There are just two rules for success: 1. Never tell all you know.
Roger H. Lincoln
Blog Quote of the Day
From Stephen Moore of the Wall Street Journal:
In 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government. Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). It gets worse. More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments is the $1 trillion-a-year tab for pay and benefits of state and local employees.Kudos to Tennessee for Groundbreaking Teacher Tenure Reform!
This past Tuesday, yet another fine Republican Governor, Bill Haslam, signed much-needed teacher tenure reform legislation into law; this extends the period needed to qualify for tenure from 3 to 5 years, allows principals some discretion to retain teachers after 5 years, and ties tenure more closely to performance referencing a database of student outcomes. In addition, Tennessee has broadened the use of charter schools.
[I have to point out I oppose the concept of tenure across the board (including legislative, executive and judicial terms in office). I, of all people, do understand the concept that tenure is a check on managerial abuse of power, but I am more concerned about executive accountability (when executive decisions are bounded by special interest restrictions, e.g., morally-corrupt collective bargaining agreements) and moral hazard--i.e., if I'm going to be employed and paid the same no matter what I do (short of gross misconduct), why should I invest more time and effort than necessary? Nevertheless, this legislation is an important first step towards long overdue teaching reform and sets a standard for other states to follow.]
The sources I've seen have not discussed key considerations I consider to be crucial, including streamlining the process of terminating teachers, regardless of tenure, with a trend of mediocre or subpar performance, more market-level teacher pay and performance-based raises, and flexibility in retaining the best teachers, across experience levels, under budgetary constraints.
Obama's Deficit Plan: Some Initial Thoughts
Cough! Cough! Sorry; it's all this smoke, and the sunlight in the mirrors is blinding my eyes...
The Associated Press summarized some of the key points of the Obama deficit plan, and I wanted to provide some relevant comments:
- Deficit: Current projections indicate a $7T deficit over the coming decade. (My personal belief is that the estimates of economic growth (and tax revenues) are overly optimistic, and the new health care law costs and related expenditures are grossly understated, not to mention interest expenditures. I believe that inflation will be much more of a factor than expected, and this alone will push up outflows across the board.) Obama claims that he's going to reduce the deficit by $4T over the next dozen years: $3T in cuts and $1T in additional revenue. The cuts include future spending cut triggers and savings from interest payments. Comments: Let's consider this idea of triggers and automated spending cuts. First of all, we need to start cutting now, not later. As usual, Obama is postponing the tough political problem of spending cuts past his Presidency. But before we go any further, let me just say one thing: "doc fixes". Remember how over 10 years ago, Congress tried to force doctors to be more productive by automatically cutting reimbursement rates? Inevitably, to deal with the fact the doctors were increasingly reluctant to take on government-sponsored patients (i.e., Medicaid and Medicare) as they have to subsidize these patients through other (private-sector) health plans, Congress has had to offset the automated cuts. Let's see the hands of everyone who thinks that DC politicians have spines to take the heat for cutting transfer payments or popular programs in the face of powerful special interest groups (e.g., senior citizens or unions)? Obama here is writing a check he knows will never be cashed; it's not a serious proposal--it's little more than a political gimmick. As for savings on interest payments: there are very few certainties in life, but the US Treasury bubble almost certainly will burst, and if and when it does, the US is going to have to attract investors by raising rates--which will cost interest payments to EXPLODE. The idea that you can keep adding trillions to the national debt--but somehow cut interest rate payments (with effective interest rates near zero now)--is a departure from reality. Does that mean I think we can grow our way out of a $1.6T deficit? Not likely, but we need more of what I call a "Goldilocks" tax revenue model: flatter, more balanced. For example, most of the European countries have a VAT, a type of consumption tax. For the most part, we have relatively modest sales taxes in many states/localities. We have an economy where tax policies penalize savings and investment but encourage consumption (e.g., home mortgage interest deduction). The first knee-jerk thing any politician will say when you bring up the deduction is--this will kill the housing market. No, it's more like taking away one of the special ingredients of the toxic brew causing the housing bubble.
- Medicare and Medicaid: The existing health care bill claims it will shave $500B from Medicare over the next 10 years. (Yeah, right...) Obama claims he's going to trim enough $300B by using an independent advisory, which will be authorized to cap prices, negotiate quantity discounts, and regulate providers (by reducing, say, the long-term costs of suboptimal care). Comments: The costs of increased regulation get passed down to the consumers, and attempts to fix prices generally result in a number of unpleasant unintended size effects (e.g., shortages). Generally speaking, I have a philosophic objection to the megalomaniac hubris that 'Big Government Knows Best'. There are things that would make more sense, like making prescription prices, based on recent payment information, for a local region more accessible for comparative analysis for plan participants and providing a participant incentive for choosing the lowest-price provider. I think all of these purported savings (including ObamaCare) are illusory; what you have is an intrinsic weakness of the government business model: since government is a monopoly, it has no direct incentive to streamline operations, guard against fraud and inefficiencies, or engage in competitive practices--for example, look at how we now have the highest business income tax rate of any economically developed nation. Businesses have an intrinsic cost interest in keeping benefit costs down; they can't necessarily guarantee (unlike the government) that they can survive a financial or market crisis. And yet President Obama, already sitting on about $4T of debt under his own administration, a debt of and by itself would have caused any private sector company to go bankrupt and out of business, decides that he has the moral authority to lecture the private sector on healthcare costs? PLEASE. If the government was run like a business, it would have decided a long time ago to stick to its core competencies and subcontracted out its healthcare operations to the private sector. But what else do you expect from the Obama Administration, which is the most business/economic-illiterate Presidential administration in recent American history?
