIV's reign and it's true today. Our government is bent on controlling more businesses, either through direct take over like GM, Chrysler, the banks, and health care, or through onerous regulation and taxation, all in the name of 'stimulus' and 'fairness'.

Apparently our leaders have learned nothing from past attempts to tighten control over economies and businesses that their attempts won't work, won't create the results they want, and won't lead to anything but more poverty, less business, and a weaker economy than if they'd just left everything alone. But government is incapable of not fiddling about with things they really don't understand. And that's our biggest problem today.

As John Stossel writes, it's not the taxes that are the problem, it's the spending.

Last week on "The O'Reilly Factor", we talked about California's and New York's enormous budget deficits and planned tax increases. Those states would have big surpluses had they just grown their governments in pace with inflation. But of course they didn't. Now the politicians act like their current deficits are something imposed on them by the recession.

But that's nonsense. They created the problem with their reckless spending.

--snip--

O'Reilly told me that America is ready for a tax revolt. I hope he's right. But I don't think it will happen until more people see the ruling elite for what it is: a gang of arrogant bullies that has the audacity to believe that they know how to direct our lives better than we do.

That's why, bad as the taxes are, I'm more upset about ObamaCare, Medicare, the "stimulus," the auto bailout, the bank bailouts, the Fannie/Freddie bailouts, the trillions in guarantees, and on and on.

The need for all those extra taxes would be reduced if government at state and federal level could get their spending under control. For the most part that's not going to happen because far too many of those in power like to "bring home the bacon" regardless of the actual costs to their constituents. Only those states forced to address their spending issues, like California, New York, New Jersey, and Michigan, to name a few, will actually have the opportunity to trim spending by billions of dollars. They won't have a choice because if they don't cut spending higher taxes won't fill the empty coffers and the states will face bankruptcy. They simply don't have the money to pay for all those really 'neat things' everyone thought they could afford during the good times. But the good times are gone and with them, the revenues the states had gotten used to having.

To paraphrase James Carville, "It's the spending, stupid!"

It appears the budget deficit is going to be bigger than either the White House or the Congressional Budget Office had predicted.

That's not surprising considering federal revenues were 18% below projections. At least it didn't surprise me considering Congress and the White House ignored the Law of Diminishing Returns: Once you raise taxes and fees above a certain point the amount of revenue you collect will fall. It's a perfect example of the Laffer Curve in action.

On the other hand government spending hasn't dropped off nearly enough (only about 3%) to make up for the revenue shortfall. I have no doubt Congress will act to correct the problem...by raising more taxes and fees. This will have the effect of causing an even greater falloff in revenue. Congress shouldn't be raising taxes during a deep recession. They also shouldn't be spending money we don't have, either. But I don't expect Congress or the White House to do the necessary things to stem this flood of red ink.

Here in New Hampshire the state is seeing a similar falloff in revenues, being short about $38 million so far. A number of people within the New Hampshire legislature warned that revenue projections were unrealistic, particularly in light of the hefty increase in taxes and fees. This is the second budget cycle where the Democrat dominated legislature overestimated revenues and used those projected revenue figures to increase state spending by amounts that far exceeded the inflation rate. Over four years state spending has increased by 30%, but revenues haven't come anywhere near to covering the larger expenditures.

The state ended it's last budget cycle (New Hampshire has a two-year budget) over $100 million in the red. The legislature still has that budget gap to fill and has been trying to do so by raiding $110 million in surplus insurance premiums being held by the state chartered Joint Underwriting Association, a private organization created by the state to ensure doctors, medical practices, hospitals, and other medical facilities and personnel could get malpractice insurance. So far the state has failed in its attempts to confiscate those funds. A Belknap County judge ruled in a suit filed by the JUA that the state had no rights to those funds because the law that set up the Association states surplus funds must be returned to the policy holders, past and present. The judge also ruled the state had no other claims to the funds because the JUA is a private entity, particularly in light of the fact that no state funds or state personnel are used to administer the Association. The state disagreed and has taken the case to the New Hampshire Supreme Court.

