Somewhat Reasonable

As the Department of Energy seized the last of Fisker Automotive’s reserves in lieu of an unknown amount that it was due to repay this week, what’s left of the lame electric automaker clings to the slim hope it can survive.

While CEO Tony Posawatz and his team may need an intervention, a hearing before the House Oversight and Government Reform Committee yesterday revealed that DOE and committee Democrats (as well as those in the Obama administration) are hopelessly stuck in an alternate universe, where losing millions of taxpayer dollars is considered a good record. Republicans had called officials from the company – including founder Henrik Fisker, as well as administrators of DOE’s loan program – to explain the logic that went into granting $529 million to a fledgling, unproven car company that targets an ultra-rich clientele.

Democrats attempted to dismiss the hearing as a “show trial” to embarrass the president, but the facts kept getting in the way of their trivialization efforts.

“The committee’s efforts to stoke false controversy by selectively leaking a few out-of-context documents just do not stand up to scrutiny,” said White House spokesman Jay Carney.

A Democrat committee member, Rep. Matt Cartwright of Pennsylvania, downplayed the loss of $192 million in taxpayer money (the amount Fisker received before DOE halted the loan payouts) compared to the overall $8 billion of stimulus money that backed the electric vehicle program.

“In the world outside the Beltway,” Cartwright said, “anybody who exceeds expectations 98 percent of the time gets an A-plus.”

That boast echoed one by DOE two weeks ago, when the hearing was scheduled.

“Despite Fisker’s difficulties, our overall loan portfolio of more than 30 projects continues to perform very well, and more than 90 percent of the $10 billion loan loss reserve that Congress set aside for these programs remains intact,” a spokeswoman told the Wall Street Journal.

Those remarks indicate it’s probably impossible to shame the Obama administration and Congressional Democrats about the embarrassing performance of their management of the stimulus, especially when it comes to the green energy sector. Failures such as Solyndra, Abound Solar, A123 Systems, Ener1, Beacon Power, LG Chem and others already mar their record, but the spectacle of Fisker’s failure reaches new levels. While Solyndra accounted for a far greater loss in terms of dollars, the tanking of the Anaheim-based maker of one lousy electric car – the Karma – represents an amazing fusion of futility and cronyism that may never be matched again.

Fisker is one of several molted feathers fallen from Energy Secretary Steven Chu’s soon-to-be-removed cap. As NLPC has reported ad nauseum, the authorities over DOE’s Loan Guarantee Program saw fit to grant Henrik Fisker a $529 million sum just because he 1.) designed cars for Aston Martin and BMW; 2.) was backed by hundreds of millions in private support from Democrat cronies; and 3.) was going to produce a “green” car, even though he’d never headed such a company in his life and Fisker hadn’t built anything en masse to that point. Add to that the fact that he had celebrities Al Gore and Leonardo DiCaprio on board as early customers, and the powerhouse Silicon Valley investment firm Kleiner, Perkins, Caufield and Byers stroking DC egos with campaign cash and lobbying sway, and the DOE Loan Program Officers (DOELPOs?) couldn’t resist the sizzle.

Then reality set in with mishaps such as recalls, production failures, vehicle fires and bad reviews. Yet despite this stunningly bad record, Obama and the Defender-crats chalked it up to routine losses in an investment firm’s portfolio, rather than the coercively extracted resources that once belonged to taxpayers.

“Only in Washington would a $200 million loss be viewed as a success,” said Republican Rep. Jim Jordan of Ohio, who chairs the Oversight subcommittee on economic growth and regulation.

“The Obama administration owes the American taxpayer an explanation as to why this bad loan was made in the first place,” Jordan said at another point in the hearing yesterday, “and what they are going to do to minimize the loss that taxpayers face.”

But the president’s people don’t think they did anything wrong, and therefore they consider the losses to the taxpayer acceptable. According to the Associated Press, former acting director of the Loan Program Office’s electric vehicle program Nicholas Whitcombe said DOE acted “decisively” to protect taxpayer interests after Fisker Automotive failed to reach goals per its agreement.

Unfortunately the facts again prove the Obama administration wrong, as AP reported. Documents released yesterday showed that four months passed before DOE recognized that Fisker had fallen short of its milestones, which allowed the company to access an additional $32 million in taxpayer support before the loan’s June 2011 suspension.

As for Mr. Fisker, he testified that an Energy Department official in 2008 invited him to apply for the government loan (thus inspiring Democrats to bellow “Bush did it too!”), which he said he didn’t really need because he (and presumably Kleiner Perkins) had already raised millions of dollars in private investment.

“I am not aware and do not believe that any improper political influence was used in connection with the company’s loan application or subsequent negotiations with the Department of Energy,” Mr. Fisker told the committee yesterday.

So he’s saying the taxpayer money was forced on him and his company. I guess that’s why Fisker and Kleiner Perkins together spent nearly $900,000 in 2009 and 2010 to lobby Congress and the administration about the loan program and other renewable funding schemes. Once again, the facts undermine what comes out of the mouths of nearly every enthusiastic backer of President Obama’s green energy “stimulus” program.

Meanwhile DOE on April 11 sucked $21 million out of the already-gasping company to pay back a portion of the $192 million. According to two Reuters sources, the amount due on Monday was $10 million, and Fisker had less than $30 million (a figure that had been reported previously) on hand after it had fired three-quarters of its work force, before DOE confiscated its reserves.

“Given the obvious difficulties the company is facing,” said DOE spokeswoman Aoife McCarthy, “we are taking strong and appropriate action on behalf of taxpayers.”

Failure is success; millions in financial losses are good; heavy lobbying and campaign contributions are disinterest; and weak and late really means “strong and appropriate” action. I’m sure it all makes perfect sense in the alternate world the Obama administration and renewable energy advocates dwell in.

[First published at National Legal and Policy Center]

It is cruelly ironic, but the massive law that was enacted to solve the problem of the uninsured in America is more likely to worsen it. This would be true even if the program is perfectly implemented and all the provisions come online on time and within budget.

How could this be? It is a multistep process. Stay with me for a second.

The more things change, The more they stay the same.

Medicaid

First, the simplest and most direct form of expanding coverage — Medicaid expansion — is likely to have very little effect. I’m not talking here of the states that refuse to do it after the Supreme Court made it optional, but of the entire program.

Remember that one-third of the uninsured have always been eligible for Medicaid and/or SCHIP coverage but don’t bother to sign up. Actually, it is worse than that. A few years ago, William Sommers wrote in Health Affairs that one-third of all uninsured children had been enrolled in Medicaid or SCHIP within the previous year but their parents found so little of value that they didn’t bother to re-enroll them.

Nothing about ObamaCare’s Medicaid expansion is likely to change this dynamic. Yes, there will be more advertising, and yes a larger number of people will be eligible, but quite of a few of those newly eligible people are already getting coverage on the job, so any expansion of enrollment is likely to be a crowd-out of private insurance. One of ObamaCare’s architects, Jonathan Gruber, has done extensive research on this subject and concluded that as much as 60% of the enrollment in expanded public programs is from people who had been privately insured. No doubt this effect grows bigger the higher up the income scale you go.

By the way, a recent example of this crowd-out phenomenon is revealed in a new study by the Robert Wood Johnson-funded State Health Access Data Assistance Center (SHADAC). Much has been made of the numbers of adult “children” covered under ObamaCare’s mandate allowing people up to age 26 to stay on their parent’s policies. This study shows that the number of such people covered as dependents on employer plans rose from 30.2% of the population group in 2009 to 36.5% in 2011. Sounds like a great success until you realize that the percentage of that age group that had employer coverage in their own names dropped from 21.8% in 2009 to 16.5% in 2011. So, virtually all of the people now covered as dependents were previously covered on their own.

Less studied is the stark reality that many of the people who might be eligible for Medicaid are simply too dysfunctional to enroll. They might be functionally illiterate, drug addicted, mentally ill, outlaws, or in the underground economy and not want to bring attention to themselves. They can’t understand an insurance contract or make and keep appointments for services, but they know where the doctors are 24/7 — the hospital emergency department. When these people have a health problem they don’t need insurance coverage. They need direct care.

Here is where the Supreme Court decision made a very big difference. It said there is nothing illegal about not enrolling in coverage; it simply exposes you to a tax. This removes many of the tools state and local government might have used to compel enrollment. All manner of government services might have been denied to people who do not have proof of insurance — school admission, public housing eligibility, fishing licenses, food stamps, job training, day care — all might have been denied to lawbreakers. But the Supreme Court shut down that possibility. So for low-income people there will be as little compulsion under ObamaCare as there was before and people will continue to behave as they always have.

We can’t calculate what the net effect of all this will be. At best Medicaid expansion will have only modest impact on reducing the numbers of uninsured. But it is equally likely to have no effect at all.

Employment-Based Coverage

Next up is the mind-boggling assumption that employers will continue to provide coverage as they have in the past. No one actually believes this.

In fact, employers have been dropping coverage for at least the past ten years. There is no reason to think this will not continue and may dramatically accelerate under ObamaCare.

