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The term “greedy corporations” or its equivalent seems to appear regularly in commentaries about oil and gas prices, pharmaceuticals, energy, minimum wage, housing, the mortgage crisis, tax policy, etc. – just about every economic or social issue. “Greedy corporations” and, by implication, their “greedy” owners are said to be responsible for many of the ills that befall our society. However, as Pogo famously said, “We have met the enemy and they is us.”
To begin with, corporations aren’t greedy or generous or socially conscious or anything else, for that matter. They are merely a legal fiction, entities created by the state for the purpose of facilitating the conduct of business. They can sue and be sued in the courts, but they do not eat, breathe, love or hate, or vote, or any of the other things that people do. So, how can they exhibit such human characteristics as greed? And, if corporations can’t actually be greedy themselves, then perhaps it is their owners and managers who are.
And, who might these terrible people be? They are your friends, relatives, neighbors, church and community leaders, directors and executives of non-profit entities, school administrators - just about any leader of any enterprise, perhaps you yourself. No doubt you may think some of them are greedy, but certainly not all, or even most of them. Who qualifies as greedy and who makes that determination? You? Or are others deciding for you?
Major corporations, such as the Fortune 500 companies, are generally owned by many thousands or millions of shareholders, often through union pension trusts, retirement plans, mutual funds and other investment entities, which assemble the power of numbers to make large investments on behalf of their individual investors - “Us.” However, for the most part, small corporations are businesses that don’t have enough economic power to influence anyone. They are usually just vehicles for managing the affairs of a business, providing a way for their owner-operators to make a living. Their profits are often not much more than wages, and not too great a wage at that. Are these the greedy corporations we read or hear about so often?
Out of a total of approximately 5.6 million corporate tax returns filed in 2004 (IRS Statistics: Number of Returns, Receipts, and Net Income by Type of Business), freerepublic.com reported that over three million small businesses were “Subchapter S” (Sub S) corporations in that year. They pay little or no income tax on their earnings because they are treated like partnerships for tax reporting purposes. These are referred to as “pass through” entities, which means they simply pass their earnings through directly to the owners, who include them on their personal income tax returns and pay taxes on the corporate profits at individual rates.
Further demonstrating the extent to which “greedy corporations” are “Us,” in their “Outline of the U.S. economy,” www.usinfo.state.gov noted, “Fully 99 percent of all independent enterprises in the country employ fewer than 500 people. These small enterprises account for 52 percent of all U.S. workers, according to the U.S. Small Business Administration (SBA)…By contrast, 47.7 million Americans work for firms with 500 or more employees.”
If corporations can’t actually be greedy, and if their owners are, for the most part, “Us,” where does the notion of “greedy corporations” come from, and why? The obvious answer is from the media and other special interest groups, including politicians, who want to influence the public’s view of various issues.
The public is continually duped into accepting broad brush character assassination that is intended to influence their perceptions for political purposes. Just one example is the current situation with the financial crisis, which politicians are using in an effort to enhance their own credentials as self-sacrificing crusaders for the public good who are trying to regulate the market for the benefit of their constituents.
No one ever seems to point out the fact that the very people who label someone else as greedy are, in fact, often guilty of the same behavior themselves. Taxpayers are called greedy if they want to keep their own money, but politicians who want to take it from them and spend it themselves are not. Or, large corporations, as in drug, oil and energy companies, are labeled greedy when prices go up and their profits increase but not when prices go down and they lose money.
There are individual examples of greed that are so extreme that they cry out for justice, however, in general it’s apparently Ok to lose money but it’s greedy to make it, unless, of course, we are the ones making the profit.
In the final analysis, greed is not bad but good. It’s nothing more than self-interest at work, which provides the lubricant that makes the wheels of commerce turn, not just in capitalist America but everywhere in every type of economic system, including socialism and communism.
Numberspeak makes most people’s eyes glaze over. But, as has often been said, the devil is in the details and, unfortunately, the only way to understand much of what goes on in government is through the numbers that are released for public consumption.
It’s always been surprising to me how people in government can get away with misrepresenting financial information while those who do the same thing in private life can be prosecuted for fraud. For example, financial reporting: The federal government imposes so many reporting requirements on public companies through the Securities and Exchange Commission (SEC) and various other agencies that it is often difficult, if not impossible, for them to comply, and even when they do, it is usually not easy to interpret. But the government does not have to meet the same standards in their own financial reporting.