You know it's getting bad when the state legislature figures it can raid private funds to plug a budget gap. I believe that's called theft. Of course the Democrats in the legislature see it as monies being withheld from them by greedy doctors when the state can make far better use of that money. Never mind that state law says otherwise. Never mind that the money isn't theirs to begin with.

It's going to be interesting (in the old Chinese curse definition) to see how the financial situation at the federal and state level will play out.

Update: A number of states are looking at growing revenue shortfalls, with some heading towards bankruptcy because of pension funding obligations and state union contracts that leave them with little wiggle room.

How's that $787 billion stimulus workin' for ya? For three New England states it's not helping all that much.

So far the stimulus has saved or created 20 jobs in Connecticut, 28 jobs in Vermont, and 22 jobs in New Hampshire. As Jim Hoft put it "Obama would have done better if he would have opened a McDonalds in each state."

The most I've seen of the billions in stimulus spending so far are the signs along a couple of highways touting that certain projects have been paid for via the ARRA stimulus bill.

At least the sign makers are making a buck from all this stimulus money.

Looking At The Left has a report on the activities in Washington, DC where a reported 2 million anti-big government, anti-big spending protestors made their voices heard.

Some attending have called it "the conservative Woodstock." I call it the usually silent majority finally finding their voices.

There were a number of differences between this protest and other protests held by those of a more progressive bent. I think the most obvious one was the scarcity of professionally printed signs. Almost all of them were hand-made. Another - most of the people there paid their own way to get there.

Another difference? In an e-mail to Glenn Reynolds an Instapundit reader wrote:

"I'll tell you what I find impressive. I'm watching the Fox news video about 15 minutes after the end of the event. The crowd has thinned out enough that you can see the ground and there is not a speck of trash on the grass. Absolutely clean. To contrast, google 'pictures of litter on the mall after the inauguration.'"

I noticed that too, and not for the first time. After the April 15th Tea Party protest in Manchester, New Hampshire it was the same thing: the park was clean. Does this mean conservative protesters care more for the environment than liberal protesters because they're willing to clean up after themselves?

UPDATE: Gateway Pundit has the pictures to show us the difference between "clean" conservatives and "filthy" liberals.

While there is agreement amongst most parties that health care reform is something needed, it is the difference in approach that divides the nation (and more specifically, Congress).

Being the frugal Yankee that I am, I am all for making sure any reforms are sustainable, actually save money, and require no use of tax dollars to support. Is such a thing possible? I believe so, and I'm not the only one. Unfortunately far too many members of Congress and their 'supporters' believe the only answer is government control (and funding) of any and all reform. The only problem with that viewpoint is that it entirely overlooks the economics of such a system, to the peril of us all (and our wallets).

Peter Angerhofer in the September 6th Sunday Citizen (Laconia, NH) reminds us, again, that health care reform can't defy economics. (Sorry, no link available)

[I]f the current governmental health care reforms attempt to subvert basic economic laws, they are, at best, bound for failure; at worst, they could destroy the quality of care that most Americans enjoy.

While the problems of rising costs should be obvious for all to see, the president and his allies have proposed solutions that ignore the fundamental economic laws of supply and demand. I f we are to provide better access to health care, we need to recognize these basic laws and reduce prices by either reducing demand, increasing supply, or both.

The President and the leftists in Congress are basing their health care reform on the mistaken premise that the supply of health care is finite, that it is static and that it won't change. And because of that false premise, they'll try to force a drop in demand for health care as the means of reducing the costs. The only means of reducing demand is to ration care, to deny care, to decide who will and who won't be treated, who will live and who will die.

But the supply is not finite except at the present moment. Tomorrow there could be more. The day after there could be less. It is fluid. But should the government 'take over' health care, the finite supply will not expand. It will not be static. Instead, it will shrink.

How do I know that? History.

All one needs to do is look at every country that has instituted government provided/controlled health care. In every single case the quantity and quality of health care declined. In a few there were minor changes, mostly because the quality of health care wasn't all that great to begin with. In most others the decline was dramatic. Is that what we, the American people, really want to do here?

Of course not. But the Obama Administration and the leftists in Congress do. That desire has nothing to do with actually providing health care. Instead it's about control. They truly believe they know what's good for you better than you do. They believe they are the only ones that can possibly make the right decisions for you because you are incapable of making them for yourselves, that you're not smart enough. Only the government is wise enough to make those decisions. Of course we've seen the dystopian results of that before and we know we don't want to go down that path.

