It’s not easy being a governor or state legislator these days. With states facing deep budget deficits, state lawmakers around the nation are working to close their budget gaps by tackling one of the biggest costs they face: government employee compensation. As we saw in Wisconsin (and to a lesser extent in Ohio), Republican lawmakers who take on the government employee union lobby can expect an all-out backlash from it.
But it’s not just Republicans. Some Democratic state elected officials are also trying to close their own states’ budget gaps. While public employee unions have not been as vocal in their opposition to Blue Team-proposed cuts, Democrats depend on campaign support from unions in a way Republicans do not, so alienating those unions could prove costly politically — at least in theory.
That’s difficult enough, but now it appears that Massachusetts Governor Deval Patrick, a Democrat, recently had to deal with the Obama administration on this issue. The Boston Globe reported this week:
The White House took the unusual step this spring of calling Governor Deval Patrick to discuss his plan to curb the collective bargaining rights of public employees, an indication that the Obama administration may have been concerned about the potential for national political fallout.
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Tech:
Amazon seeks ballot measure to undo California tax:
“The attorney general’s office received the petition on Friday and will prepare a title and summary for the initiative, which would require nearly 434,000 voters’ signatures to qualify for the ballot, the spokeswoman said.”
Police: Internet providers must keep user logs:
“Law enforcement representatives are planning to endorse a proposed federal law that would require Internet service providers to store logs about their customers for 18 months, CNET has learned.”
Global Warming / Environment / Energy:
Gore Launches ‘Climate Reality Project, ‘Asks people to ‘Reject Mistruths’ About ‘Climate Crisis’:
“Former vice-president Al Gore is back with a new global warming campaign. This morning, he announced the launch of “The Climate Reality Project,“ an initiative he claims is intended to ”…broadcast the reality of the climate crisis.””
Insurance / Gambling:
Rep. Polis on debt: tax pot, gambling:
“The federal government should legalize and tax marijuana and internet gambling to help get the country out of the current debt crisis, writes Rep. Jared Polis, a second-term Colorado Democrat, on Wednesday’s Wall Street Journal op-ed page.”
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In the Wall Street Journal, Peter Wallison, who prophetically warned against the risky practices of mortgage giant Fannie Mae, describes the key role that government-sponsored entity played in spawning the recent financial crisis, in an article entitled “Government-Sponsored Meltdown.” He cites the findings of a recent book about the causes of the crisis by New York Times business reporter Gretchen Morgenson and financial analyst Josh Rosner, a book called “Reckless Endangerment,” which chronicles how “it was Fannie Mae and the government housing policies it supported, pursued, and exploited that brought the financial system to a halt in 2008.” Earlier, a top investment manager at JP Morgan Private Bank reached a similar conclusion, noting that “new research” showed that “US Agencies played a larger role in the housing crisis than we first reported,” and thus were a “primary catalyst for the US housing crisis.”
As Wallison notes, Government-Sponsored Enterprises (GSE’s) like Fannie Mae played a central role in precipitating the financial crisis:
After James A. Johnson, a Democratic political operative and former aide to Walter Mondale, became chairman of Fannie Mae in 1991 . . . it became a political powerhouse, intimidating and suborning Congress and tying itself closely to the Clinton administration’s support for the low-income lending program called “affordable housing.” This program required subprime and other risky lending, but it solidified Fannie’s support among Democrats and some Republicans in Congress, and enabled the agency to resist privatization or significant regulation until 2008. “Under Johnson,” write Ms. Morgenson and Mr. Rosner, “Fannie Mae led the way in encouraging loose lending practices among banks whose loans the company bought. . . . Johnson led both the private and public sectors down a path that led directly to the financial crisis of 2008.”. . .Far from being a marginal player, Fannie Mae was the source of the decline in mortgage underwriting standards that eventually brought down the financial system. It led rather than followed Wall Street into risky lending. . .Edward Pinto (a former chief credit officer of Fannie Mae) . . . presented . . . evidence . . . showing that by 2008 half of all mortgages in the U.S. (27 million loans) were subprime or otherwise risky, and that 12 million of these loans were on the books of the GSEs.