Here’s an accounting primer (in 67 words): The principal difference between government and corporate accounting is that business financial statements must include the amounts it owes for goods and services it purchased during the period (month, quarter, year). It’s called accrual accounting. On the other hand, governmental financial reporting is generally prepared on the cash basis and do not show the largest portion of their liabilities on the financial statements it issues.
So, what does this mean? Looking at the big picture, it means that the financial statements the federal government releases do not include the amounts it expects to pay in the future for the Social Security and health care programs, such Medicare and Medicaid, and various other obligations, like publicly held debt, military and civilian pensions, federal insurance, loan guarantees and leases.
David M. Walker, formerly the Comptroller General of the United States, and currently president of The Peter G. Peterson Foundation, has prepared “A Citizens Guide to the Financial Condition of the United States Government,” which is available online at www.pgpf.org and which notes that in 2007 the major fiscal exposures to the government amounted to $52.7 trillion dollars. The report observes: “The dollar figures used when discussing the federal budget are almost too large to comprehend. To translate the estimated $52.7 trillion in major fiscal exposures – our federal fiscal hole – into more understandable numbers, the U.S. Government Accountability Office (GAO) calculated the burden as equivalent to $175,000 per person living in the United States; $410,000 per full-time worker; $455,000 per household.”
The Citizens Guide also notes, among other things, “…about 42 percent of the (federal) budget is devoted to Social Security, Medicare and Medicaid. Because these programs provide significant benefits to older people, that percentage will grow as the population ages.” Medicare and Medicaid will also experience rapid growth. As baby boomers become eligible for these benefits, the budgets for these programs will consume ever greater percentages of the federal budget.
These huge amounts do not show up in the financial reporting the public usually sees when politicians talk about fiscal policies, prepare and approve budgets, or generally discuss the federal government’s financial situation. It’s amazing but, for the most part, these “unfunded liabilities” are treated as if they don’t exist. The government seems to operate on the theory that out of sight is out of mind. But they do exist, and they are coming due much faster than most people realize. When that happens, we will not be able to fund them without these commitments consuming the entire discretionary budget. In other words, we won’t be able to buy or pay for anything else.
Since most people do not have the resources to pay their share of these federal obligations, where will the money come from? The primary sources are either increased taxes, borrowing, or printing money. If the choice is to raise taxes, the amount would be great enough to cripple the economy and chances are it would be so politically risky that politicians would likely turn to one or both of the other alternatives: borrowing or printing the money, both of which would be highly inflationary and would undoubtedly result in hyperinflation.
We are in a trap of our own making and very few of our political leaders have been willing to deal with this challenge. If we don’t stop hiding the facts from the public and face up to reality, we will eventually cross the line into hyperinflation.
Executives of large corporations who are guilty of this sort of financial misrepresentation often go to jail. Perhaps some of the leading political charlatans should also go to jail for hiding the financial facts from the public.
How much longer can the United States continue to spend more money than it takes in, and how much longer can we continue our spendthrift ways before something literally gives? The numbers are getting so big that they are beyond comprehension.
For example, billions and trillions of dollars are almost impossible to understand. Generally, we seem to know what a million dollars can buy. We see the number in the prices of real estate and homes, or perhaps the statistics about various businesses. But, we rarely see big numbers illustrated in terms that are easier to visualize. For example, a billion dollars is 100,000 times one million, and a trillion is a million times a million.
Considering a billion dollars in terms that may be easier to grasp, at an average of $1,000 per month, based on U.S. Social Security Administration statistics, it would cover the social security benefits for over 83,000 seniors (age 65 and over) for one year, and a trillion dollars could pay social security benefits for every senior in America, a total of about 36.8 million, for over two-and-a-quarter years.
America’s politicians are rapidly spending our way into oblivion. Almost a trillion dollars for the Bailout package, including 25 billion for the auto industry, 150 billion for the Federal Deposit Insurance Corporation (FDIC), an 85 billion loan to insurance giant, A.I.G., along with millions of dollars of “pork” for Hollywood producers, stockcar race track owners, Caribbean rum producers, Alaskan fishermen, and who knows what else. Remember, this bill was about 450 pages of text, and since it was handed to Congress only about one day before it was approved, it’s obvious that no one read it or really knew what was buried in it.