Should Congressional leftists ignore the economics of their health care reform bills, reform won't work. The burden placed upon the economy and the taxpayers will be too great. It will require the infusion of billions, if not trillions to ensure mediocre health care, increased morbidity, and increased suffering. A once great, though imperfect, health care system will have been reduced to a shadow of its former self. And the leftists will congratulate themselves for succeeding in pulling of the greatest swindle since Bernie Madoff.

Daniel Henninger is calling it the Revolt of the Masses, and rightfully so.

In a number of countries around the world the status quo is being upset by voters, turning out long established political parties from power and bringing new blood into their legislatures. Old leaders are being replaced with those that have had enough of creeping socialism and growing indebtedness.

It's no different here in the US, with the public becoming increasingly disenchanted with those in Congress as well as the present occupant of the White House.

In the U.S., political handicappers are predicting heavy Democratic losses in the House next November. This just four years after ending GOP control of Congress in the 2006 elections and two years after sweeping into office Barack Obama and his Democratic partners.

Congress's approval rating remains stuck around 30%. This number may be more important as an indicator of public sentiment toward the nation's leadership than presidential approval.

Some search for an ideological trend toward the left or right in these votes, but the only evident trend is to strike out at whichever blob is currently in power. Even as Americans turned over their country to liberal Democrats, opinion polls showed that the British people were turning toward the Conservatives for relief from listless Labour.

I have a feeling the American people will reverse that decision and move away from the big spenders presently sitting in Congress. It doesn't take a genius to figure out spending far more money than we really have is no way to run a country, particularly when the deficits created will be so much bigger than we've ever experienced.

One commenter to Henninger's piece thought he missed the actual cause of the growing discontent. Steven Flint wrote:

The author is on the right path, but he stopped short of the destination. He is blaming a symptom, not the root cause. He is correct that the problem isn't directly about left and right, but he misses the big picture -- its about up and down.

Lets start here in America. Let's throw all of the writings and lessons of the Founding Fathers into a big pot and bring it to a boil. Add in all of the reasons we fought our wars against ourselves and others, toss in the battles we fought at home for rights and freedom, and heck, even shovel in the adolescent rebellion of the boomers, and let the whole thing reduce to its most elemental. What you'll find when the rhetoric and the posturing is boiled away is the essence of America... a simple idea.

It is this: That everyday common people can run their lives and build a prosperous and fair nation without the ruling hand of their "betters"... whether those "betters" are aristocratic or meritocratic. That is the root of all freedom and all rights. Without that core idea all you have left are temporary dispensations to act and think and talk a certain way... until further notice. But that is not freedom, and those are not rights.

We don't want rulers, only temporary leaders. We don't need kings, be they hereditary or philosopher.

Other nations have their own balancing points, of course. They all have their own social compacts delineating what belongs to the people and what belongs to the elite. But in almost every nation, the political/academic/media/business elite have unilaterally abrogated these understandings. Not all at once, of course, but bit by bit, over the past 4 or 5 decades. We, the people are given empty promises, heavier chains, and shrunken horizons, while the elites gather power and privilege for themselves.

They've gotten good at selling slavery. Most folks volunteer for it, and feel noble while doing it. We have no problems anymore, only crisis. Catastrophe is always right around the corner. Flood the airwaves with experts (those with the "correct" opinions, of course). Cue the stock footage of the approved stock victims. Install the big, blinking guilt-button in the minds and hearts of the people, and press it repeatedly, until the people believe the world is a zero-sum game and they must nobly sacrifice for the good of society. But most of all, get 'em to hand over power and control... no, not to the approved victims, silly... upward! Pass it upward!

Maybe the folks are waking up around the world. Maybe they've noticed that, despite all of the noise and the drama, the elites haven't really fixed anything. Maybe they've noticed that the top-down, expertly planned society is a faux society, more dead than alive. Maybe they've noticed it only produces stagnation and decay. Maybe they realized that all of that debt is meant to cover up all of that stagnation and decay... to create an illusion of growth as their nation is hollowed out, by their own elites, all in the name of some sort of global equality... an equality the elites have no ability to create, but their egos prevent them from admitting so.