The study by the State Health Access Data Assistance Center (SHADAC) cited above finds that the nonelderly population with employer-sponsored coverage decreased from 69.7% of the population in 1999/2000 to 59.2% in 2010/2011. This is because fewer employers offer coverage, and of those that do, fewer employees accept the coverage that is offered. The drop-off is particularly acute for smaller firms with fewer than 50 employees. Only 37.5% of these companies now offer coverage, down from 47.2% ten years earlier.

Once ObamaCare kicks in, many more employers will drop coverage. The only dispute is over how many.

Two years ago the well-respected McKinsey Company conducted a survey of employers and found that 30% said they will “definitely or probably” drop their coverage. The survey was criticized by Obama’s supporters because it wasn’t an economic analysis. Odd, since the same folks seem to live or die according to survey results that are far less rigorous. Avik Roy noted in Forbes that the actual results were even worse than it seemed at first blush. He wrote that the more respondents knew about the law and the more directly involved they were in decision-making, the more likely they were to want to drop their coverage −

…primary decision makers were significantly more likely to drop employee health benefits: 36.5% of primary decision makers said they “definitely or probably” would drop benefits, compared to 22.4% of those who simply had some influence over the decision.

More recently, Douglas Holtz-Eakin, former CBO Director and currently with the American Action Forum, published a study with the economic features the McKinsey critics apparently prefer. He estimated that 35 million American workers will lose their coverage. He assumes most of these will go to the exchanges for subsidized coverage (more on this below), costing the federal treasury an additional $1.4 trillion over ten years.

The Congressional Budget Office is more constrained, but even they have upped their estimate of the number of workers losing coverage from a mere 3 million a few years ago to 7 million just last month.

The CBO number is almost certainly a gross under-estimate. CBO’s ability to predict the future has long been constrained by two things:

1. It is required to assume that current law will be in effect in the future. So, for example, its budget predictions always assume that the SGR cuts in physician payments will actually occur. But that never happens, so the predictions are never accurate.
2. It tends to use “static scoring,” which means it assumes that current behavior will be unchanged by new incentives. In this case it issued a 30-page justification for its estimate. As an example, part of that report said −

The fact that many firms currently offer health insurance coverage to their workers despite the high cost of premiums and rapid growth in those premiums for many years shows that many firms continue to find health insurance coverage to be a worthwhile element of their compensation packages. If firms could have attracted employees more cheaply by dropping health benefits and adding wages or other benefits that cost less, then they would have done so.

Good grief! This is about as shallow as you can get. Firms have been offering coverage despite the high cost because there has been no viable alternative, and they feel an obligation to ensure their workers can get coverage. The whole point of ObamaCare is to provide an alternative! Companies will now feel free to drop coverage in the belief that workers will now be able to get good coverage through the exchanges.

On top of actually dropping coverage, no one is estimating the effects of employers who convert full-time workers to part time, reduce the size of the workforce to stay under the mandate, out-source jobs to other companies or even other countries, or enter employee-sharing arrangements with other companies. There is no data for these developments (so they are invisible to policy researchers) but local daily newspapers are awash in stories about companies doing exactly this.

Whether it is McKinsey’s 50 million or so, Holtz-Eakin’s 35 million, or CBO’s 7 million, there is no denying that some large number of workers will no longer have employer-based coverage and will be left to their own devices.

Why should this be the least bit surprising? Kaiser Family Foundation’s 2012 employer benefits survey found that on average employer coverage costs $15,745 per family, of which the employer pays $11,429 (for single coverage it is $5,615, with the employer paying $4,664.) Holtz-Eakin finds that the federal subsidy for a $15,000 plan in the exchange will range from $14,176 for people with incomes of 133% to $2,935 for people with incomes at 400% of poverty ($94,800 for a family of four). For all income groups below 250% of poverty ($59,000), the federal subsidy is far greater than the employer subsidy is.

Employers will be doing their workers a favor if they stop offering coverage, pay the $2,000 fine, and send workers into the exchanges. This is especially true if the company pays out the savings in the form of higher wages. Holtz-Eakin doesn’t even consider the enormous savings for the company if they no longer have to pay the Human Resources cost of finding and negotiating coverage, enrolling workers, explaining the coverage, answering questions, and intervening when there is a problem with a claim. Any CFO worthy of the title would take that trade in a heartbeat.

The Exchanges

So, the Medicaid expansion will make very little difference and some 35 million (perhaps more) people will lose their employment-based coverage. What is left to pick up the pieces? The much-vaunted “health insurance exchanges” (now referred to as “marketplaces” by the federal government).  How will that work out?

Never mind for now the implementation problems (which are massive).  Let’s assume for the moment that they work as planned — they are up and running by October of this year, the hundreds of thousands of newly hired navigators” are competent and well-trained, plenty of insurance companies are participating, and the data-sharing arrangements between employers, state Medicaid programs, and the IRS all work flawlessly. With all of this behind us, what do we have?

Well, first we have the underlying assumption that people really want to have insurance coverage. That is the whole point of this exercise, after all — there are so many uninsured, not because they don’t want it, but because they are deprived of it for one reason or another. One might think somebody would have tested that premise before enacting this boondoggle.

Oops! Three years after enactment, CMS decided to finally ask the question: just who are these poor wretched uninsured people and what are they looking for?

Turns out 92% of them can be divided into three segments:

1. The biggest cluster (47.8% of all the uninsured) are “healthy and young.” They are not much motivated to enroll and they take their health for granted.
2. The next largest group (28.9%) are “sick, active and worried.” These tend to be older and are pretty good candidates for coverage.
3. Finally we have the “passive and unengaged” group (15.3%). I’ve tried to bring some attention to this population (see here). These folks tend to be older and have poor literacy skills.

All of these groups say cost is the main reason they are uninsured, but I expect that is just a throw away excuse. I doubt many of them have the slightest idea what insurance costs. They aren’t interested enough to even look into it.

At best, two-thirds of these people will be hard to reach and even harder to sell (as any insurance agent could have told you years ago.) They are uninsured, not because they are deprived, but because they do not see value in it. The time to do this research would have been before passing the law, not afterwards. That way the law could have been tailored to meet their needs, instead of assuming they will comply with whatever Nancy Pelosi crams down their throats. So out of the 50 million or so currently uninsured we might get 15 million who sign up for coverage.

But what about the newly uninsured, whose employers no longer will offer coverage? Most of these people have been passive recipients of whatever coverage their employers offered. They never had to do anything to secure coverage. We have written about this population before.

For the most part they are very much like their uninsured brethren except they happened to have a job that provided coverage. Once again, one-third may be motivated enough to seek coverage on the exchange, the rest won’t bother, knowing they can always get coverage later on when they need it. Meanwhile, they can save a whole lot of money that would otherwise go the premiums. So, out of 35 million newly uninsured possibly 12 million will get coverage on the exchanges.

But what about the mandate? Won’t that persuade people to get coverage even if they don’t particularly want it? Hardly. The mandate literally has no teeth. The only enforcement mechanism available to the IRS is to confiscate income tax refunds. The vast majority of the uninsured are lower-income (so they pay no federal taxes) and the rest can easily adjust their withholding at the start of the year to avoid sending excess money to the Treasury. No refund = no penalty.

So what are we left with? Medicaid expansion that will enroll few people and most of those will be people who were previously covered (crowd-out). Of the 50 million currently uninsured, possibly 15 million will get new coverage. But these will be offset by the 23 million who lose their employer coverage and don’t bother signing up for exchange coverage. Net result — 8 million more uninsured than before ObamaCare was enacted.

[First published at John Goodman's Health Policy Blog]

Where is all the rapidly accelerating global warming that is supposed to be gripping the world?

It’s not in the air. Atmospheric temperature readings show global temperatures have been flat for more than a decade.

It’s not in the upper ocean. Sea surface temperature readings similarly show no recent warming.

It’s not in the polar ice caps. National Oceanic and Atmospheric Administration satellite data show polar ice is currently more extensive than the long-term average.

Global warming activists have finally come up with a last line of defense they know nobody will able to prove wrong: The missing global warming is in the Bermuda Triangle.

No, I am not kidding. This is what they are claiming.

You see, the alarmists have been telling us for decades that rapidly accelerating global warming was imminent and unavoidable. The problem for the alarmists is the warming that has occurred has been modest and decelerating. In fact, it has ground to a complete halt for more than a decade.

So how do Al Gore, Michael Mann and the rest of the global warming Chicken Little’s save face when their promised global warming apocalypse fails to occur? Easy, blame it on the Bermuda Triangle.

“Where did global warming go? The deep ocean, experts say,” claimed NBC News in an April 11 headline.

“Where’s the heat? In the oceans!” USA Today claimed in a headline the same day.

The headlines reflect a prominent global warming activist claiming that he developed a computer model by which global warming can bypass the atmosphere, bypass the upper ocean, and be entirely hidden in the deep ocean; you know, that part of our planet where we really can’t measure or find anything. The missing global warming is apparently hanging out at the underwater space alien base in the heart of the Bermuda Triangle, along with the missing files proving the 9/11 Truthers are right that George W. Bush bombed the World Trade Center, along with the Vast Rightwing Conspiracy files proving that Bill Clinton really did not have sexual relations with that woman, Miss Lewinsky, and along with the missing film footage proving the seven Apollo astronauts and two Johnson Space Center directors who claim global warming is not a crisis really did stage their moon landings on a vacant lot somewhere in the Arizona desert.

