QUOTE OF THE DAY
National Review: Obamacare Adds $6.2 Trillion to Long-Term Deficit
Obamacare will increase the long-term federal deficit by $6.2 trillion, according to a Government Accountability Office (GAO) report released today.
Senator Jeff Sessions (R., Ala.), who requested the report, revealed the findings this morning at a Senate Budget Committee hearing. The report, he said, “confirms everything critics and Republicans were saying about the faults of this bill,” and “dramatically proves that the promises made assuring the nation that the largest new entitlement program in history would not add one dime to the deficit were false.”
President Obama and other Democrats attempted to win support for the health-care bill by touting it as a fiscally responsible enterprise. “I will not sign a plan that adds one dime to our deficits — either now or in the future,” Obama told a joint-session of Congress in September 2009. “I will not sign it if it adds one dime to the deficit, now or in the future, period.”
The new report exposes the “lack of honesty” surrounding such claims, Sessions argued. “The big-government crowd in Washington manipulated the numbers in order to get the financial score they wanted, in order to get their bill passed and to increase power and influence,” he said. “The goal was not truth or financial responsibility, but to pass the bill. This is how a country goes broke.”
The GAO report is essentially the first attempt to isolate and calculate Obamacare’s impact on the deficit beyond the traditional ten-year budget window. GAO ran two simulations “based on broad sets of assumptions about health care spending and other components of federal spending and revenue” over a 75-year period. First, a baseline-extended simulation, which “illustrates the long-term outlook assuming federal laws (applicable at the time the simulation was run) remain unchanged,” and second, an alternative simulation, which “illustrates the long-term fiscal outlook assuming historical trends and policy preferences continue.”
The baseline scenario is far more optimistic, largely because it does not take into account the concerns — expressed by the Congressional Budget Office (CBO), the Centers for Medicare & Medicaid Services (CMS) Trustees, and Medicare’s chief actuary — about “whether certain cost-containment mechanisms included in PPACA can be sustained over the long term.”
However, the GAO report concluded that even under these “more optimistic assumptions,” Obamacare’s cost-control provisions “were not sufficient to prevent an unsustainable increase in debt held by the public.”
The alternative scenario, which incorporates the more realistic “alternative projections” suggested by CBO, the CMS trustees, and the chief Medicare actuary, is even more dire. Under this scenario, the “primary deficit” increases by 0.7 percent of GDP over the 75-year period. The GAO does not put a dollar value on that figure, but Senate Budget Committee staff has calculated, and GAO has confirmed, that it would amount to a $6.2 trillion increase in the federal deficit.
Indy Star: Indiana House backs drug tests of welfare recipients
Indiana welfare recipients could face drug testing and loss of benefits if they fail to stick to treatment in a bill now headed to the Indiana Senate.
House Bill 1483, which passed the Indiana House 78-17 Monday, is part of a growing movement among states trying to ensure that those who receive tax dollars because they are poor don't spend them on illegal drugs.
Seven states have laws, passed in 2011 and 2012, requiring drug testing or screening for public assistance applicants or recipients, according to the National Conference of State Legislatures. They are Arizona, Florida, Georgia, Missouri, Oklahoma, Tennessee and Utah.
"What we're trying to do is give somebody a hand up instead of a handout," said Rep. Jud McMillin, the Brookville, Ind., Republican who wrote the bill.
In his proposal, those who receive Temporary Assistance to Needy Families would have to take a written test used nationally to screen people for potential drug use. Those whom the test shows to have a high propensity to abuse drugs would be part of a pool randomly required to take a drug test.
Those who pass the test would continue to receive benefits. Those who fail the first time would keep their benefits but would have to enter a treatment program at their own cost. McMillin said it could be anything from one at a church to in-patient treatment.
He said Medicaid and other government programs are available to help cover the cost of in-patient treatment.
Real Clear Markets: To Cut Government Spending, Lay Off the Loafers
With the sequester scheduled for March 1, everyone is looking for ways to save money. How about cutting the employees the federal government pays not to work for Uncle Sam?
In a new report issued earlier this month, the Office of Personnel Management announced that the federal government paid over $156 million in 2011 for some of its employees to work as representatives for government unions, up from $139 million in 2010 and $129 million in 2009.