Maybe they remembered that the elites get all of their legitimacy from the people, and to withhold it is the greatest power of all.

Maybe.

I couldn't have said it better myself, so I'm not even going to try.

Do you want a preview of what's coming in California, New York, New Jersey, Massachusetts, and quite possibly the nation? Then all one need do is look at the mess that is Michigan.

Writes native Michigander Michael Barone:

Things are pretty bad in my native state of Michigan, which has the nation's highest unemployment rate and is the headquarters of government- and union-owned General Motors and Chrysler. Conditions are so bad that they seen to have sent some Michiganians (we used to say Michiganders when I was growing up) over the bend.

Case in point: Democratic State Chairman Mark Brewer. Ordinarily a pretty savvy political operator, Brewer is now suggesting five ballot propositions for the 2010 ballot. Their aim apparently is to improve the lot of Michigan citizens. But the result, as anyone with an iota of sense can see, would be to inflict horrifying damage on an already staggering state economy. They include:

● Mandating all employers to provide affordable health care for all their employees and dependents or pay a penalty.

● Raising the minimum wage from $7.40 per hour to $10 per hour and covering all workers with no exceptions.

● Increasing unemployment benefits by $100 a week, making all workers eligible and adding six months to the time one can receive benefits.

●Cutting utility rates by 20%.

● Imposing a one-year moratorium on home foreclosures.

[O]verall this is a program to pillage the private sector and drive it out of Michigan.

It sounds almost like Directive 10-289 from Atlas Shrugged. It certainly contains some of the elements of the directive.

The state government seems totally disconnected from the facts of the economy. All their efforts have done nothing more than make things worse. It's as if no one in the legislature or the governor's office has ever taken an economics and/or sociology course. The proposed ballot initiatives are based on nothing more than the need to "Do something!" even if that something is wrong. It may make then feel better to propose it, but they clearly haven't thought out the consequences of those initiatives should they ever see the light of day.

Residents and businesses have been leaving Michigan at an increasing rate. The number of people leaving is greater than the number of people moving into the state. Cities like Detroit and Flint are emptying out. In the case of Flint, entire neighborhoods are being torn down and returned "to the wild" because no one lives there. It's not too often city populations shrink at the high rates being seen in Detroit, Flint, Pontiac, and a number of other cities and towns in Michigan.

If California, New York, New Jersey, Massachusetts, and a handful of other states don't get their fiscal houses in order by slashing all but necessary spending, get the nice-to-have social programs under control or even eliminated, and roll back confiscatory taxes and fees, they will suffer the same fate as Michigan. And should the federal government fail to do the same, the entire country could end up looking like Michigan.

(H/T Maggie's Farm)

It's ironic that Governor John Lynch is touting New Hampshire to other states as an example of fiscal responsibility. Ironic because it isn't true.

In the face of a deep national recession, New Hampshire stands as an example for other states in crafting a budget that makes tough cuts and lowers spending, while protecting essential services and avoiding major new taxes.

Instead, the Legislature raised existing taxes and fees, in some cases adversely affecting 45,000 small businesses in the state at a time when they could least afford it. (Hey, there's a recession on and business is way down, meaning income is down.)

The state did not lower spending...unless you call over $1.2 billion (~13%) in additional spending compared to the previous budget "lowering" spending.

We produced a budget that makes cuts by making changes to just about every area of state government and sets state government on a path to greater reform. Overall, state spending is down about 1 percent.

"Down 1 percent"? Maybe compared to the original proposed budget (an increase of 13% instead of 14%), but not when compared to the previous budget.

The governor and the legislature had more than enough opportunities to truly trim the budget and minimize the burden to the taxpayers in New Hampshire. They had more than enough time to look at the projected revenues and to craft a budget that fit within the constraints of those revenues. Instead they reversed the order, putting together a budget and only then looking to see if there would be enough money to pay for it. When it became apparent the revenues wouldn't come close to being able to fund the proposed spending, the legislature raised taxes and fees that hit the taxpayers at a time when they could least afford it.