The global warming activists, of course, do their best to make their Bermuda Triangle defense sound scientific. The paper claims all this phantom global warming really can directly bypass the atmosphere and the upper ocean if winds start blowing strangely enough and strongly enough to bury the warming deep in the ocean. Thankfully, we can spare ourselves the dizzying asserted logic of such claims by examining recent global sea surface wind data. As Bermuda Triangle-busting science would have it, NASA satellite instruments show global sea surface wind speeds have declined rather than increased during the past decade.

So much for the Bermuda Triangle….

Nevertheless, it has been quite interesting watching the alarmists go into conniptions imploring us to trust them on this final last line of defense. “No, you can’t objectively verify our claims, but you can’t objectively disprove the Bermuda Triangle either,” the alarmists argue. “Just trust us. And if you do, as a bonus, we’ll show you the secret undersea living quarters of Elvis Presley and Jim Morrison.”

[First published at Forbes]

Brent Hamachek and Tom Kuchan of Segueway Solutions invited President and CEO of The Heartland Institute, Joe Bast, to speak on their radio show, “Segueway to Success.”

They talk about Heartland’s mission, how Heartland goes about implementing that mission, the challenges of running a not-for-profit organization, and how that has changed over the last several years.

Joe goes into detail about the business of running a think tank and the challenges that go along with it. Heartland was founded during the Reagan years in Chicago, and tried to bridge the gap between the “Chicago School” and City Hall. In the beginning, the dominating free-market ideology meshed well with Heartland’s mission, but as the years passed, much has changed. Now Heartland fights against the current, publishing educational materials for the public and politicians about controversial topics, such as climate change, school reform, the effects of Obamacare, and budget & tax policy.

It’s especially interesting to hear about the challenges facing think tanks in the information age. There are a lot of advantages to being constantly connected to the Internet: quick communication, easy data manipulation, and being able to reach thousands of people with a single tweet. However, it’s difficult to break through all the noise. There is so much information available, if your content doesn’t appeal to the masses it will probably be lost in the shuffle. Nonprofits with small communications departments can’t compete with public relations firms that are experts in creating and promoting viral media.

Joe also comments that think tanks may become obsolete. The traditional role of the think tank was to connect the ideas of academics in their ivory towers to the media and the minds of individuals. With the abundance of online classes, experts can reach their audiences without the help of a third party. Political parties have also become skilled at using the powers of the Internet and information manipulation to sway voters, and in turn, public policy.

With the opening of the George W. Bush Library this week in Texas, plenty of journalists are writing long think-pieces about the man and his legacy, which basically amount to saying he was a terrible president but a pretty good guy, despite all those things we wrote about him at the time. The truth is that Bush himself has enjoyed a bit of a resurgence in personal popularity, and some are hoping his approach to governance will provide guidance to the GOP for the future.

My own view is that whatever Bush’s personal qualities as a genuine, honorable fellow, his presidential legacy is of a lighter tax burden, a safer country… and a destroyed Republican Party. The last is not all his fault, but has more to do with who he picked for which jobs, and misplaced loyalty for those who served him ill. I view the entire second term of the Bush administration as a giant black hole for domestic policy: arguably, the only good thing the right got out of those four years was one reliable Supreme Court Justice, Samuel Alito, and they got that only after fighting tooth and nail against Bush’s instincts to choose Harriet Miers instead. And as for politics: Bush’s decisions, or the implementation thereof, destroyed the Republican brand as the adults in the room. The GOP cannot be the party of good governance, balanced foreign policy, and fiscal responsibility in the wake of Katrina, Iraq, the Bush deficits and the financial crisis – and the Republican Party’s inability to recognize the degree to which these factors undermined their core case for existing remains a tangible problem.

Witness the debate this past week between Walter Russell Mead and Pete Wehner for how far apart these visions are:

“Wehner, who by all accounts is a thoughtful and sensible person with a lot to contribute to the national debate, is so caught up with angry defenses of the brilliance of policy making during the Bush era that he misses our point entirely… [E]xcept for a minority of true believers, the American public largely believes that Bush failed, and no matter how many blog posts ex-Bush officials write, that isn’t going to change anytime soon. There are lots of intelligent people out there who think this is a gross injustice, and want the national conversation to focus on setting the record straight. For its own sake the Republican Party has to deafen itself to their piteous pleas; they are sirens luring the sailors to their destruction on the rocks. This will sound harsh and unfair to some, but it is true and it is real.”

“Mr. Wehner’s touching, honorable but politically toxic Bush loyalty is the kind of gift left-leaning Dems pray for night and day. Liberals want the Republican Party to spend the next four years defending the Bush record as strongly as possible. They want potential conservative presidential candidates to say as many things as possible that will tie them to Bush in the mind of the public. They want Mr. Wehner’s approach to be mandatory for the next generation of Republican candidates; they want loyalty to the Bush legacy to be a litmus test for decades to come. They want to use President Bush the way their grandfathers used Herbert Hoover, and if Mr. Wehner has his way, they will.”

A smarter approach, in my view, is understanding the primary lesson of the failure of Bush’s administration: the essential need, in all administrations, of a healthy skepticism of the power of government to do good. My conversation on that point comes up in this friendly debate I recently had with Wehner, which you can see here:

How to Save the Republican Party

Central to the conversation this week will likely be another reconsideration of Iraq – what led Bush to undertake the war, what went wrong, and why it went wrong. Lost in the conversation will be what lessons the Democrats themselves, particularly President Obama, failed to learn from the case-making for Iraq in advancing his own signature policy. Ezra Klein responds to that comparison from me this morning, but along the way, I think he misses the point.

The Iraq war debacle shows us why it’s important to make the case for policy on the actual grounds the principals believe in, instead of an argument based on building up fear or overpromising on outcome. Rather than resting the case for war on the moral argument for human freedom neoconservatives held, Bush advanced a case designed to bring along the realists, based on faulty intelligence, about the burgeoning threat of weapons of mass destruction. Instead of basing his case for his health care law on its true justification and the moral argument for universal coverage, Obama promised it would address problems it never will, resulting in lower premiums for all, better quality care, and keeping your doctor and plan if you like them.

For both parties, the trouble was in making these policies a reality, which proved far more challenging than either expected. Iraq remains a Republican millstone – Obamacare may be about to become one for the Democrats as well. Foreign policy failures and domestic policy failures are different in significant ways, but one consequence of the latter is that everything that breaks is blamed on the most recent big reform. For the foreseeable future, everything wrong with health care is going to get blamed on Obamacare, fairly or not, and its effects on doctors, providers, and systems across the country.

If Obamacare meets its promise to lower premium costs, let you keep your doctor and your plan, trim the deficit, and improve the quality of care, Democrats will be running on it for generations. If it doesn’t, they will have to run away from it, or run by saying how they’ll fix it. Though fixing it, as we saw with the surge, doesn’t erase blame for the original mistake.

Among smart Democrats, concerns about implementation of the law are rising significantly. Senator Max Baucus, the powerful Finance Chairman who was the architect of much of the law, has announced his retirement mere days after voicing concerns with the problems of implementation as a potentially “huge train wreck”. HHS is attempting to satisfy his concerns by throwing more money at marketing and promoting the law’s exchanges. As Peter Suderman notes:

The Hill reports that [HHS] just announced that it signed an agreement to spend another $8 million—with the option to spend more—further promoting the exchanges… I’ll give the folks at HHS this: They could probably use some effective marketing. But maybe they ought to consider scaling back a bit, and work more on trying to raise awareness about the law’s benefits with Sen. Max Baucus? When you’ve already spent $3 million promoting ObamaCare’s exchanges, and yet the senator who claims to have written the bill on which the law was based thinks those exchanges are about to be a “huge train wreck,” you kind of have to wonder whether the agency is really getting much value out of its marketing budget.

But market they will have to, given the very real concerns about getting enough healthy people signed up for the exchanges. If only the sick do so (the healthy having less of an incentive), you’re going to see premiums explode at an even faster rate than previously expected. Had you built Obamacare around approaches that were actually designed to address the number one problem according to most Americans – high premium costs – instead of that moral agenda for universal coverage, you wouldn’t need to do all this spinning: people would want to buy a product because it’s priced reasonably. But you didn’t, it isn’t, so you have to lean on the marketing and hope for the best.

The feeling during the second term among many in the Bush administration was that their problem was one of public relations, not policy ramifications. They rarely questioned their policy approaches. They felt, as Wehner still feels, that things were going well far past the point where they weren’t. They blamed media reports, echo chambers, and partisan posturing for shifting public opinion. Today we see the same traits still in place in this administration: If only we promote this better, and more thoroughly, it will result in better outcomes. It’s hardly a new trend in political governance, and whoever comes next to the White House will feel it, too.

A healthier lesson to take from the Bush and Obama years is that it’s better to be honest with the American people than to approach them with false hope or false fear. They shouldn’t count on policies or approaches which accomplishes all the missions, offering everything and delivering so much less. Politicians like to promise the world, but we’d be better off, and so would they, if they were honest about the limitations of their power to deliver.

[First published at Ricochet]

If you flew somewhere this week, or know anyone who flew this week, you’ve likely either experienced or heard about flight delays due to President Obama’s cynical strategy to make the sequester as painful as possible for everyone.

