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Saturday, February 19, 2011

New Rule For Myself

New Rule: If Ezra Klein agrees with me, I must be wrong!

Sigh. I suppose this post is really about my own stupidity, which is such a deep and broad subject that I tend to avoid it. I am running like a squirrel on a wheel who has just been assigned to provide renewable power to several major NA cities, and I haven't had much time to read this week. That's one excuse.

To proceed to the main confession, I had glanced at the WI kerfuffle over state unions, and I had vaguely formed the impression that it was a bit of grandstanding for political effect. Then I read Ezra Klein's opinion on the subject, and I began to suspect that I might be a bit of an ass. Sadly, when I have developed such suspicions before they have usually been confirmed, so....

I did a little research. The meme that the Ezra's of this world have been pushing is that Wisconsin really doesn't have a budget problem and that they are just seizing the opportunity to take it out on the unions. Pew's report on the states from 2009 lists Wisconsin as one of the 10 most fiscally worrisome states. Not a good sign. Sunshine Review for Wisconsin told me that WI does a two-year budget (like Texas), that WI had already raised taxes, hiked fees, etc, and that they are slated to run a 3.6 billion dollar deficits for the next two-year budget.

In short, they've already eaten the low-lying fruit, are losing the stimulus state payments, have already furloughed, etc, and are facing a short range hike in deficits that will never clear due to oncoming retirements.

From State Budget Watch, it turns out that there is an underfunding problem with retirements for state and local public employees:
Wisconsin law requires the adequate funding of pension benefits, but no such law exists for State employees’ and teachers’ retirement and healthcare benefits. The Institute’s study found obligations related to these benefits total more than $1.6 billion. This is a result of years of over-promising retirement benefits, while shortchanging funding. Since retiree’s healthcare benefits are not immediately payable in cash, Wisconsin’s politicians ignore these payroll costs when calculating “balanced” budgets. As of June 30, 2009, the State had set aside only 22 cents to pay for each dollar of healthcare benefits promised. As of that date only $450 million was deposited into the healthcare retirement systems, even though the actuaries calculated that a minimum of $2.03 billion should have already been contributed.
Apparently the employees currently contribute almost nothing to retirement and medical benefits. Once again, union management has gained promises by negotiating benefit packages without requiring funding. If they had required funding, it's a good guess that the WI taxpayers would have already demanded the payments.

As to whether the collective bargaining limits are fair or not, I don't know. But it is clear that the unions have been irresponsible, and so have successive administrations. So far the Ezra Klein rule is working well for me.

PS: Ann Althouse is blogging steadily on the whole thing. She has skin in the game (she estimates the proposed changes will cost her 10K a year).

PPS: Offered by commenter Rick Caird, a PolitiFact Wisconsin examination of the WI budget surplus meme. In any case, what's really at stake is the next two-year (biennial) budget. Not that they aren't in at least a 400 million dollar hole right now.

It is devastating to contemplate the unending sea of red ink some of these states face.

Ezra Klein is a child and thinks like a child. Likely, he picked up the meme that Wisconsin does not have a problem from the NYT. Klein and the NYT are scrambling to find some reason not to blame the expansion of government for the fiscal problems. But, they can only get there by sticking their collective heads in the sand.

For years there has been an unholy alliance between the public employees and the legislators they work hard to elect. This alliance has resulted in seriously over paid government workers coupled with benefit packages that far outstrip those of private industry. The public employees know they could command no such benefits and salary outside of government. That is why they fight so hard to keep what they have and screw the taxpayers. That has caught up with.

Klein, on the other hand, needs the NYT and Journolist to tell him what to think.
Republicans have introduced social change as critical elements of their budget proposals from anti union plans in WI to redefining Rape in the House. The result will probably mean the Democrats regain the House and Obama a second term. The Republicans had an opportunity to provide budget leadership but are recharging the Democrats base and disappointing the swing independent voters who had hoped for some budget sanity in D.C.
"... Republicans have introduced social change as critical elements of their budget proposals..."


Are you sure the Repubs aren't just trying to UN-DO the "social change" policies which Progressives have put into place over the last several-dozen years?

After all, when the State runs out of "O.P.M.", something HAS to be cut from SOMEWHERE, and yep, the cut-ee is gonna scream bloody murder. As John Boehner said, "So be it".
We could ask "Sonoma potter" if she (guessing it is a she) believes that ObamaCare is, somehow, not social change.