In addition, two bills sponsored by Barack Obama are currently working their way through Congress: the Jubilee Act (S. 2166) would cancel as much as another $75 billion worth of Third World Debt and the Global Poverty Act (S. 2433), at an estimated cost of $845 billion.
All this adds up to about two trillion dollars, enough to pay Social Security benefits to the entire senior population for more than four-and-a-half years. We are told the money comes from borrowing, which amounts to putting more currency into circulation.
The ultimate result is inflation. How much and how fast is anyone’s guess, but history is clear about what happens to governments that increase the supply of their currency without appropriate controls and corresponding increases in production. It’s simply a matter of too much money chasing too few goods.
Argentina experienced chronic inflation from 1949 through the 1980s. Hyperinflation exploded to almost 5,000 percent in1989, when government expenditures reached 35.6 percent of GDP (Gross Domestic Product) and subsequently topped out at over 20,000 percent.
A more contemporary example is Zimbabwe, where hyperinflation reached 12,000 percent in 2006, then increased to the point where a single Zimbabwean dollar was eventually denominated as about $10 trillion of their dollars. Their government was finally forced to lop ten zeros from their currency so the calculators could handle the numbers.
When this happens, people refuse to hold their own nation’s currency and convert their money to other assets that they believe will hold their value as their currency continues to rapidly depreciate. In Argentina, wealthy citizens tried to deposit their money in American banks or they bought stock in American companies. The less wealthy attempted to hold U.S. $100 bills or bought houses or gold or commodities, such as rice – anything to get rid of their pesos. They also tried to offset the consequences of unbridled inflation by indexing contracts, which adjusted payments to compensate for the rise in prices over time.
The bottom line is that the currency of a nation that is experiencing runaway inflation becomes worthless, productivity decreases, capital takes flight, and there are a variety of other consequences, such as the government refusing to redeem the bonds it has issued, etc.
The U.S. is rapidly headed down this track. Running continuous deficits and issuing bonds far in excess of our ability to pay is the beginning of the cycle. We’ve been doing this since WWII, and Americans instinctively know that it’s not right. They may not be financial experts, but they know a con when they see one, and most of them seem to recognize what’s happening now with the “$700 Billion Bailout” and have protested very vocally. Unfortunately, only a few members of Congress have been listening.
It’s not too late to stop the train, if common sense is allowed to prevail. If not, we can only look forward to more and higher inflation, just as in Argentina or Zimbabwe, with all the consequences that go with it.
There’s been so much smoke and mirrors that it’s hard to tell where the presidential candidates actually stand on many issues. But, there are some things we do know about Barack Obama. For example, his long-term associations with people who hate America, such as William Ayers, a self-confessed domestic terrorist, the Reverend Jeremiah Wright, who preached anti-American diatribes from the pulpit of Chicago’s United Church of Christ, where Obama was a member for 20 years, and Tony Rezko, a felon with whom he had questionable financial dealings, among others.
We also know that Senator Obama is very liberal. Investors Business Daily notes, “Obama is the most liberal member of the United States Senate…He received a one hundred percent Liberal Rating from the National Journal, making him the most left-wing Senator in Washington — more liberal than even Democratic senators like Ted Kennedy.” His liberal positions include supporting an “infanticide” law that was too extreme even for many “pro-choice” advocates.
Obama has been endorsed by radicals, such as Nation of Islam Leader Louis Farrakhan, who said that when Obama talks, “the Messiah is absolutely speaking.” Obama “has promised to meet with radical leaders like Iranian President Mahmoud Ahmadinejad without ‘preconditions’ even though Ahmadinejad has promised to ‘wipe Israel off the map’ and ‘destroy’ America.”
Obama also pledges to reduce taxes for 95 percent of Americans and increase the taxes of those with annual incomes in excess of $250,000. But, Internal Revenue Service (IRS) statistics show that just 50 percent of taxpayers pay 97 percent of all income taxes. In other words, almost half of all workers do not pay any income tax at all, so how do they get a refund? The obvious conclusion is that their “refund” checks will actually be another form of welfare, like the earned income tax credit.