Below are three excellent pieces on what is going on here, one from The Wall Street Journal, one from Heartland Senior Fellow Peter Ferrara in the American Spectator, and one from Chris Edwards of Cato’s DownsizingGovernment.org in the Daily Caller. Perhaps this purposeful pain and inconvenience to travelers will backfire and the public will come to advocate privatizing a cherished public agency. The arguments are compelling.

I recommend you read all three pieces, but on to some excerpts.

From the WSJ comes “The FAA Strikes Again, the FAA Brags: The bureaucracy revels in its own failures“:

The Federal Aviation Administration claims the sequester spending cuts are forcing it to delay some 6,700 flights a day, but rarely has a bureaucracy taken such joy in inconveniencing the public.

Though the FAA says it is strapped for cash, the air traffic control agency managed to find the dollars to update its interactive “command center” tool on its website so passengers can check if their airports are behind schedule due to what it calls sequester-related “staffing” problems. Oklahoma Senator Tom Coburn noticed this rare case of FAA technological entrepreneurship and fired off a letter Wednesday protesting what he called the agency’s “full blown media rollout” to hype the flight delays.

From Peter Ferrara, who is, as usual, quite passionate in “Fight Back! Privatize the FAA!: The flight-delaying Obama crowd is really asking for it this time“:

If you are an air traveler this week, you might get a dose of how it feels to be deliberately abused by your government to score political points. President Obama and the Democrat Party are so adamantly opposed to any semblance of cuts in government spending that they cannot abide the sequester that cuts only 2% of federal spending, not out of actual spending, but out of the growth in spending, over the next 10 years. …

The portion of those cuts that the Obama Administration specified apply to the FAA is $600 million. They could cut instead the $500 million the FAA is spending on consultants, the $325 million it is spending on supplies and travel, and the Transportation Department’s new $474 million grant program “to make communities more livable and sustainable,” as reported in the Wall Street Journal yesterday. Republicans have also already passed legislation in the House, and introduced it in the Senate, to give President Obama complete discretion to make the 2% cuts in spending growth out of the most wasteful federal spending to be found.

But President Obama and the Democrat majority Senate oppose that. They don’t want to make the sequester cuts out of government waste, or out of counterproductive federal spending. They are still on their original plan to get the Republicans to back down from the modest sequester spending restraint, by making those cuts as painful for the public as possible.

So pursuant to that plan, the Obama Administration is trying to manipulate the public by imposing artificial, unnecessary, abusive air travel delays, hoping the easily fooled, Twitter voters will rise in anger to force the Republicans to reverse the sequester cuts, and increase taxes yet again, after all. If this was still the real America of free and independent people, they would rise in fury instead and demand that the President be impeached for such abusive, dishonest manipulation of the public he is supposed to be serving. What President Obama is doing this week is an attack on the American people, for cynical political gain.

But the more fundamental solution is to eliminate the potential for such political manipulation and abuse through the long overdue, and increasingly urgent reform of privatizing the FAA. Incorporate the whole organization into a private, for profit, D.C. corporation with all the stock held by the federal government to start. Then auction off the stock to the highest bidder. Use the funds to pay down the national debt.

It would be up to the new FAA Corp. to negotiate its own contracts with each airport for air traffic control services. But there is no need for this to be a monopoly. Each airport would be free to contract with any alternative competitor that would arise. That competitive market would produce the best service at the least cost.

Moreover, air travel would then be entirely free of Washington political manipulation. It would no longer be a political football, with James Carville laughing on TV how the Democrats are going to manipulate the public by abusing it to get their way.

Finally we have Chris Edwards, who notes that our Canadian friends have privatized their air traffic control system … and we don’t see planes falling from the sky, just falling prices for air travel:

The government wouldn’t be very good at running Apple Computer, and so it’s no surprise that the Federal Aviation Administration (FAA) has major problems running the computer-intensive ATC business. To run smoothly and efficiently, our ATC system should be given independence from the government. We should privatize the system, as Canada has done very successfully. …

Canada provides an excellent model for U.S. reforms. Canada’s ATC system is run by the nonprofit corporation Nav Canada, which is separate from the government. Like any private business, it raises revenues from its customers to cover its operational costs and capital investments. The company’s financial statements for 2012 show revenues and expenses of $1.2 billion, with $125 million allocated to capital expenditures. Unlike the U.S. system, Nav Canada is self-supporting and not subsidized.

The 1996 privatization of Canada’s ATC system replaced a government ticket tax with direct charges on aircraft operators for services provided. Nav Canada’s $1.2 billion in revenues comes from charges for en route and terminal services. Thus, airlines get charged for flying through Canadian airspace and for landing at Canadian airports. For example, an airline flying an Airbus A330 from New York to Frankfurt through Canadian airspace would be charged $1,756.

A privatized U.S. ATC system would be able to raise the revenue it needed to fund its operations free of the central planning that comes from politicians. As a private company with a monopoly, there would be a concern that the costs and charges of a privatized FAA would rise excessively. But that has not happened in Canada. Indeed, Nav Canada’s customer charges have actually risen more slowly than inflation over the past decade. …

America has always been a global leader in aviation, which makes it all the more unfortunate that we are stuck with a backwards, government-run ATC system. We should have the best ATC system in the world, so it’s time to privatize the FAA and give the Canadians some competition for all those prestigious Eagle Awards.

Read them all, and share with friends. Maybe something good will come from the sequester after all — genuinely less government. Privatize the FAA!

The Democrats have gotten the great Republican hope, Marco Rubio, to sign on  to a measure that accomplishes nearly all of their goals on immigration:

“The pre-bill marketing campaign — driven by  leaks that seemed to come from Republican negotiators — focused on stringent new  border-control measures and a long, difficult path to citizenship. The goal was  to minimize conservative opposition by creating a first impression of the bill  as a tough solution to the country’s illegal immigration problem. But when  Democrats got a look at the 844-page measure, they discovered that their  negotiators extracted more concessions than they thought possible. Those include  an expansive version of the DREAM Act and subtle but meaningful tradeoffs on all  the major pieces of the system, from family reunification to legalization and  border security… Republicans succeeded in making the path to legalization  contingent upon the government meeting border security benchmarks, prohibiting  undocumented immigrants from accessing federal benefits even as they pay taxes,  blocking a provision to allow foreign spouses of same-sex couples to apply for  visas, and creating a temporary worker program. But in return, Democrats got  what Mary Giovagnoli, a former Kennedy immigration aide and director of the  Immigration Policy Center, called an “extremely generous legalization  program.”

About the only thing they didn’t get was their preferred cutoff date of  December 31, 2012. Everything else is in there.

The problem for the Republican Party is that either path they follow on the  immigration policy front leads to all sorts of bad things. Consider Conn  Carroll’s proposal here in this context:

“Why not give those found illegally in the United  States a simple choice? You can stay and become legal by registering with the  federal government, but if you do, you forfeit all chance of becoming an  American citizen. This offer would depend, of course, on passing an extensive  background check paid for by the immigrant in question. And if this policy was open not just to those in the country today, but also those found illegally in  the country tomorrow, it would not be amnesty in any way. It would just be a new legal alternative to deportation. Considering that far less than half of those  who were granted resident status in 1986 ever bothered to become citizens, why  are Democrats so focused on guaranteeing citizenship this time around?”

Trying to find a middle path between amnesty and deportation sounds well and  good – I don’t share Peter Skerry’s view that there needs to be a prohibition on  eventual citizenship, but what Carroll proposes is certainly better than the  status quo and the current proposal – the challenge is that neither side will  find Carroll’s position acceptable. There is no appetite for meeting the actual  market needs for low-skilled labor – for legalizing people without making them  citizens. The Michelle Malkins of the world will yell shamnesty (they will not  be content until millions of people are packed into train cars and headed  south), while on the other side, Marco Rubio’s press secretary compared the idea outright to slavery.

What we have here is more than a failure to communicate, it’s a failure of  leadership. The immigration policy negotiation should’ve been an opportunity for  Rubio to prove that he is more than just a biography staffed by the ambitious.  Instead, he may have made an  error that could prove crippling by jumping into this fractious policy arena  before the base has been brought along to where the party elite is on the  subject, provoking all sorts of backlash not just from Rush Limbaugh listeners but now getting into it with the Heritage Foundation, too. It’s a classic big unwieldy bit of Washington pork barrel politics, with carveouts for state interests.

Or maybe the problem is that the bill just won’t do what was promised. Byron  York:

“One key trigger, they claimed, was the creation  and empowerment of something called the Southern Border Security Commission. If  within five years after the passage of the bill, the Secretary of Homeland  Security has failed to increase border security to a level in which 100 percent  of the border is under surveillance and 90 percent of those attempting to cross  illegally are caught — if Homeland Security has not reached those goals, then  the Commission would be formed. It wouldn’t be the standard, do-nothing  Washington commission, Gang sources argued. Instead, it would have real legal  authority to actually carry out the border security measures that the Secretary of Homeland Security had failed to accomplish.”