The rest of her post is pretty much wishful thinking. When Obama has to mobilize OFA to fight what is happening in the states, you can be sure it is because he sees where this is going and he fears for his own reelection. All those (like Barone) who pointed out the Republican wins in the states and state houses were the real story of 2010 are being proven right.

Here in Florida, our new governor, Rick Scott, has turned down any money for high speed rail. Now we have our Senator, Bill Nelson, and LaHood trying to interfere and see if they can force rail on the state. That will not happen, but it shows where Nelson really is and it is not with Florida. He is wherever the Democratic party wants him to be.
The Milwaukee Jrunal Sentinel has a discussion on the claim of the deficit being self induced and destroys that claim. The article goes directly to Rachel Maddow making the claim the child, Ezra Klein, picks up.


Any bets on when either of them will issue a correction? Me either.
Mouse: Republicans need to answer whether they are in fact about fiscal policy restraint or focus on social policy issues such as abortion and unions. Independent voters such as myself have been hoping to see a Republican party that was not dominated by social agenda items rather a clear cut fiscal approach but what is quickly coming from both the Federal and State levels is a return to social wars of the 60's. Its not an issue of what the Democrats have done its now an issue of what the Republican party stands for and if social agenda changes are its primary focus so be it, I don't care frankly, but my point is expect a large push back at the polls.
I always liked Mish' suggestion of taxing Public Pension benefits above some threshold at a 90% marginal rate. I wonder whether that would pass equal protection lawsuits though. Even if it didn't, it would be a nice stroke of counter-class warfare for the Republicans to make the Dem's show how they really care about the working man.

Also, the mostly unstated thing that killed Obamacare the first time around was the tax on cadillac plans would have fell squarely on public employees. The news media kept using UAW as their example, but anymore those guys are a bunch of pikers compared to public employees.

Lastly, the other reason politico's have no incentive to rein in public employee pay is that they are public employees themselves. They move in and out of public employment through appointed positions and so forth. And even if they are management the rates management gets paid is based on the rates the unions negotiate for their rank and file. Even absent public unions, there's a strong impetus for lavish compensation. Unions are just the gilding on the lily.
"As to whether the collective bargaining limits are fair or not, I don't know."

It's my understanding is that the typical bargaining session in the past took an average of 15 months. The governor is saying he doesn't have that kind of time. Thus, he is doing what needs to be done and plans to work out these issues with the public employees at a later date.

As a person who has had my pension and medical benefits cut by a bankruptcy court, I know that no one likes to be faced with making less money or paying more for medical care. The question comes down to, "Where is the money going to come from?" Obviously, the progressives and their acolytes think it can be produced out of thin air. At least that's the way they act.

IMHO, the "Shootout at Madison, Wisconsin" is kind of a modern day equivalent of the battle at the Gates of Vienna. It will decide whether the taxpayers and voters are in charge or the public employees unions are.

If I could afford it, I'd be there with the taxpayer demonstration that's taking place in Madison today.
We'd be having the same battle in Minnesota, except the crowds would be bigger. But while Minnesota overturned the Democrat majorities in the state houses, like Wisconsin did, Minnesota instead elected a depressive alcoholic dilettante as governor. His family money, as well as millions in public employee union money, made it possible.

Our governor has promised the unions more, more, more, at the expense of taxpayers. His solution to the deficit is 1/6 budget cuts, 5/6 more taxes. The legislature ain't going for any more taxes, so it's going to be a hell of a showdown come April.
I've spent the last couple of days, countering posts of Facebook about the "union busing" going on in WI. I simply post Ann Althouse's figures on exactly what the cuts are (employees go from paying .2% into their pensions to 5.8% and pick up more of the tab for their medical benefits.) Sometimes I mention that they will be restricted to striking only over pay, not work conditions. It's amazing how much that calms the discussion down. (I also refer them to Ann Althouse's blog. She figures the change will cost her $10,000 a year). Oh, the other change is that the state will stop taking their union dues out of their paychecks. They'll have to pay the dues themselves.