Furthermore, he intends to almost double the capital gains tax, to remove the cap on the FICA (Social Security) tax of every person making over $97,500, increase the dividend tax and let the Bush tax cuts expire, which would automatically increase taxes for almost every American family. He obviously does not believe the oft-quoted maxim that a nation can’t tax its way to prosperity.
Senator Obama believes the United States should be sending more money, much more, to other nations. This is made glaringly obvious by two bills he has sponsored that are currently working their way through Congress: The Jubilee Act (S. 2166) would cancel as much as $75 billion of Third World Debt and the Global Poverty Act (S.2433) would cost an estimated $845 billion, a total potential cost of $920 billion. This, on top of the $700 billion “Bailout” just signed into law. In addition, Obama is proposing almost a trillion dollars in new spending without explaining where that money will come from.
With only 143 days in office as a U.S. Senator and a complete lack of experience or background in military matters, Obama is clearly not qualified to be Commander-in-Chief. He has made the unsubstantiated claim that American forces are air-raiding villages and killing innocent civilians in Afghanistan, and he has stated that he intends to significantly reduce the defense budget, revealing that he does not understand the importance of maintaining military superiority in conducting foreign policy.
Furthermore, he has never run an organization or an institution of any size.
In these times of grave danger to our nation, choosing a leader who is clearly not qualified and who will continue to overspend without regard to the fact that we are now in deep financial trouble is beyond risky, it is downright dangerous.
The American people are universally fed up – with Congress, both political parties, the administration, the financial institutions, the lenders and loan brokers who were responsible for the subprime loan mess, and with unqualified borrowers who took on the obligations of home ownership and now expect the government to keep them in homes they can’t afford. They are all culpable, but the public has not yet found a specific target for their anger, partially because they really don’t know who to blame. Their frustration is palpable.
Some political leaders have declared that the situation is a failure of capitalism and that they intend to fix it by spreading billions of dollars around to prop up failing financial institutions. Michael Reagan, among others, sees it as a “socialistic answer to a capitalistic problem.” It has been labeled as the “largest move to socialism and statism since FDR’s new deal.”
There’s plenty of blame to go around, lots of greed and misguided thinking to condemn, the Democrat and Republican parties, and individuals who have gamed the system for personal financial benefit. But, before anyone in particular is pilloried, perhaps we should first look at ourselves. I believe we, the American public in general, are also part of the underlying cause of the events we are now living through, because we allowed our legislators to continuously spend more money than they take in. It’s been going on for generations, and the cumulative effect is taking us to the point of financial failure.
One of the more annoying aspects of this whole ugly mess is the fact that the fox is being allowed to guard the chicken house. Congressman Barney Frank (MA) and Senator Chris Dodd (CT), both Democrats, are two of the leading politicians who are largely responsible for the Freddie Mack/Fannie Mae fiasco, and they have been players in trying to fix the problem, as if they really know what to do. Thomas Sowell observed, “Among the Congressional ‘leaders’ invited to the White House to devise a bailout ‘solution’ are the very people who have for years created the risks that have now come home to roost.”
These are the same politicians who led the effort to relax regulatory oversight of Fannie Mae and Freddie Mack for years, which ultimately led to their collapse. The situation actually started during the Clinton administration, when lenders were pressured to relax their standards for qualifying borrowers in order to increase the availability of “affordable” housing.
Where we go from here is anybody’s guess. No one really knows what effect the Bailout will ultimately have on restoring financial markets to some semblance of order. There have already been efforts to exploit the situation in the presidential campaign, primarily by the Democrats, who are trying to blame the Bush administration and tie John McCain to it. On this particular point, Thomas Sowell noted, “In reality, President Bush tried unsuccessfully, years ago, to get Congress to create some regulatory agency to oversee Fannie Mae and Freddie Mack.” And, I might add, so did Senator McCain. .
Once again, we witnessed political gamesmanship at work. The failure of the bailout legislation in the House of Representatives was caused by political jockeying for position. The Democrats had enough control to pass the bailout bill, pretty much without Republican votes. However, they insisted on Republican participation for cover, in case the plan did not work as advertised.
The Bailout bill has been passed, but at this point, it is not working and no one really knows what will happen, except that we have already seen the bottom drop out of the stock market, and the specter of unintended consequences is rearing its ugly head.