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Would-be home-owners with subpar credit histories are getting a second chance through the private sector. Yes, that’s right — it didn’t take a government program to help these disadvantaged buyers. Private investment firms, like Athas Capital Group and New Penn Financial, are extending mortgages to risky debtors in return for higher down payments and higher interest rates.
Although banks have been reluctant to finance home-buyers with low credit scores since the 2008 crisis, investment firms are stepping in to supply loans so that previously unemployed or foreclosed upon people may have a chance of owning a home. Contrary to government-run or sponsored entities like the Federal Housing Administration, Fannie, or Freddie, taxpayers will not be left to foot the bill if these risky home-buyers turn out to live up to their credit histories. Score this as a win for free-market capitalism, as the private sector continues to defy misinformed claims of its inability to assist the disadvantaged while not endangering others.
Ironically, it is government interventions intended to encourage housing market recovery, like the risk-retention rules contained within the Dodd-Frank Act, that actually fulfill the misguided fears of private enterprise. The rules will push creditworthy home-buyers out of the private mortgage market and thereby produce more systemic risk, as those thrown out of the private sector will seek mortgaging options through the government and its sponsored entities (e.g., the FHA, Fannie, and Freddie), for which the taxpayer is ultimately responsible.
I am no fan of ad hominem attacks, especially when it’s the President and his administration that deserve true criticism for their policies. So, when I read the articles labeling the First Lady as a hypocrite for indulging in a high-fat fast food meal, I was reluctant to join in on the rancor. Yet, as the head of a federally funded task force, Michelle Obama is, for all intents and purposes, part of an administration that has waged a veritable war on consumers’ ability to choose the foods they want to consume.
As an outspoken advocate for a healthy eating and warrior-queen in the fight against childhood obesity, many were surprised by reports that Michelle Obama had been “caught” chowing down on a 1700 calorie lunch at Shake Shack in DC, consisting of a burger, fries, and a chocolate shake. Many called her a hypocrite.
She is not a hypocrite, at least not for this. Mrs. Obama has repeatedly stated that maintaining healthy diet doesn’t mean one must never indulge in cookies, fries, or burgers. That her lunch at a burger shack is newsworthy leads me to believe that she isn’t regularly ingesting massive quantities of fast food—so she’s not a hypocrite. She is, however, a dilettante and an elitist who, like so many other lifestyle moralists, doesn’t think or care about the effects that the policies they advocate will have on people who are not part of the middle or upper classes.
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CEI Vice President for Strategy, and director of CEI’s Center for Economic Freedom, Iain Murray has a new book, Stealing You Blind: How Government Fat Cats Are Getting Rich Off of You, and was interviewed by The Daily Caller on the matters he examines in great detail in Stealing You Blind:
1. Why did you decide to write the book?
Ever since I arrived in the United States (I’m an immigrant from Great Britain, where I was a government employee), all my dealings with American bureaucracy have convinced me that the system isn’t run for the benefit of the taxpayer or the recipient of government services, but for the benefit of the bureaucracy itself. With government sucking up a third of the economy — half if you include the cost of regulation — we are left with a system that really amounts to a massive swindle on the American people.
2. What are some of the more outlandish programs our government is spending money on?
Where do you start? There are grant programs to study how sick shrimp react on treadmills or feed cocaine to monkeys to find — surprise, surprise —that they get addicted to it. Other grants have been used to organize a robot hoedown and to study how Farmville affects social relationships. Those are small beer compared to things like High Speed Rail, however — which isn’t high speed and no one will use. That’s pretty outlandish when you think about it.
3. While those examples of government waste will certainly make headlines, they are not really what threatens our long-term economic health. What programs are really killing us fiscally?