Both the governor and the legislature failed the people of New Hampshire. We expected an austere budget, even if it meant laying off state employees and a reduction in services. What we got instead was a crap sandwich that we were expected to swallow whole and then say "Please, sir, may we have another?"

Is it a surprise to anyone that federal tax revenues are down, seeing the biggest drop since the Great Depression?

I guess Congress and the President still haven't learned that there is such a thing as too many taxes. Maybe they need to take an economics course. Then again all they really need to do is listen to Arthur Laffer as he explains his curve.

We already know the present Congress is incapable of actually reducing spending (hence the $1.2+ trillion deficit for the coming fiscal year), so we should expect nothing but more taxes to be laid upon the rich (newly redefined as "anyone with a job").

In all 50 states revenues are down as well. In New Hampshire, where the Weekend Pundit team resides, state revenues in July were down compared to July last year. Somehow I doubt the Democrat majority in the state legislature planned for that, figuring with all the tax and fee increases revenues would rise.

The question is what will they do if revenues continue to come in under projections? I'd like to think they'd finally get around to making some tough decisions and start trimming the state budget. I'd really like to think that. Even 10 years ago that might have happened. But today, they'll merely decide that they need to raise even more taxes and fees or, even worse, institute a broad-based tax (income or sales tax) and drive the final nail into the coffin of the New Hampshire Advantage. Then we'd be no different from any other state in the Northeast, with poor economic outlook, a crushing tax burden, and nothing to show for it but empty store fronts and factories and higher unemployment.

Democrat politicians are seeing a big drop in their popularity as the economy continues its suckage and the actual cost of health care reform and cap-and-trade have come into public awareness.

Obama has seen his popularity and support drop off, with many of the independents and moderates shying away from Obama's shift to the extreme left. Obama's Congressional support has also been falling away as Blue Dog Democrats have balked at the price tag and the accompanying erosion of rights his aforementioned programs entail.

Those on the Right have had enough of the Obamessiah too, with a number of them borrowing a page from the Left's playbook and showing their support for the President.

The falloff in the popularity of Democrats has also been seen in lower level political circles.
New Hampshire Governor John Lynch, while seen as a nice guy, has seen his popularity numbers slide from solid majority favorable numbers in April to a majority unfavorable this month. One big factor seen in this decline is his poor handling of the state budget process, his unwillingness to tell the state legislature he'd wield his veto pen like a machete in order to hold the line on state spending. Instead, he signed a bloated two-year budget that included a 13% spending increase and related tax and fee increases during a deep recession. That hasn't set well with New Hampshire voters, meaning the governor will be vulnerable during the 2010 election. Fiscal responsibility will be his greatest weakness.

The same can be said of many Congressional and Legislative Democrats as well. Could this mean long-time Congresscritters like Pelosi, Frank, Dodd, and Reid could be vulnerable during the 2010 elections too? If they keep spending money we don't have on programs no one wants or needs, they may have to start looking for new jobs in 2011.

One can only hope.

I have to wonder why Barney Frank is still in office.

First, he torpedoes any effort by Congress or President Bush to tighten controls on Fannie Mae and Freddie Mac, declaring they were both financially sound even though their lending practices were sketchy at best.

We all know what happened to Fannie Mae and Freddie Mac.

Now dimbulb Barney wants Fannie Mae and Freddie Mac to loosen their lending standards again.

Back when the housing mania was taking off, Massachusetts Congressman Barney Frank famously said he wanted Fannie Mae and Freddie Mac to "roll the dice" in the name of affordable housing. That didn't turn out so well, but Mr. Frank has since only accumulated more power. And now he is returning to the scene of the calamity -- with your money. He and New York Representative Anthony Weiner have sent a letter to the heads of Fannie and Freddie exhorting them to lower lending standards for condo buyers.

You read that right. After two years of telling us how lax lending standards drove up the market and led to loans that should never have been made, Mr. Frank wants Fannie and Freddie to take more risk in condo developments with high percentages of unsold units, high delinquency rates or high concentrations of ownership within the development.

Isn't this how we got into trouble in the first place? He doesn't get it, does he? He really doesn't get it.