Future historians may well look back at the half century following the Vietnam War as the period when our society lost its common sense. Political Correctness (PC) will very likely be a major factor in this conclusion, but perhaps a more compelling reason will be our failure to deal with the problem of providing sufficient energy to maintain America’s standard of living. As the proverbial Three Monkeys might say, “Hear” no energy crisis, “See” no energy crisis, “Speak” no energy crisis.
Although we are in the midst of a period of significantly escalating prices for oil, gas and food, spurred by growing world-wide competition for available supplies, we not only seem to be unable to act but are knowingly doing so. Solutions to our energy problems are clearly understood, most everyone is pretty much aware of them, yet we don’t seem to be able to bring ourselves to take appropriate actions to deal with a growing crisis that is rapidly turning critical.
The following list illustrates the point:
No nuclear power.
No drilling for oil in ANWR
No drilling for oil anywhere off our coasts.
No large scale oil development in new fields in the Continental U.S.
No large scale wind turbine farms - because of visual impacts (they don’t look good), potential harm to birds and noise.
No large scale solar projects.
No relaxing of environmental regulations to facilitate construction of new oil refineries.
No significant conversion of coal to gasoline.
No exploration for new gas fields in the U.S.
No new hydroelectric projects (dams).
No doubt you can think of other examples.
The nature of the problem and therefore the solution is not rocket science. Economics 101 clearly teaches that increased demand without an increase in the supply of any commodity drives up the price. It’s quite simple: Without a corresponding increase in supply, more bidders competing in the marketplace to buy anything cause prices to go up. Conversely, it’s also well established that just trying to control prices by fiat creates shortages, and if prices are not allowed to rise there is little or no incentive to produce more. President Carter tried imposing price controls on gasoline during his administration, with disastrous results: widespread shortages throughout the nation, long lines at service stations, violence and a black market.
The folly of deliberately preventing ourselves from increasing the supply of energy is obvious, yet far too many Americans passively stand by while environmental activists block every attempt to develop or increase our sources of energy.
Since the passage of the Endangered Species Act, when a tiny fish (the snail darter) was used to delay construction of the Tennessee Valley Authority’s Tellico dam in 1973, we have allowed continuous expansion of environmental laws, which have gradually stifled the nation’s ability to meet its growing need for energy. One of the more graphic examples is the fact that not one new oil refinery has been built in the U.S. for over 30 years, because of environmental restrictions. If the oil companies are unwilling to build more refineries in the face of expanded demand, what makes people think it will be possible for U.S. oil companies to produce enough gasoline to bring the retail price down? Anyone with any common sense knows it can’t be done.
The belief that no new energy projects should be undertaken, no time, nowhere, no how, often makes me wonder if the anti-energy activists have a hidden goal of returning society to the Stone Age. That’s surely where we will find ourselves if we continue to prevent any and all new energy projects without regard to the consequences. Actions do have consequences and never more so than in this situation.
America’s highly touted way of life will surely decline and eventually disappear if we do not overcome the mindless resistance to the development of every conceivable type of alternative energy, except for those that are considered “politically correct” (PC). And, even those that may be PC are often blocked for such inane reasons as “visual impacts” or other so-called “environmental” concerns, such as the habitat of field mice, frogs and lizards. It defies logic that we have allowed the Endangered Species Act to be used as the basis for preventing almost any conceivable expansion of energy resources.
The death of common sense in America, which is graphically illustrated by our energy policies, may well lead to the death of the American way of life. History will tell. Most of us probably won’t be around to see it. Or will we? If we don’t restore common sense to its rightful place in American culture, it could happen sooner than we think.
Is America’s health care system failing? A lot of people seem to think so. For one thing, there are now an estimated forty-seven million people without health care insurance. And, the solution to the problem invariably involves spending more money.
P.J. O’Rourke said, “If you think health care is expensive now, wait until you see what it costs when it’s free.
Do you think that Barack Obama has the answers to providing health care in America? Or, John McCain? How about George W. Bush? Hillary Clinton? Or, for that matter, any politician? Do they really have the answers?
If they can’t do it, then how about the politicians in Canada or Great Britain? Have they solved the problem in their countries? Some people believe they have. However, in England, where the private practice of medicine was outlawed when socialized medicine was first established there, they were eventually forced to permit the public to go outside the state’s system to obtain health care from private physicians.