If you add all the congressional pork projects together you get $30 billion annually — a lot of money. But our big entitlement programs — Medicare, Medicaid, Social Security — cost us $2 trillion, and are going to cost a lot more. Then there’s the cost of the regulations government imposes on us —$1.75 trillion a year. In a $12 trillion economy, that represents a significant portion of our national wealth.
Full interview here. Buy Iain’s book on Amazon. It will soon be released for Kindle, which you can pre-order here for automatic delivery.
Publicly, President Obama has suggested a grand bargain to get America’s staggering budget deficits under control, a deal in which Republicans would agree to tax increases in exchange for Democrats agreeing to budget cuts. (Yesterday, I called for both massive budget cuts and tax increases to save the country from bankruptcy). But the president’s recent remarks printed in today’s Daily Caller make me doubt whether he is sincere about accepting any overall spending cuts. His remarks suggest he would like to use any tax increases to increase spending, rather than reduce the deficit. Talk of budget-cutting may simply be a ruse to get Republicans to agree to tax increases. In his remarks yesterday, the president said:
“Let’s get this [deficit and debt] problem off the table … [and] with a solid fiscal situation, we will then be in a position to make the kind of investments that I think are going to be necessary to win the future,” he told reporters gathered for a White House press conference Monday morning. The big-spending jobs agenda, the president said, could cost additional trillions of dollars. “We’ve been looking at the whole menu of steps that can be taken … [but] taking an approach that costs trillions of dollars is not an option. We don’t have that kind of money right now.”
Obama also suggested that he might want to continue some elements of the 2009 stimulus. The $787 billion law provided a flood of money to fund the employees of state and local governments. But, he said, “as we’ve seen that federal support for states diminish, you’ve seen the biggest job losses in the public sector [such as] teachers, police officers, firefighters losing their jobs … [so] my strong preference would be for us to figure out ways that we can continue to provide help across the board.”
The last thing we need is more “investments” — a euphemism for more wasteful federal spending. We “invested” $800 billion in the stimulus package, and unemployment now is not only higher than the Obama administration said it would be if the stimulus passed — it’s even higher than they said it would be if Congress had blocked its passage! (Two economists recently concluded that the stimulus package actually reduced the size of the economy and increased unemployment.)
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Yesterday, arch rent-seeker Jeffrey Immelt, General Electric CEO and Obama’s job czar, headlined the “Campaign for Free Enterprise” job summit. In typical fashion, Immelt had little concern for free enterprise or job creation. Since the beginning of the Obama administration, GE has realized that lobbying for big government, subsidies, and tax credits is far more profitable than competing and profiting from merit.
GE has chosen to specialize in rent-seeking behavior and has directly receiving millions of dollars from Obama’s stimulus and much more cash indirectly. GE notoriously paid zero taxes in 2010. GE has continuously lobbied Congress for beneficial legislation, while contributing millions to top-down spending Democrat cronies to achieve these ends.
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Tech:
Study: Fair use drives large part of US economy:
“Industries that rely on fair use exceptions to U.S. copyright law have weathered the recent slow economy better than other businesses, according to a new study released by a tech trade group.”
Global Warming / Environment / Energy:
Drought Spreads Pain From Florida to Arizona:
“The heat and the drought are so bad in this southwest corner of Georgia that hogs can barely eat. Corn, a lucrative crop with a notorious thirst, is burning up in fields. Cotton plants are too weak to punch through soil so dry it might as well be pavement.”
Insurance / Gambling:
Online Gambling Laws being Reviewed by Lawmakers in Australia:
“The present government in Australia is currently watching as the United States Department of Justice has been going after a number of online casino websites using numerous indictments. These indictments have recently ended the run of Full Tilt Poker, as well severely hurt other online gambling websites, like Absolute Poker and PokerStars.”
Health / Safety:
Nanny State madness of the day:
“Europe, but I certainly didn’t miss this kind of Nanny State nuttiness now manifesting itself in Colorado.”
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