As usual, the media is talking up union busting and people are picking it up without even bothering to see what the WI governor is actually asking for.
For Sonoma Potter:

There are always going to be elements of the Republican party that are concerned about social issues, just like there are in the Democratic party. I do think that there's room for more diversity of option in the Repubs these days than you will find in the Dems.
SP - Republicans have not attempted to redefine rape. They have attempted to redefine categories of rape for which taxpayer funding can be used to pay for an abortion. You may disagree with this action, but at least be honest about it.
HR3 allows taxpayer funding for abortion for "forcible rape." This categorization of types of rape is only necessary because the definition of rape has expanded to include acts which would not have been categorized as rape in times past. As new behaviors are criminalized, the words we use to describe those behaviors will need to be refined. It is widely agreed in America that rape and incest are mitigating factors so that support for abortion in those cases is much less controversial than abortion in other cases. The reason America is in consensus that rape is mitigating is because most people think of rape in the old definition which is by and large forced rather than non-consensual. Since non-consensual sex has now been included in the category that used to only include forced sex, a more precise language is useful.
I don't know why this conversation is taking place on this blog, but for the love of MOM, be honest about it.
In Sonoma I am the right wing nut, always writing editorials and letters trying to get voters to focus on cutting spending rather then approving various bond and tax schemes. It never works I am always shocked that the voters actually reelect either Democrats or Republicans both parties act more like crime families.

The focus at the Federal level has to be a complete remake of our national security programs along the lines that Ron Paul has outline and elimination of Federal overhead including, CIA,Commerce,Education,
DEA,etc. No small task!

Sentor Paul's recent speech that we can freeze spending at 2008 levels and keep 85% of the Federal programs sounds like something our local Democrat Supervisor says when discussing various budget proposals; wishful thinking!

My sincere hope is that a true 3rd party can be formed that will provide clear cut leadership on reducing Federal overhead significantly. The two major political parties have created the current Federal overhead and related tax structure so it seems apparent that they are not going to seriously remake what they have carefully created.
I apologize for that "union busing". Should have been union busting, of course. I will say that the discussion has been civil and that we've actually been able to discuss the topic. I think that's great.
My sincere hope is that a true 3rd party can be formed that will provide clear cut leadership on reducing Federal overhead significantly.

That isn't going to happen from outside the two established parties, if it happens it will happen from a split within one or both existing parties. And it will be painful to witness. So maybe it is starting to happen and we're just witnessing the pain.

I broadly agree with you, but putting the public employee unions in their place is not a social issue anymore. It's a fiscal issue that desperately needs to be addressed.

The unions are not the only reason the Federal government is so bloated, but they are the primary source of political funds and street-level manpower; they are the engine that drives the beast toward the crash. We can't get the budget under control (and the Federal government won't be able to provide good value) until the public employee unions are taken out of the decision-making process.

It seems the voters are aware of this to some extent, and the polls say that the Wisconsin situation is bringing more people on board with it, not less. If the governors stick with it, the Republican party in general will get a political boost from this.
I see many here are focused on the Wisconsin
public employees health and retirement benefits. Look
at the total compensation rather then the different
parts. They are not out of line in most cases. As to the
budget, if the deficit is so large than why cut taxes
for the largest corporations as was done the first of the year ? Those tax dollars are likely to leave the state and not come back. Who were the Governor's second largest contributors ? The Koch brothers, who stand
to reap a windfall since the budget includes a plan to
allow the governor to sell off public utilities. This
whole situation seems shady.
Sporkfed, as I understand it Wisconsin's problem is their underfunded pension system and the projected increases in the cost of state employees' health care. Their current budget looks good only because they're ignoring future shortfalls.

They lowered the corporate tax rate in a bid to encourage employment in the state, on the theory that increased employment would generate more state revenue than the loss in the corporate taxes. Seems plausible to me, although reasonable people can differ. I don't see why lower corporate taxes would allow money to "leave the state"--seems to me it would encourage money to stay there.


Follow the link.
OK, so what? The unions are playing hardball, so is the governor.
Lower tax rates on public corporations have
both good and not so good results. Some of the refunded or non collected taxes are distributed
out of state. Let me ask you this, why should a corporation get tax breaks and you and i pay the myriad of taxes that we do ? If I get a tax break I'll probably spend it and help to create jobs also.
Multiply that by a million taxpayers and that is a
stimulus also. You want to cut spending, fine, but
everyone including corporations need to pay their way.
The governor is getting ready to sell the states assets
to his backers. He will put his interest ahead of the citizens. Hell; we've been cutting corporate taxes for
40 years, where are the jobs ?