With the prospect of the US Government deciding enough is enough when it comes to bailouts, it looks like Governor Schwarzenegger has finally remembered that he is indeed the governor and is finally doing something that might actually help California out of the $40 billion hole it dug for itself.

With a restructuring of the state income tax to a flat 6% that covers a much wider portion of the wage earners than the existing progressive (and very high) income tax and the willingness to lay off state employees, it could be the Governator has finally seen the financial light and is doing something he should have done after taking office: rein in profligate spending and stop tapping the taxpayer's wallets again and again and again.

Will these measures erase California's budget deficit? No, but they will make a significant dent. They also set a precedent that should be carried forward until state spending is under control.

Another state has also reached the conclusion that layoffs and furloughs of state employees are necessary at a time when the state's taxpayers are telling the legislature and the governor "Enough!"

The proposed budget for New Hampshire includes more job cuts after a conference committee couldn't agree on a wide swath of tax and fee increases many saw as a a detriment to the states economy because they were business hostile. Things like video slot machines at the state's race tracks (dog and horse tracks) as well as two other locations in the northern tier of the state were shot down, as were efforts to remove a tax credit that offset the Business Profits Tax,. An increase in gasoline taxes, as well as new taxes on capital gains, estates, and mortgage refinancing were defeated in committee.

Neither state has gone far enough to balance their budgets. New Hampshire will still see a substantial increase in state spending on top of the 17.5% increase it had to endure in the last state budget. California still has billions it must shave off of its state budget if it wants to avoid bankruptcy.

Hopefully both states have learned a valuable lesson. The question is whether they will remember that lesson.

Skip here!  I am really hoping that Chan and family are having a deLIGHTFUL vacation, far away from the cold here in NH (yeah, couple of nights ago, we had to fire up OUR wood stove on consecutive nights.  No, not long burns - just enough to take the clammy, chill out (it's been raining, dontcha see?).

Anyways, I though that the WeekendPundit readers, seeing that both DCE and I are engineers and interested in what affects our families, would be interested in a recent post I did

President Obama is oft wont to proclaim how bad the Bush Administration was in spending; it seems to be a hobby (habit) now in using that old child's ruse of trying to deflect a parent's ire over some ill he has done by stating "But look what Johnny did!"

And just like with Johnny, Obama is trying the same trick: blaming Bush for the "mess he inherited" and then promptly making it 4 times worse (or more, as the deficit keeps climbing).  Recently he proudly proclaim that he's been more productive than even FDR - I'd not be too loud in trumpeting that fact, sir.

Anyways, USA Today had a good piece on the nation's debtand brings it down to the individual family level - remember folks, our political leaders have spent this on "our behalf" - it is OUR debt!  Even as individual citizens are deleveraging themselves (Businessweek reports that this is the sixth straight months that credit card debt has lessened), Obama is spending it for us:

Here's a little table I put together from the Flash presentation that animates the above:

Personal Debt				Federal Debt
Mortgages	$89,514	73.4%		Medicare	$284,288	52.0%
Consumer Debt	$22,231	18.2%		Social Security	$160,126	29.3%
Other	$10,208	8.4%		National Debt	$54,537	10.0%
				Military Retirement	$29,694	5.4%
TOTAL	$121,953			Civil Servant Retirement	$15,851	2.9%
				Other	$2,172	0.4%
				TOTAL	$546,668

 

And a couple of bullet point type stats from the piece:

• Taxpayers are on the hook for an extra $55,000 a household to cover rising federal commitments made just in the past year for retirement benefits, the national debt and other government promises, a USA TODAY analysis shows.

• The 12% rise in red ink in 2008 stems from an explosion of federal borrowing during the recession, plus an aging population driving up the costs of Medicare and Social Security.
  

Bottom line: The government took on $6.8 trillion in new obligations in 2008, pushing the total owed to a record $63.8 trillion.

Key federal obligations:

• Social Security. It will grow by 1 million to 2 million beneficiaries a year from 2008 through 2032, up from 500,000 a year in the 1990s, its actuaries say. Average benefit: $12,089 in 2008.

• Medicare. More than 1 million a year will enroll starting in 2011 when the first Baby Boomer turns 65. Average 2008 benefit: $11,018.