“It sounded tough, intended to convince skeptical  conservatives that reform would be based on stringent border security. But as it  turns out, the structure Gang sources described is simply not in the bill… The  bill requires that the head of the Government Accountability Office then review  the report to determine whether the Commission’s recommendations are likely to  work and what they will cost. And then — the process stops. “The Commission  shall terminate 30 days after the date on which the report is submitted,” says  the bill. There is nothing about the Commission going from “being an advisory  panel to a policy-making one.” The strict trigger that Gang sources advertised  as being in the bill just isn’t there.”

Mickey Kaus has more on that here.

The Gang will continue to try to emphasize the security portions of the law in the days ahead, in response to the backlash  over Boston. But it remains to be seen if any of that will  stick. Claims like this from Dick Durbin just don’t make sense at all, and sound like the bluster they  are. Waiting on the sidelines are hardliners like Ted  Cruz, who could prove very problematic for Rubio. And none of the  participants are operating from a position of real  trust on the issue. It’s just a great big mess.

This could all reach a boiling point in the days ahead, one that will only  please the White House, given that they never wanted a policy to pass to begin  with, as I noted back in January.

“The President apparently likes this situation  just fine: he’s now weighed in with his own framework for an immigration plan,  which does absolutely nothing in terms of meaningful reform targeted at the root  cause of the problem (the persistent black market in unskilled labor) and  instead amounts to Simpson Mazzoli 2013. Why would the president do such a  thing, making passage of an immigration plan less likely by coming out in favor  of an even more obviously political ploy in lieu of a real policy solution?  Isn’t it obvious? … The mission isn’t a reasonable solution for very real  immigration policy problems, it’s political destruction of the enemy. Thus, Democrats benefit either way, even if the nation doesn’t.”

So OFA will make a push, but it’s a win-win for Obama even if that doesn’t succeed.  And so we end up with the Cesar  Chavez world persisting, and none of the real problems

[First published at Real Clear Politics]

Heartland‘s Benjamin Domenech speaks with Curtis Dubay, Senior Tax Analyst at The Heritage Foundation, about Internet Taxes.

The proposed Marketplace Fairness Act would force Internet retailers to collect sales tax for the state and local governments of their customers, even if their business does not have a physical presence in those jurisdictions.

Competition is alive and well in the U.S. communications market.

Market forces have produced a barrage of big competitive developments in just a few weeks. Dish’s disruptive $25b bid for Sprint could offer consumers a new choice of a lower-price, faster-speed, all-wireless platform for the first time. Google’s disruptive ongoing expansion of Google Fiber from Kansas City to Austin Texas and Provo Utah signals more and new consumers could increasingly enjoy the choice of a new, much-faster, near-comprehensively-integrated broadband offering. And T-Mobile is disrupting in yet another major way with a new maverick wireless pricing model that offers no contract plans and relatively more a la carte pricing.

These developments are proof positive why competition is so far superior to regulation. Survival is a powerful motivator to disrupt, differentiate and innovate, just as the opportunity for large profit and market leadership are powerful motivators as well.

While regulators slowly fret over how they can solve yesterday’s problems by fiat or opaque subsidy, competition is automatically devising alternative solutions to today’s problems, and inevitably is working on different solutions to tomorrow’s problems.

I.    Dish-Sprint

Dish’s $25b offer for Sprint spotlights a huge relative weakness in the Softbank-Sprint deal – no synergies. In the absence of a competing bid, Softbank could get away with the bluff of a no-synergies offer: a simple debt-capital-infusion and the “special sauce” of a billionaire’s-price-cutting-acumen.

However, the Dish offer matches one billionaire’s-price-cutting-acumen with another billionaire’s-price-cutting-acumen, and matches one debt-capital infusion with another debt-capital infusion.

Then most importantly, Dish raises Softbank’s bid substantially with a higher bid reflecting: real cost and marketing synergies, valuable 4G-ready fallow spectrum, and a uniquely-differentiated, lower-priced, more-mobile-video-friendly, all-wireless platform.

Real synergies are the mother’s milk of deals. Real differentiation is the key to competing successfully. Spectrum is hugely valuable to an all-wireless platform. And combining different assets in new ways to meet new needs is innovation.

Even if Softbank raises its bid, Sprint would be foolish to not take the superior Dish offer. A Dish-Sprint offering would be much more competitively disruptive than a Softbank-Sprint deal; it’s not even a close call.

This Dish-Sprint opportunity represents a real gut check for Sprint’s board and management (and for regulators and antitrust authorities as well). Do they really want more vibrant competition in the marketplace that will increase competitive pressure on pricing, bundling, and innovation? If so, they will go with Dish and make it happen.

However, if they are more wedded to complaining about insufficient competition and pursuing industrial-policy regulatory-favoritism and subsidies, both will go with the Softbank deal, and what they think would be best for (government-managed) competition.

II.   Google Fiber Expansion

Just the prospect of Google entering local broadband markets around the country quickly — like it has with Google Fiber in Kansas City, Austin and Provo, with a much faster, more comprehensive and commoditizing competitive offering — is highly disruptive competitively. In a fixed-cost, capital-intensive market, that traditionally requires long-lead times and substantial share to be profitable, Google knows it can compete in the provision of broadband, despite many financial naysayers, by changing the game.

Google is no traditional over-builder. Google’s comprehensively-integrated service potentially offers more ways for Google to make money than any other competitor. Apparently Google is taking the concept of an integrated offering further than the “triple” or “quadruple play” of  broadband, video, voice, pay-TV, and mobile;  and further than the Apple-pioneered, integrated offering of hardware, software, and a store. Google Fiber can leverage the #1 search, Internet video, mobile operating system, and location services, the #2 social media platform, and competitive mobile devices, free full-service software, cloud services, content-store, shopping, payment mechanisms, etc.

Traditional subscription broadband service is an end in itself. For Google Fiber, it is both a subscription “end” but also a “means” to another business “end” – more web services advertising.

Just because current broadband providers can’t make money from giving broadband service away for free does not mean that Google can’t. Google is offering a 5MBs broadband service for free to anyone that will pay for the installation fee. This isn’t charity, it is a shrewd investment in greatly expanding the market for Google’s advertising, just like it has done before by offering a slew of services for free that people previously paid for – gMail, YouTube, Android, Maps, Voice, etc.

With Google Fiber’s paid and free offerings, Google knows it will be identifying and developing an all-Google customer cohort based on low-cost/free connectivity, devices and services: i.e. Fiber, Chromebooks, low-cost smart phones, free software, free video, free communications, free maps, low-cost/free payments, low-cost/free cloud services/storage, etc.

Google Fiber will continue to roll-out shrewdly where it makes sense because Google Fiber enables Google to meet most all of a person’s Internet needs in a way other competitors cannot.

And the competitive disruption of Google Fiber also continues because Google drives a hard bargain. Google is shrewdly entering markets selectively where regulators allow Google to control the extent of its build-out based on pre-orders, a freedom and massive cost savings that traditional broadband players have never enjoyed.

Kansas City, Austin, and Provo all have given Google substantial regulatory advantages, subsidies and benefits that were unavailable to their competitors. Simply, Google is enjoying a special national cherry-picking strategy, ultimately focusing on the ~20% of the markets it assesses that offer ~80% of the upside for Google.

Regulators must recognize that communications competition is going through a profound metamorphosis that is rapidly making existing communications law and regulation obsolescent, and at the same time creating new competitors and forms of competition like Google Fiber.

Regulators should focus on clearing away obsolete restrictions and micromanagement of a bygone era, so that there is modern system and a level-playing field, where similarly-situated competitors are treated similarly.

III.  T-Mobile No Contracts

T-Mobile has made a big marketing splash recently by boldly differentiating its service by requiring no contracts and allowing users to pay installments for just a device not bundled with the wireless service plan. This maverick competitive pricing meets and satisfies a consumer need without the need for regulation. If there is sufficient demand for this type of pricing flexibility, other competitors will be compelled to offer it.

While regulators wring their hands that T-Mobile is not a strong enough competitor for their liking, they forget that competition works because it makes competitors that aren’t fully succeeding adapt, change and disrupt the status quo in new ways. Rather than trying to stand on the scales to help smaller competitors like T-Mobile and Sprint to compete, regulators need to open their eyes and see that more motivated competitors make for more competition.

IV.  Conclusion

In short, the U.S. communications marketplace is highly competitive and only becoming more so.

The big mistake that regulators can make now is imagining that competition should produce neatly-monolithic commodity price competition.

Real market competition in the communications marketplace is all about differentiation — meeting new and old needs in innovative ways. Market forces deliver this automatically, without Government.

Proof positive is the multiple major competitive disruptions we have witnessed in the last few weeks. Dish is disruptively proposing to redraw the boundaries of broadband facilities-based competition. Google is disruptively entering a high-fixed cost business via a non-traditional hybrid revenue model, and in doing so threatens to redraw the boundaries of broadband competition in yet another way. And T-Mobile’s pricing disruptions remind us of the competitive truism: necessity is the mother of invention.

Competition is alive and well in the U.S. communications marketplace. Regulators should stay out of the way and let competitors compete on a level-playing field.

[First Published at The Precursor Blog]

“Ineptocracy” is a new Internet-popularized word in wide circulation, which came to my inbox with the following definition:

“A system of government where the least capable to lead are elected by the least capable of producing, and where the members of society least likely to sustain themselves or succeed, are rewarded with goods and services paid for by the confiscated wealth of a diminishing number of producers.”