The story is much the same in Canada today. Many Canadians come to the U.S. for emergent needs, such as bypass surgery, because the waiting time in Canada is interminable, often many months before their citizens can get life-saving treatment when they need it. And, it can take many months to get an appointment with a doctor in some communities.
All state-run health care systems have one thing in common: rationing. Not necessarily involving the use of ration cards, but rationing nonetheless. That is, rationing of resources. The cause is a devilishly simple principle that is present in all nationalized health care programs: it’s free, or so low cost that it’s almost free. Basic economics clearly demonstrates that whenever something is free, the demand quickly becomes unlimited. The lower the price, the greater the “demand.” Give something away that people want and the “demand” will be virtually unlimited.
However, the flip side of unlimited demand is a shortage of supply. And, not having enough doctors, nurses, or equipment, such as CT Scanners and MRIs, eventually leads to rationing. Without enough health care to go around, rationing becomes a necessity. That’s what has been wrong with nationalized health care in England, Canada, Germany, Japan, the former USSR, everywhere it has been tried.
If there are no politicians who really know what should be done to solve our health care problems why do we keep expecting them to come up with answers?
Just exactly what are the problems? Too many uninsured? Too high cost? Poor quality? Lack of availability? All of the above? Do you know? Or think you know? And, what have been the government’s (read politicians’) solutions to date?
National health care (socialized medicine) in one form or another is the primary health care policy that is gradually being adopted in America. And it is slowly but surely lowering the quality of the health care we are getting. Talk to any doctor you trust and see if they don’t agree. They will tell you that they are working much longer hours for far less money, that many M.D.s are retiring early because they are fed up with the government and insurance company bureaucrats telling them how to practice medicine. There is a growing shortage of doctors and nurses.
You may say, we don’t have socialized medicine in America! Perhaps not yet, but we’ve been headed in that direction for a while, and we seem to be going further down the path as the years progress. It’s a slippery slope. For example, consider Medicare.
But, Medicare is not socialized medicine, you may insist.
Unfortunately, it is, or is headed that way. Why? For one thing, it’s a system that is based on price controls.
Price controls have never worked, ever, in any society at any time in history. They were tried as early as 301 A.D. by a Roman emperor, Diocletian, who implemented price controls under penalty of death. But, even that didn’t work. What price controls do is cause shortages, increase costs and disrupt markets.
Look at what has happened to the Medicare program since 1984, the year the government changed its method of reimbursing hospitals from cost plus to a system called DRGs (Diagnostic Related Groupings). DRGs is a method of classifying illnesses and assigning a comparative value and a specific authorized payment to each. At that point, many hospitals began to lose money because the government started dictating the prices that are paid for inpatient care.
Around 70% of most hospitals’ patients are seniors, whose bills are paid by Medicare. The Federal Health Care Financing Administration (HCFA) determines, in its sole discretion, the prices that can be charged for seniors’ inpatient hospital care, and then pays only 80% of those amounts. The differences between a hospital’s standard fees for service and the amounts that Medicare pays must be written off. They cannot be collected from the patient. That’s price control.
Furthermore, because Medicare payments are determined solely by the government, annual Cost of Living increases are limited, generally to between one and two-and-one-half percent, in spite of the fact that hospital costs have been rising for years at an annual rate of anywhere from six to fourteen percent.
Between health insurance contracts (HMOs) and Medicare limits on their charges, hospitals generally collect only about 50% of their total billings. The rest is written off. The result of all this is predictable: many of them are losing money. About one-third of all hospitals in California are currently operating at a loss. For the non-profit hospitals, part of the loss is made-up through fund raising, but it’s not enough. With a national health care plan, at some point, many hospitals would either be closed or services curtailed. That has been the pattern in every country that has nationalized its health care. Nonetheless, that seems to be where we are headed, in spite of compelling evidence that it doesn’t work.
Like the proverbial frog being cooked in a pot of cold water, Americans are gradually becoming aware that the quality of their health care is declining, even as costs continue to go up. It just hasn’t sunk in yet. When it does, they will undoubtedly be led into believing government has the answers and demand more government control, regulation and oversight. And, our politicians will be only too willing to oblige.