Get that - that's  $23,107 for each retired adult just for SS and Medicare - it does NOT account for the other debt in the above table.  It is also projected that the number of active workers to support each retired person will soon drop to 2.  Now add in the "regular" in "on-going" taxes - think we will be Taxed Enough Already?  Time to Party yet?  Is that sustainable?

Ask yourself: is this what you want to leave as your legacy for your children and grand children.  Remember, low taxes are the result of low spending.  Isn't it time, as Obama keeps telling the rest of us, for Government to start sacrificing financially?

Yup, time for some more TEA Parties!!

(Cross-posted at GraniteGrok)

When it comes to holding spending in check, Minnesota Governor Tim Pawlenty knows how to do just that, especially when the Democrat-controlled legislature decides it isn't going to play along.

The legislature failed to deal with a $4 billion dollar budget deficit, and increased spending for the new budget, and increased or added taxes across the board.

Governor Pawlenty was having none of it.

Using a little known and little used Minnesota law, Pawlenty slashed through the budget with aplomb.

Upon receiving the last spending bill, he announced that he would exercise the power of "unallotment," which has been on the books since 1939 and which has been used four times. Under it, the governor is allowed to "unallot" (take away) any state spending for which there is no money to pay.

Of course the legislature responded with a last minute tax hikes, but Pawlenty didn't let them get away with it and vetoed the tax bills.

Mr. Pawlenty is now free to strip $2.7 billion from state spending to balance the budget. Tax hikes are dead.

These cuts, he says, will position Minnesota to take advantage of the recovery when it comes.

Of course the Minnesota Democrats have gone ballistic, spreading words of doom and gloom and trying to make sure Minnesota voters will know to blame the governor when 'vital' services are cut. ( My definition of 'vital' differs greatly from theirs.) Fortunately the voters aren't buying it.

Voters elsewhere might wish for a little more such show. Mr. Pawlenty's hardball has earned him glowing praise from the state's job creators, in particular small businesses, who are relieved to be spared additional tax burdens in today's economy. The governor's message -- that it is simply "inappropriate" for state legislators to keep spending like lunatics and raise taxes in a recession -- has resonated with cash-strapped voters.

That sort of tax-and-spend governance is precisely what has now pushed California to the brink of insolvency. California voters revolted this week, defeating five budget ballot initiatives. "The sky isn't going to fall," Mr. Pawlenty told reporters on Tuesday, just because Minnesota has to trim 3% to 4% from a $34 billion budget. Oh, to hear such words from a California pol.

I wish my home state of New Hampshire had such a law or something akin to it, like a line-item veto. Goodness knows we could use it now considering our Democrat-majority legislature is ready to spend us into the poor house with yet another unbalanced budget (which is unconstitutional in this state) and a broad slate of tax and fee hikes. Of course our present wishy-washy governor would be unlikely to use it, except to cut out a few minor spending issues for appearances sake. The upcoming biennial budget needs about a $1.5 billion reduction in order to keep spending in check. But that's not likely to happen this time around.

If we needed any more evidence that high taxes can drive businesses and residents out of a state, there's the example of Ohio. Like California, New York, New Jersey, and Massachusetts, ever rising taxes, coupled with less effective services, failing schools, and a rising crime rate are helping fuel an outmigration from the Buckeye State.

Ohioans have been leaving the state's large cities for four reasons, only one of which -- the natural human desire for open space -- is arguably not their fault. The causes the cities have failed to deal with, and which have been within their control, are high crime, lousy schools, and high taxes. For decades, their governments have been asking, "Where else can they go?" Hundreds of thousands have answered with their feet.

While some may claim there are plenty of other factors prompting the flight from Ohio, it still comes down government pulling too much money out of the economy and giving little in return, other than demands for even more money.

Some states have realized having tax rates beyond a 'reasonable' level is the kiss of death to its economic health and have worked hard to live within their means. Others have stumbled now and then and seen the effects of high taxes and were able to pull themselves back from the brink. Others have not. And yet others will fall into the vicious cycle of raising taxes, falling revenues and contracting economy, raising taxes to make up for the falling revenues, and so on ad nauseum, much like California.