Clearly the word’s creation was inspired by the current presidential administration, where the ineptocrats abound. And as NLPC has documented for 4+ years, nowhere has that been more evident than in President Obama’s Department of Energy, under the management of soon-departing Secretary Steven Chu.

Most of those stories have documented the foolishness, misjudgment and cronyism surrounding the distribution of stimulus funds. But another area of mismanagement and incompetence has been revealed at DOE, and this time it has security implications.

Inspector General Gregory Friedman, the internal affairs watchdog for DOE, reported last week that dysfunction infects the department’s Office of Special Operations, which is tasked with the protection of the Secretary and other top officials within the branch. They are supposed to develop and implement policies and procedures for security both at headquarters and when officers are traveling, but the IG determined that simply getting along is a challenge within the division.

“During the course of our review, it became clear that morale among many members of the Special Operations staff was low and that there appeared to be a lack of trust between the agents and management,” the IG wrote in his report. “Agents told us that there was an apparent unwillingness to work together to resolve differences of professional opinion. On these and other related issues, we were also provided information by the respective parties that was inconsistent and, at times, contradictory. Positions were often irreconcilable.”

Friedman described the Executive Protection Program as a small group due to the limited number of officials in need of security. He cited numerous examples of agents who registered complaints about each other, many which he could not substantiate. But rather than appear like there’s much ado about nothing, instead the picture is one of deep animosity of employees towards one another.

The antagonism is clearly getting in the way of everyone doing their jobs, despite recent attempts by DOE’s Office of Health, Safety and Security – which oversees the security team – to address the morale and discord problems. Friedman outlined several examples in which agents: did not receive individual or collaborative training; did not know correct procedures; and were informed about performance tests on operations and procedures ahead of time when they were not supposed to be.

“The HSS evaluator administering the tests also reported to senior Special Operations officials that the agents had demonstrated competency in the tested areas, when in fact the agents had either not completed portions of the test or lacked the requisite knowledge,” the Inspector General reported.

Friedman also documented several examples in which agents did not understand policies. Out of the 16-person Executive Protection team, on vital operations that included “active shooter response,” “fire evacuation,” “direct threats,” and “medical emergencies,” only one or two agents were familiar with policies. On “security room operations,” “duress system response,” “bomb threats,” and “motorcade operations,” no more than 6 or 7 of the 16 agents had an understanding of any of the policies.

Besides the lack of information and training, the security team apparently was ill equipped as well. According to Friedman, body armor was not acquired for agents between 2007 and 2012, until an anonymous complaint was filed with the Office of Safety and Health Administration in February 2012. In response Special Operations management purchased eight non custom-fitted vests in various sizes for 13 agents, rather than custom-fitted vests that optimize “comfort and ballistic stoppage capability.” Management informed the inspector that the non-custom vests were purchased “due to the high attrition rates of agents and replacement costs for the vests.”

Incompetence in dispensing taxpayer funds is one thing, but the compromising of security due to unprofessional conduct is disturbing. Secretary Chu certainly has allowed DOE to fall into a moribund condition.

As mentioned above, the administration of DOE’s allocation of stimulus funds has been careless and wasteful. NLPC has documented billions of dollars blown on Recovery Act grants and loans, many of which the Inspector General has reported. He testified in November 2011 before a House regulatory affairs subcommittee that “the Loan Guarantee Program had not properly documented, and as such could not always readily demonstrate, how it resolved or mitigated relevant risks prior to granting loan guarantees.”

Friedman also painted a picture of a cabinet agency entirely unprepared for the flood of stimulus money it was suddenly given to distribute, and incapable of tracking it both administratively and ethically.

“To date, our Recovery Act-related investigations have resulted in over $2.3 million in monetary recoveries as well as five criminal prosecutions,” he testified at the time. “This includes a series of cases involving fictitious claims for travel per diem resulting in the recovery of $1 million alone in Recovery Act funds.”

In a hearing back in March before another House investigative committee, Friedman also told of “fraudulent claims for rebates,” “weatherization fraud to include mischarging,” and “the directing of contracts and grants to friends and family.”

Friedman has investigated numerous other DOE stimulus recipients, including electric vehicle battery maker LG Chem, which received a $151 million grant but had little for its employees to do. Reports last year told of workers on the clock playing Texas Hold ‘Em and video games, doing Sudoku and crossword puzzles, and volunteering at nonprofits like Habitat for Humanity – all of which Friedman confirmed. He reported that DOE “did not always take sufficient action to ensure adequate oversight of project progress” and said monitoring was so poor that – despite the obvious evidence in early 2012 of employee furloughs, construction delays and cost overruns – no red flags were raised.

And in January 2012 Friedman discovered the rush to distribute stimulus money also may have compromised national security. In an audit report of the department’s management of the Smart Grid Investment Grant Program, which received $3.5 billion to modernize and improve the reliability of the U.S. power grid, the IG found that grant recipients’ plans to prevent “malicious cyber attacks” were often inadequate.

Steven Chu has been in way over his head for years, and the Obama administration should have relieved him of his duties long ago. But that doesn’t happen when you blithely run an ineptocracy.

[First Published at National Legal and Policy Center]

Every year, April 15 is tax day. The morning’s news shows featured last minute tax tips and other tax-related information. A new poll was discussed. When asked: “Thinking about paying taxes, which one of the following bothers you the most?” Surprisingly, “What you pay” received the lowest response, while the “Way the government spends taxes” was the highest. “Feeling that some don’t pay fair share” was near the top and “Complexity of system and forms” was near the bottom.” So people understand that it takes money to run the government and generally don’t object to paying their taxes. It is what the government does with that money that frustrates us.

When asked about the way government spends taxes, responders were likely thinking of the green-energy crony-corruption spending on flawed ventures like Solyndra and the, now, fifty-plus other green-energy embarrassments that received taxpayer dollars as a result of President Obama’s 2009 Stimulus Bill (as well as other green-energy funds) that poured nearly $100 billion into the pet projects of his donors.

Solyndra filed for bankruptcy in September 2011. It was just the bellwether; the first of many to come.

A year later Christine Lakatos and I profiled nearly 20 green-energy stimulus-funded companies that had gone bankrupt. The next week, we highlighted the other bookend: “companies/projects that received funding from various loan guarantee programs (LGP), grants, and tax incentives. These are projects that are still functioning, but are facing difficulties.” One of those troubled companies was A123 Systems. One week after our report, A123 filed for bankruptcy. Nearly two months later, A123 was purchased by a large Chinese auto parts maker that has renamed the lithium-ion battery company B456. (Note: A123/B456’s biggest customer is another company on our troubled list: Fisker Automotive—manufacturer of the $100,000+ electric sports car made in Finland—is now facing bankruptcy itself after efforts to find a Chinese investor “stalled.”)

Wait. In his 2008 campaign, didn’t Obama promise to “create five million new energy jobs over the next decade––jobs that pay well and can’t be outsourced”? But our tax-payer dollars created jobs in Finland and have benefitted a Chinese company—Obamanomics outsourced. No wonder the “way the government spends taxes” tops the list. And most have no idea that the Obama administration is responsible for steering billions of our tax dollars from the stimulus and other clean energy programs to foreign-owned entities, of which big chunk was doled out in the form of free cash via the 1603 stimulus grant program.

But there’s more—new news the poll respondents probably didn’t even know about.

One day after the poll was taken, CNN Money reports: “China’s Suntech Power has put its largest subsidiary into bankruptcy.” What they don’t mention is that China’s Suntech Power benefitted from Obama’s 2009 Stimulus Bill—receiving a $2.1 million credit from the Energy Department’s stimulus-funded Advanced Energy Manufacturing (48C) Tax Credit. (Suntech was included in our 2012 “troubled” list.) In her blog, The Green Corruption Files, Lakatos states: “according to the Heritage Foundation, in November 2012, Suntech shed some employees, claiming that it was the ‘U.S. International Trade Commission’s 35.95% tariff on Chinese solar panels that was partially responsible for the 50 impending layoffs at its Arizona production facilities.’” Suntech was even blamed for the Solyndra debacle. In December 2011, The Pittsburgh Tribune-Review reported: “China’s major solar panel companies—whose low-cost products led some American factories to close, helped create the Solyndra controversy, and spawned talk of a trade war—were bankrolled in the United States by the world’s largest investment banks.” Those “investment banks” include some the same ones we have profiled in our previous reports that have deep ties to the Obama campaign and administration, and many green-energy projects that received loans, grants, and special tax breaks representing billions in stimulus money.

Suntech has more interconnections. Arizona’s Mesquite Solar Project, which received $337 million in taxpayer money despite its non-investment grade rating by Fitch, was to be built with Suntech’s solar panels and the power was to be sold to Pacific Gas & Electric—which has strong political presence in Washington, DC, and connections to billions in stimulus funds. California’s PG&E, a company with “an extensive network of former high-ranking employees holding influential positions in government agencies at the federal and state level, has benefitted handsomely from government financing of green energy projects.” The most controversial former PG&E employee to hold an influential government post is Cathy Zoi, a former energy analyst for the company, who we profiled in our report on George Soros.

There is much more that can be found in Lakato’s Suntech report.