- Social Security. Obama calls for a bipartisan effort to come to a consensus without putting current retirees at risk or "slashing benefits for future generations". Comment: Well, Obama punted the ball on stimulus, health care, financial reform, etc. to the legislature (after all, isn't that what "leadership" is all about?) This is all about Obama wanting to avoid a political loss by proposing a plan that gets shot down, perhaps in a bipartisan fashion, in Congress. Disgraceful and unworthy of a legitimate American President. Why would we expect Obama to do anything other than the one thing he thinks he's good at--campaigning and self-promotion? The fact of the matter is we are now running permanent social security deficits. The one thing he rules out is shared sacrifice. Now giving the fact that past contributions have failed to factor in longer lifetimes--heaven forbid we should question current recipients receiving windfall benefits, far beyond what they and their employers put into the system, which is basically stripping resources for future recipients, but now Obama has decided we shouldn't ask other workers to make concessions to make the system more solvent. Let me make an educated guess: he's against raising the retirement ages, he's against changes in computing cost of living adjustments, he's against raising middle-class employee contributions, he's against self-directed investments of contributions (because, of course, Big Government Knows Best what to do with your own money).... What's left? Oh, my head hurts; Obama is so unpredictable... [HINT: CLASS WARFARE: fill-in-the-blank] Well, okay here's a "wild guess": he's willing to lift the income ceiling, means-test beneficiaries, etc.
- Taxes. Obama is also trying to increase tax revenues by eliminating or minimizing deductions for the higher-income taxpayer. Comments: Until we get to a legitimate more simplified tax code, all Obama is trying to do here is like squeezing a balloon. He's doing what he always does: he's trying to fine-tune class-based policy, extract as much money as he can from higher income/asset individuals, while asking no further sacrifice from anybody else (he still can't figure out why anyone would oppose him if he doesn't intend to pick their pocket, too; maybe it's because they're already figured out where he goes next after he picks the wealthy clean...) Note that many deficit models assume expiration of all the Bush tax cuts at the end of 2012. Obama hopes that the House GOP will roll over on the 75% of the tax cuts aimed at the middle class; that didn't happen last year when the Dems held super-majorities in both chambers of Congress, and a class warfare tax cut extension is dead on arrival. Unfortunately, Obama lacked the integrity and leadership skills to build on the very results of his own bipartisan deficit reduction commission. We do have the Gang of 6 (Senators Mark Warner (D-VA), Saxby Chambliss (R-GA), Mike Crapo (R-ID), Dick Durbin (D-IL), Kent Conrad (D-ND) and Tom Coburn (R-OK)) working on a bipartisan solution (including entitlement reform and tax simplification). I will address the Ryan plan, which passed yesterday in a mostly party-line vote, in a future post; let's just say as a fiscal conservative, I think it's incomplete and doesn't do nearly enough not only to close the deficit but start paying down the existing debt, but I give Ryan (R-WI) credit for filling the leadership void left by a spineless President.
- Defense. Obama promises to cut $400B from defense spending by 2023 but declines to identify specifics, referencing ongoing discussions with the Defense Department. Comment: I think the failure to be specific was politically motivated. I understand that Obama doesn't want to give the GOP or military conservatives ammunition to portray him as soft on defense, but I myself have called on across-the-board cuts.
Atomic Power Review notes:
- morning: The most intriguing news seems to be a potential workaround for currently unusable residual heat cooling systems which would use existing access to the reactor pressurized vessels (used for coolant injection) to attach pumps which would directly cycle cooling water into the vessel (no discussion about related concepts for the spent fuel pools). The blogger notes that because of Japanese nuclear safety agencies looking at higher-contaminated water and risk-based considerations (e.g., another earthquake), the amount of dewatering from basements/trenches to main condensers will be less than originally planned (i.e., requiring additional portable storage capacity to the site). Temperature and pressure are steady or declining for all three RPV's. Additional work is being done outside the buildings on the site, clearing debris and spraying resin to control for environmental spread of radioactive matter.
"Another air traffic controller fell asleep on the job, but he had a good excuse. He was watching President Obama’s deficit speech." - Jay Leno
[No doubt that 5 straight years of the same old same old partisan class warfare campaign speech gets predictable and boring. But you would think people would know better than listen to fairy tales with unhappy endings...]
The air traffic controllers are sleeping, the TSA is groping you, and the pilots are drunk. Who would have thought the most reliable workers at the airport would be the baggage handlers?" - Jay Leno
[That missing luggage is on the shelf, next to your dignity and unalienable rights.]
Musical Interlude: My Favorite Groups
ABBA, "Honey, Honey". Another personal favorite. When I bought my first ABBA hits compilation in the mid-70's, this track (along with "SOS" and "Momma Mia") was played the most. (The latter day hits on my heavy rotation list included "Knowing Me, Knowing You", "The Winner Takes It All", "The Name of the Game", and "Does Your Mother Know?") I just love to watch the ladies dance and their saucy facial expressions (a fetching brunette, a gorgeous blonde, both dressed in blue... How does a man choose? Sigh! No fun being on a diet.)