Nationalized health care in America is gradually overtaking the free market, and we are all being slowly cooked in the pot of government intervention. So, don’t be surprised at the type of health care program we get as time progresses. Whatever your own conclusions, remember one thing: that our politicians won’t have to rely on whatever health care plan they establish for everyone else. As usual, they will have their own, superior plan. And, it will not be a part of the nationalized health care system that the rest of us will be required to use. If you doubt that assertion, just look at the health care plan that our Federal legislators and government employees have now.
The “Official Voter Information Guide” for the November election recently arrived in our mailbox. After giving it the usual once over, I was struck by the number of propositions the state’s electorate will be asked to vote on in November. However, as I read through the slate of propositions in the Guide, what really got my attention was the money that’s involved. Thinking back to the last election cycle and remembering that the voters approved around $41 billion in new borrowing at that time, I was motivated to prepare a schedule that summarizes the spending that’s being requested in the current election.
First, a brief summary:
1) There are twelve propositions on the ballot.
2) Total amount of new borrowing (bonds): $15.93 billion.
3) Annual debt service on the proposed new bonds: $1.10 billion.
4) Annual cost of the various propositions, not including debt service on the bonds: $1.85
billion.
Proposition 12, the “Veterans’ Bond Act of 2008,” in the amount of $900 million, is intended to provide farm and home aid for California veterans, but the cost may be a wash because payments received on loans to the vets could repay the bonds.
In addition, about $3.4 million of the estimated annual cost of Proposition 7, the “Renewable Energy Generation Initiative,” is expected to be paid by fees that will be charged to the utility companies. Although it appears that the state’s administrative expense for this proposition will be covered by fees, the ratepayers’ bills are sure to go up as a result of the mandates the utilities will be required to meet.
The rest of the propositions will cost a total of $1.83 billion a year, a hefty sum indeed.
Proposition 1, “High Speed Rail Bonds,” is the most costly, and perhaps the most questionable. It authorize $9.95 billion in borrowing to develop a high speed train between San Francisco and Los Angeles, and the annual debt service payments of $647 million are expected to come from the state’s General Fund.
A number of questions about Proposition 1 occur to me:
Is there really a need for it? The Howard Jarvis Taxpayers Association (HJTA) argues, “This political boondoggle will cost taxpayers $19,200,000,000 in principal and interest. We need that money for schools, healthcare, and public safety. The bureaucrats could waste billions of dollars before we see one inch of track. During California’s biggest budget crisis we can’t afford to spend billions on a pipedream.”
How will the money be spent?
Will $9.95 billion be enough to build a high speed rail? The rebuttal to the argument in favor of the proposition notes: “Even they admit the train is likely to cost at least $40 billion so this is just a ‘partial payment’ by taxpayers, with NO guarantee it will ever get finished.”
Since the state’s general fund is the proposed source of repayment, where will the funds for the annual $647 million payments come from, considering that the state’s budget is already running a deficit, with no end in sight?
But, there’s another larger and perhaps more important issue involved in the ballot propositions this year, which is the additional taxes that are proposed on the local ballots, along with the state’s borrowing and taxation initiatives. For example, in Santa Barbara County, two parcel taxes are being proposed for Santa Barbara High School and Measure A, which is asking the electorate to approve renewal of a one-half percent sales tax for maintenance of roads, widening 101, alternative transportation, etc. In addition, among other tax proposals in the County, the City of Santa Barbara is seeking approval of a tax on cell phone usage.
HJTA also points out that residents of the City of Los Angeles “will be asked to approve a property parcel tax for anti-gang programs, two huge multi-billion dollar bonds for the community college system and the LAUSD (L.A. Unified School District) as well as a half cent sales tax for transportation.” In addition to the sales tax increase, L.A. County residents “face paying more to use wireless phone service…San Jose has two telephone related tax measures on the ballot and Sacramento wants to expand the tax on phones to include text messaging. There are dozens more.”
In addition to the revenue they already receive from taxes and fees, all governmental entities invariably have their hands out, asking for more. There is little or no coordination between them and no one seems to give any thought to the cumulative impact of ever increasing taxation on taxpayers. It never stops, and what most voters don’t see is the bureaucratic structure that’s often created to maintain and collect the taxes that accompany just about every tax initiative.
Sooner or later, the voters must take a stand and defend themselves at the ballot box. Perhaps if they simply vote no on every request for money, our politicians will get the message.
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