Another sparsely reported solar-power embarrassment was covered by Fox News on the same day the aforementioned poll was taken. “SoloPower, which makes thin-film solar panels at a new plant in Portland, OR, opened September 27 with an upbeat ribbon-cutting ceremony. Local and state politicians gushed about the company eventually operating four production lines and creating 450 well-paid green jobs.” After its grand opening just months ago, SoloPower’s power is waning: “The first production line was never completed,” and “in January, the company had a round of layoffs.”

This is not a surprise to those of us who watch the green-energy crony-corruption scandal. SoloPower was one of the worst-rated loans. One month before it received a $197 million loan guarantee to “support the retrofit of an existing building to operate a thin-film solar panel manufacturing facility in Portland, OR,” Standard and Poors (S&P) gave SoloPower a credit rating of CCC+.

On March 29, 2012, U.S. House of Representatives Committee on Oversight and Government Reform released a report titled “The Department of Energy’s Disastrous Management of Loan Guarantee Programs” which states: “S&P predicted that SoloPower will fail to meet its debt obligations.” DOE emails, released on October 31, 2012, reveal that James McCrea, Senior Credit Advisor Loan Programs, called SoloPower “a completely uninspiring project.”

Yet, in addition to the $197 million of US taxpayer money SoloPower was given from the DOE through the 1705 LGP, this European firm also received $40 million from Oregon taxpayers. Then in December 2012, “despite unfulfilled job and production promises and signs the Portland solar panel factory was sliding even further behind,” Oregon officials tripled the “taxpayer’s stake,” said the Oregonian. Business Oregon approved a $20 million tax credit for SoloPower—which SoloPower then exchanged for $13.5 million in cash. After a management shake-up, Fox News reports, SoloPower is “trying to raise money by selling some of its equipment through a third party and is attempting to restructure its $197 million federal loan guarantee.”

With the bad credit rating, the “uninspiring” label, and poor performance, why did SoloPower receive federal, state, and city funding—ultimately paid by the taxpayers? Because as the Oversight Committee report states: “What SoloPower lacked in economic value, it made up for in political connections.”

Suntech and SoloPower are just two recent stories, part of a long list of bankrupt and/or “troubled” politically connected green-energy projects.

When President Obama released his FY2014 budget, it included new spending of nearly $1 billion “to support deployment and long-term development in the clean energy industries.” Renewable Energy World appears gleeful. “It’s been said before and it bears repeating that Obama has done more for solar than any previous US President.” And: “The support of the federal government has led to an explosion in the amount of solar across America.” Do you think?

In contrast, Tom Pyle, President of the American Energy Alliance, pointed out that the budget “represents the administration’s desire to double down on bad energy policy.” And, “calls for fast-track permitting for renewables” while never mentioning the Keystone pipeline. Pyle concludes his comments by saying: the President “hopes that the American people will forget the failures of the past four years, higher gasoline prices, skyrocketing electricity rates, bankrupt renewable firms, and billions in wasted taxpayer money on politically connected industries.”

No wonder the “way the government spends taxes” tops the list of taxpayer’s frustrations. Perhaps if “government’s inability to learn from its mistakes” had been on the list, it would have been the number one choice.

One definition of “gangrene” offered by Webster’s Dictionary, “pervasive decay or corruption,” appropriately characterizes the work of the EPA, given its continued push to the edges of the Constitution in implementing costly regulatory requirements that thwart our national economic growth. Thus, the agency has assumed greater powers over the last several years while increasingly demonstrating a willingness to act outside the law in pursuit of its ends.

Furthermore, its unnecessary interventions in our national economy have yielded pernicious consequences. Today, the EPA punch list is long, and there is legitimate concern that the president could circumvent Congress to enact tough environmental regulations. In fact, should a presidential approval of the Keystone XL pipeline antagonize the environmental lobby, we could see more aggressive executive support for the green agenda as a quid pro quo.

With his most recent nomination of EPA activist and climate-change alarmist Gina McCarthy, Barack Obama has pledged to fulfill his State of the Union promise for aggressive policies addressing purported climate change. A brief review of McCarthy’s work while heading the EPA’s Air Board suggests a disconcerting willingness to provide misleading testimony in order to achieve her policy goals (“EPA Nominee Gina McCarthy Has a History of Misleading Congress,” Lewis & Ward, Forbes, 3/12/13).

She is also known for having deliberately circumvented existing rules to promulgate the draconian New Source Performance Standards limiting emissions from new power plants (“Carbon Power Politics,” WSJ, 3/5/13). In short, there is good reason to be concerned that McCarthy will implement unwieldy regulations that increase businesses’ operating costs, resulting in employee layoffs and/or cost pass-through to the consumer.

A second area where the EPA would like to exert greater regulatory oversight is hydraulic fracturing. By all accounts, states legally responsible for enforcing fracking regulations have capably performed their duty. Nonetheless, movies such as “Gasland” and “Promised Land” have generated a plethora of myths regarding the fracking process and its impact on groundwater supplies via methane gas and chemical infiltration. Moreover, groundwater contamination claims by the EPA for gas producing basins in Pavillion, Wyo., and Dimock, Pa., have proven to be without merit.

Constructive voices such as Phelim McAleer have, meanwhile, been helpful in providing more grounded documentation (FrackNation) of industry practices. So while economically vibrant areas such as Texas, North Dakota and southwestern Pennsylvania generate ongoing robust economic growth, we should realize that efforts by the EPA to impose unnecessary regulations on hydraulic fracturing would have a deleterious impact on our economy. Such regulations would likely discourage further domestic exploration and production, result in higher gas prices for the consumer and jeopardize our chances of domestic energy security.

One last EPA-generated boondoggle that may soon result in higher prices for gasoline is the agency’s requirement for ethanol blending. The EPA sets quotas for gasoline pool blending by domestic refiners every year. Unfortunately, if the quota is too high and above the 10 percent “blend wall” beyond which refiners are reluctant to add ethanol to their gasoline pool (for fear of lawsuits due to engine damage from ethanol blending greater than 10 percent), they are required to buy credits, or in industry parlance, RINs (renewable identification numbers).

These credits allow them to satisfy their blending quota, but due to the illiquid nature of the RINs market, their price per gallon has recently spiked from 10 cents to more than $1. This is likely to lead to fuel price increases of 5 cents a gallon or more for consumers. Other secondary effects of this EPA requirement will be increased gasoline exports by domestic refiners and declining oil product imports from Europe, both of which will exert more upward pressure on gasoline prices.

All these areas of EPA involvement are likely to continue to threaten the vibrancy of the U.S. economy should it be allowed to continue on its green crusade. We are fighting a battle against scientific ignorance and environmental nihilism that we cannot afford to lose. And as is the case in dealing with gangrene, the only solution here may be a partial “amputation” of the powers of an increasingly toxic EPA that have grown well beyond those its creators originally intended.

[First Published at PhillyBurbs.com]

This piece in the Heartlander, “Google Goes Shopping at a Dollar Store” by Randolph May of the Free State Foundation makes for some infuriating reading.

It is probably the best example I’ve ever seen as to why municipal broadband systems are a bad deal for citizens of cities with the hubris to think they can compete in the digital economy by offering “free” and “cheap” Internet service.

May’s report on what’s happening in Provo, Utah, would be very hard to top — though we should expect to see it repeated again and again. He cites this Associated Press story from April 18:

Google Inc. will pay $1 for a municipal fiber-optic system that cost $39 million to build, according to terms of the Internet company’s agreement with Provo. … Even as Google takes ownership of the municipal network, Provo will have to pay off loans for its construction for another dozen years, according to agreements released Thursday by city officials.

So … one of the most heavily capitalized companies in the history of civilization swoops in and purchases a $39 million state-of-the art fiber-optic “muni broadband” system in Provo for one dusty sawbuck. Google will maintain that network (and maybe improve it) via access fees they will charge the good citizens of Provo, while offering a “free” service that is so slow, no one would likely use it. (My now-dinosaur 3G iPhone 4 probably downloads stuff faster than the “free” network every Provo resident pays to keep afloat).

And, here’s the kicker [emphasis mine]:

Even as Google takes ownership of the municipal network, Provo will have to pay off loans for its construction for another dozen years, according to agreements released Thursday by city officials.

For nearly as many years, households have been paying $5.35 a month on their utility bills for a system that provides Internet, television and phone service — whether they use it or not.

But Provo officials say Google’s deal is a good one for the city and its residents because the system hasn’t been able to support itself. Google Fiber will offer residents something in return for the utility fee — basic Internet service at no charge if they pay a $30 hookup fee.

Got that? Provo’s taxpayers will be paying off the loans and interest on the $39 million network they hardly used — because it offered such poor service and was incompetently run by the city — until 2025. Hell, I’ll bet Google’s $1 that by 2025 the whole system will be obsolete, and another $5.35 Google will have bailed out on the whole project by then. The time between now and 2025 is an eternity in the digital economy. To put that 12-year time frame in perspective, Google was still run out of a garage just 15 years ago. Now it earns $3 billion every quarter.

“But, Jim,” you say. “Google will give the good folks of Provo free Internet after they pay a $30 hook-up fee.” Whoop-dee-doo. The “free” Internet will be just as unused as the network run for “free” by the city because those speeds are already obsolete. From the story:

In Kansas City, Google charges $70 a month for a gigabit connection, which is 1,000 megabits per second. Google’s free Internet service will run at 5 megabits a second.