In government language that would make George Orwell smile, the time that federal workers spend working for their unions and not working for taxpayers is termed "official time." According to the report, "Official time, broadly defined, is paid time off from assigned Government duties to represent a union or its bargaining unit employees."
In most workplaces, employees who don't work for the hours they are paid are called "loafers," "slackers," or worse. In the federal government, such workers are on "official time." Shirking never looked so good.
Government workers on "official time" have office space in a particular agency to which they are assigned, and are paid for full-time work by the taxpayers, including fringe benefits such as pension plans and medical insurance that many private-sector workers no longer receive.
OPM's new report, "Official Time Usage in the Federal Government," was released on February 15, just before a three-day weekend and a week of congressional recess. It shows that government employees spent more than 3.4 million hours in 2011 not working on government duties, up from 3.1 million in 2010 and 3 million in 2009. This would be a good place to trim spending.
Forbes: Capitalism In No Way Created Poverty, It Inherited It
The nineteenth century, many people believe, was an era in American history when workers were forced to toil in sweatshops twenty-eight hours a day for starvation wages. It was only when governments intervened, either directly on behalf of workers or indirectly by empowering unions, that conditions improved.
The facts tell a different story—one that reveals the unmatched power of capitalism to improve human life.
Remember the historical context. As Ayn Rand observed, “Capitalism did not create poverty—it inherited it.” For much of human history, the vast majority of the population was mired in poverty. All too often, the average individual lived in unimaginably wretched conditions. It was only in the nineteenth century, and then only in the West, that the masses started to enjoy prosperity.
Keep that in mind when you hear about living and working conditions during the nineteenth century. Because it’s true—by today’s standards, the living and working conditions of the time were often miserable. But by the standards of everything that had come before, they were not. For the men and women working those jobs, they were often a godsend.
Remember also, the population of the time was growing at a rate never before seen in human history—so fast that early economists like Malthus wrung their hands over whether such growth could be sustainable. How did the West actually sustain those growing numbers? Only through the rising productivity made possible by capitalism. Many of the workers who manned the factories would not have been able to survive at all in the era before capitalism.
Indeed, two basic facts speak more loudly than any statistical study could. First, factory owners did not have the power to force workers to labor in their factories; all they could do was offer work at a given wage to people who were free to accept the offer, or reject it and look for work elsewhere. Second, people flocked to those jobs, emigrating to the cities from America’s farms and from abroad.
Stateline: Backlash for Red-Light Cameras Hasn’t Slowed Spread
When it comes to red-light cameras, New Jersey Assemblyman Declan O’Scanlon says the people in his state have had enough. Nothing, he says, has generated more feedback in his five years as a legislator than his fight against the cameras.
“People realize the government is institutionalizing a system to rip them off,” says O’Scanlon, a Republican. The public is upset and problems in New Jersey led to a brief suspension of its traffic cameras last summer.
The outcry goes far beyond New Jersey. Traffic cameras spark heated debate nearly everywhere they are considered, and they are on legislative agendas throughout the country. This year, lawmakers in 22 states have filed more than 100 bills dealing with traffic cameras, says Anne Teigen, a senior policy specialist with the National Conference of State Legislatures.
The proposals range from outright bans on either speed or red-light cameras to rules to allow speed cameras in work zones to pilot programs to test the devices.
Where are the red-light cameras? There are 543 communities in the United States that use red-light cameras. More than half of them are located in just four states. This list shows states with the highest number of communities using red-light cameras.
WSJ: America's Red State Growth Corridors
In the wake of the 2012 presidential election, some political commentators have written political obituaries of the "red" or conservative-leaning states, envisioning a brave new world dominated by fashionably blue bastions in the Northeast or California. But political fortunes are notoriously fickle, while economic trends tend to be more enduring.
These trends point to a U.S. economic future dominated by four growth corridors that are generally less dense, more affordable, and markedly more conservative and pro-business: the Great Plains, the Intermountain West, the Third Coast (spanning the Gulf states from Texas to Florida), and the Southeastern industrial belt.
Overall, these corridors account for 45% of the nation's land mass and 30% of its population. Between 2001 and 2011, job growth in the Great Plains, the Intermountain West and the Third Coast was between 7% and 8%—nearly 10 times the job growth rate for the rest of the country. Only the Southeastern industrial belt tracked close to the national average.
Historically, these regions were little more than resource colonies or low-wage labor sites for richer, more technically advanced areas. By promoting policies that encourage enterprise and spark economic growth, they're catching up.