When has the U.S. cut corporate taxes? Highest tax rates in the OECD, I keep hearing.

Corporate rates need to be lowered because corporate profits after tax determine corporate investment, which determines corporate hiring. More hiring provides a greater tax base with which to pay our bills. Fairness has nothing to do with it. It's just more efficient.

Another problem with corporate tax receipts is that they are extremely volatile and correlated with the business cycle. Exactly the opposite of what you want for government revenues. Again, it has nothing to do with whether corporations "should" pay, it's just a bad way to fund government.

As far as the Koch brothers go, whatever graft they may intend to commit pales in comparison to the bucketloads of money shoveled at union leadership. All quite legally, I'm sure. So that line of reasoning doesn't seem at all convincing to me.
Spork - on corporate taxes, state corporate tax rates do have some impact on job creation. States are small and it is generally easier to move jobs from one to another.

WI lost a lot of jobs in this recession and it is trying to replace them.

The public employee retirement/benefit problem was known before the recession started, and it would have to be addressed regardless.

Around 2000, a lot of studies were done about the state, local and federal retirement problem. They all showed a very serious problem looming, and yes, it did hit quicker on the government retirees, because they retire earlier and receive higher benefits.

Compared to private sector, most WI public employees do have total compensation out of whack, although the proposed change will correct part of that.
Sonoma -

I guess in a sense every election is about social change. But right now, I think the difference is that the change is being forced upon us. No one is happy with it, but yet, as you note, we must deal with it, or we'll collectively end up in even worse shape.

For over thirty years, there have been bipartisan groups such as the Concord Coalition trying to address the problem. Most elected officials did not want to touch it. Still, there should be a seed of serious and credible actors in both parties with which to work.

I can envision either or both parties developing a wing that is serious about fiscal reform. Or I can envision a third party that makes them do it. My guess is that the Tea Party is that movement. It think it only exists to force change. It is a very loose coalition of the non-insane.

MoM, what do you make of this article ?
It seems that the posters on this site only
want American labor taxed. No tariffs, no
corporate taxes, and low taxes for the wealthy.

Keep in mind that WI is also experiencing "career deflation", when workers lose good paying jobs and wind up in crappier paying ones. This doesn't happen to those in government jobs, of course. But someone making 20k a year should not have to subsidize health care for someone making 45k a year.
Actually, that article provides a perfect example of why the total corporate rate needs to be less than the personal rate. The existing set-up encourages small-business owners to set up as an S-Corp or LLC, and extract money from the business for their personal use. They pay less taxes that way than by re-investing it in the business.

Same deal with having a higher rate than other countries. The big companies pay less tax by leaving their foreign profits outside the U.S. and re-investing it overseas, rather than repatriating the profit to invest in the U.S.

It comes down to whether you'd rather make it profitable for business owners to re-invest the earnings, or to pay lawyers to invent tax-avoidance strategies.
A really intellectual post, with lots of thought provoking ideas.
Sporkfed said, "MoM, what do you make of this article? It seems that the posters on this site only
want American labor taxed. No tariffs, no corporate taxes, and low taxes for the wealthy."

Who pays corporate taxes? The corporation adds their tax rate to the cost of their products. Their customers pay the taxes. Higher corporate taxes increase the price of everything. Lower corporate tax rates have an effect on where corporations do business and expand.

High taxes on the wealthy are counter productive. Why? They create more small businesses, they have income to buy consumer goods, and they have the ability to move their income or themselves to minimize their taxes. The top 10% of earners pay 50% of all taxes. When tax rates are lowered, tax receipts increase.

I have never gotten a job from a poor person. Corporations and wealthy business owners are the creators of jobs. The business of the government is not to create jobs (Except those necessary to do the government's business.) The governmment's job is to create the conditions for businesses to thrive. When businesses thrive there are more jobs, more wealth is created, and more taxes flow to the governmment.

When government discourages businesses with high taxes, restrictive regulation, and government over spending, jobs shrink and taxes decrease. That's where we are right now. That's why we want a better climate for business and investing.
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