Such policies have been pursued not only by Republicans but also by Democrats who don't share their national party's notion that business should serve as a cash cow to fund ever more expensive social-welfare, cultural or environmental programs. While California, Illinois, New York, Massachusetts and Minnesota have either enacted or pursued higher income taxes, many corridor states have no income taxes or are planning, like Kansas and Louisiana, to lower or even eliminate them.
The result is that corridor states took 11 of the top 15 spots in Chief Executive magazine's 2012 review of best state business climates. California, New York, Illinois and Massachusetts were at the bottom. The states of the old Confederacy boast 10 of the top 12 places for locating new plants, according to a recent 2012 study by Site Selection magazine.
WSJ: Why the Corporate Pension Gap Is Soaring
When United Parcel Service Inc. UPS 0.00% said last month that it was taking a noncash charge of $3 billion tied to its pension plan, the package-delivery giant blamed what might seem like an unrelated event: the downgrade last summer of several big banks by Moody's Investors Service.
But the connection between the two incidents illustrates the complexities of calculating pension liabilities—and how little power companies have in keeping them under control.
During the current earnings season, companies including UPS, Boeing Co., Ford Motor Co. and Goodyear Tire & Rubber Co. have disclosed yawning pension-fund deficits, even though they have plowed billions of dollars into their plans and strong stock markets have boosted their investment returns.
Across America's business landscape, the gap between the amount that companies expect to owe retirees and what they have on hand to pay them was an estimated $347 billion at the end of 2012. That is better than the $386 billion gap recorded at the end of 2011, but the two years represent the worst deficits ever, according to J.P. Morgan Asset Management.
The firm estimates that companies now hold only $81 of every $100 promised to pensioners.
In general, everything happening on the liability side of the pension equation is working against companies. A big source of the problem: persistently low interest rates, set largely by the Federal Reserve.
Pensions are promises made by employers to pay their workers a set amount of benefits after they retire. In their financial statements, companies are required to show those promises as a liability. But unlike other debts that a company might take on, the size of this liability can fluctuate wildly from year to year based on the prevailing interest rates.
Over the past year, some companies have tried to limit that volatility by shuffling some pension obligations off their books. General Motors Co. and Verizon Communications Inc. transferred roughly $25 billion and $7.5 billion, respectively, in liabilities to Prudential Financial Inc. In exchange for existing assets in the plans and fresh cash injections, the insurer took over responsibility for paying out those obligations to retirees.
Points and Figures: The Low Capitalization Rate of Potential
Last evening I went to the kick off of KIPP:Chicago. It was a stimulating evening, highlighted by a speech from Malcolm Gladwell. Michael Feinberg talked about how everyone told them KIPP couldn’t be done anywhere. Yet, it’s making a massive difference in major US cities and in rural areas like the Mississippi delta.
Gladwell spoke for a little bit and relayed his personal story. His mother through pure luck made it through high school and attended college. While a purposeful journey for her and her family, it was pure serendipity that made it possible. He wouldn’t be where he is today without that stroke of luck.
Then he talked some relevant numbers for today. The top 5% of income earning families in the US graduate 82% of their children from college. The bottom 5% only graduate 8% of their children through college. The scary thought, there are a lot more people in lower stratas of income.
But that difference creates opportunity that society needs to act upon. Economists describe that difference as the low capitalization rate of potential. Gladwell says it’s more important than any other economic statistic.
What to do about it? Education reform and spending dominates a lot of the political speak spewed by both sides of the aisle. Nothing gets done though for a variety of reasons. It’s easy to give the blame to the entrenched teachers unions-and they are major impediment to reform. One thing Michael Feinberg said was interesting. Instead of saying, “Every Child Can Learn”, we need to start saying, “Every Child Will Learn”.
Another oft cited statistic is how rough the home life is for many of our underperforming children. Both Gladwell and Feinberg said it doesn’t matter how rough the home life is, how bad the neighborhood is. There is little we can do to control that.
What matters is how we set up our schools to allow those children to achieve success and learn. It also matters how we educate and help the peer group of each child. Better performing peer groups create better performing children.
That takes the onus off the kids, the system and everything else and puts it on us. If every child will learn it’s up to us to make it happen.
KIPP is making that happen. The Noble School organization is making that happen.
CARTOON OF THE DAY