For another $50, Kansas City customers can sign up for Google Fiber TV, which features 200 channels, many in high-definition and featuring mainstays such as ESPN, Nickelodeon, FOX News and MTV, as well as recent newcomers HBO and Cinemax.

Wow! 5 megabits a second! Is that a joke? Like I said. If you like the speed of 3G phone for your entire home Internet experience, this is the deal for you. If you don’t, and you shouldn’t, it’ll cost you — in this case it’ll probably cost residents of Provo $70 to $120 a month on top of the taxes and fees they’ll pay to settle that $39 million “free Internet for everyone” investment by the city.

And it’s not like Provo is some underserved backwater that the city had to drag into the digital age. A metropolitan area of more than 500,000 people is a great market for broadband, and Provo is already being served by every high-speed broadband competitor in the business. Now Google gets to enter the market for free — and on the backs of taxpayers who did the hard part: building the infrastructure.

Let’s sum this up:

• Colossal investment in “free broadband” by a municipality? Check

• Poor management of the network due to lack of expertise? Check

• Few customers for the “paid” service, and few piggy backers on the crappy “free” service? Check

• Ultimate failure of the project, but taxpayers still be forking out money to pay it off for decades? Check

How lucky is Google?! They don’t have to invest a single dime into building the infrastructure, but get to own it for $1, and then turn around and charge the public that paid to build it a fee to get on its network at market speeds. That’s like taxpayers forking over the money to build me a restaurant and stock it with food and a great staff. Then I buy the place for a buck and start running the joint and collecting all the profits.

That’s not exactly “crony capitalism,” but … what … “sucker capitalism”? “Dummy capitalism”? As I was expressing my outrage about this via email with various Heartlanders, Sam Karnick emailed me to call it “last-ditch capitalism.” Any of those monikers will do. Where do I sign up to get some of that?

One last quote from the story; one last kick to the taxpayers of Provo:

“Clearly, we think there’s a good business opportunity here,” Google Fiber spokeswoman Jenna Wandres said Thursday.

No kidding.

Check out some of Heartland’s extensive, years-long work fighting back at these muni broadband schemes at PolicyBot. Can’t say we haven’t tried to warn folks, including people in Utah.

Sometimes I wonder if our work does any good. Then we receive letters like this one, from a reader in Independence, Mo., and I know we are touching people’s lives.

I was going to send my response only to our correspondent. Then I decided to send it only to a few people inside The Heartland Institute. Now I’ve decided to share it with you all.

This letter comes in response to an article quoting someone here at The Heartland Institute who opposes the Internet taxation bill, now moving through Congress:

You guys suck on your position on the Market Fairness Act [sic]. The article I read calls your group “conservative.” I say bullshit to that.

I say you guys are “on the take” from the online merchants. How much money does Amazon, Ebay, etc give you guys? There is no other possible reason you would oppose this legislation unless it is just not tough enough.

You guys sound like crooks to me.

Thanks.

S . . . . . H . . . . . . .
Independence MO

Here is my response:

Dear Mr. H . . . . . . :

Thank you for your thoughtful letter.

May I ask . . . if we were in favor of this bill, would you accuse us of being “on the take” for Wal-Mart, Target and other big-box retailers?

 Also, you apparently are under the mistaken impression that online merchants such as Amazon oppose the bill. Amazon in fact supports it. See here, for instance:

The biggest online retailer backs the bill because the company has the resources to crush small competitors who will struggle to comply with the bill if it becomes law. Does it make sense that we’d be “on the take” for Amazon when we oppose Amazon’s position?

Life is not always as cut and dried as we like to think, a lesson you no doubt will learn with age and experience.

Best regards,

Steve

As cardiovascular surgeon John Natale, M.D., sits in federal prison, the Seventh Circuit Court of Appeals in Chicago heard his appeal on April 18.

After a seven-year investigation, Dr. Natale was indicted for Medicare fraud. Unlike the majority of federal defendants, who feel compelled to cave in by signing a plea bargain even when innocent, Dr. Natale courageously exercised his constitutional right to have a public trial. That is in itself considered an “obstruction of justice” by our government. The conviction rate is more than 95 percent, and sentences may be much longer than those meted out to “cooperative” defendants.

The jury found Dr. Natale not guilty on all of the fraud charges. But he was convicted on two counts of making “false statements” in his operative reports. Over his objection, prejudicial diagrams were sent to the jury room, supposedly representing the operation described in the operative report as well as the operation that was actually done. As anyone can see, a Y-shaped graft (mentioned in the operative report) is different from a tube-shaped graft (placed in the patient, by the doctor’s own admission). The government had thereby emphasized a false statement by Defendant.

The term “false statement” suggests a deliberate lie, but it could be, as Dr. Natale said, a simple mistake, made while a tired and overworked surgeon dictated a pile of reports weeks after the surgery. The jury was not instructed that a false statement is a crime only if made in a deliberate attempt to commit fraud—and, as the jury determined, there was no fraud.

The fraud charges concerned whether Dr. Natale had billed for an operation more complex than the one he did, and were related to the upper end of the graft, not the lower end. All the patients had an abdominal aortic aneurysm that involved the renal arteries, so that the aorta had to be clamped above the branches supplying the kidneys. Dr. Natale did a reconstructive procedure to strengthen the aorta, so he did not have to cut the renal arteries off the aorta and sew them into the graft. There is no precise AMA-copyrighted code for this, so Dr. Natale used the closest one, which is not for a more complex procedure and which did not increase his payment.

After seven years of searching, the government was able to come up with only five cases to include in the indictment, all of them frail, elderly patients who would have died of rupture of their weakened abdominal aorta without surgery, or of kidney failure from inadequate surgery. All the patients survived and did well after surgery. The key patient survived for nearly a year after Dr. Natale’s operation. Later, after two very aggressive, likely unnecessary re-operations done by Dr. Natale’s main accuser, she died.

At the appeal, the main argument was not about justice, but rather about what the defense attorney did or did not say during the trial. Did he “waive” or “forfeit” grounds for appeal by not objecting to the jury instructions?

One judge referred to the need to apply the law that was in effect in 2002-2004. Under more recent law, the government’s burden of proof has been lightened. The mens rea or criminal intent requirement is virtually gone. The prosecutor does not need to prove that a doctor “knowingly and willfully” lied in order to pad his fee, only to show that an incorrect AMA code was used and the doctor intended to get paid for his work.

The implications of the case are profound, the judge noted: Any error in any medical record related to a health program could be a federal crime.

But if the rules change about defense attorneys’ waiving their client’s rights by being insufficiently assertive, the floodgates for appeals might be opened.

Let us hope that justice is done for Dr. Natale. But to this observer who attended the appellate proceeding, it looks as though the laws are increasingly designed to deter expensive care of the elderly, and that the judicial system focuses more on procedural rules than on substantive justice.

Doctors need to know that anything in the medical record can be used against them—as can errors by their own million-dollar attorney.

President Obama tells us in the Overview to his Fiscal Year 2014 Budget just released last week that his budget proposes, “more than $2 in spending cuts for every $1 of new revenue from closing tax loopholes and reducing tax benefits for the wealthiest.”

But President Obama’s budget does not propose any spending cuts at all on net, not even reductions from expected increases in spending.  Instead, his budget proposes to add $160 billion in increased spending just next year to the projected growth in spending, even increasing spending for the current 2013 fiscal year by another $61 billion as well.  Over the next 10 years, President Obama’s budget proposes to add nearly $1 trillion to the projected growth in spending, proposing to increase annual spending by 2023 by $2.1 trillion as compared to 2012.

President Obama’s budget even proposes to cancel the sequester cuts, because he can’t bear to cut even 1% of federal spending from the growth in spending.  His budget proposes to spend $46.5 trillion overall over the next 10 years, even more than the Senate Democrat budget, the highest government spending in world history.

Indeed, President Obama’s talk of “spending cuts’ in his budget Overview is followed by pages of proposals for increased spending.  That reflects Obama’s basic thinking that what drives economic recovery and growth is increased government spending.  But Obama’s economic record is a thorough rebuttal to that thinking.  Not one of those increased spending proposals in his 2014 budget would contribute to increased economic growth and prosperity on net.

Still More Tax Increases

Besides these runaway spending increases, Obama’s budget also proposes $1.1 trillion in additional tax increases, on top of the $1 trillion in tax increases already going into effect this year under Obamacare, and the $600 billion in tax increases on the nation’s job creators, investors, and successful small businesses from the expiration of the Bush tax cuts for them in January.

Those new proposed tax increases include a doubling of the federal tax on cigarettes, in direct violation of the President’s campaign pledge not to increase taxes on singles making less than $200,000, and couples making less than $250,000, “in any form.”  It includes the so-called “Buffett Rule” doubling the top capital gains tax rate from when Obama entered office.  That would impose on America the fourth highest capital gains tax rate in the world, to go with effectively the world’s highest marginal corporate income tax rate.

Throughout his first term, and in this budget, President Obama has repeatedly claimed his policies have involved pro-growth tax cuts as well.  But all of his supposed tax cut proposals (with the exception of limited, increased, investment write-offs for small businesses) have involved tax credits rather than reductions in tax rates (which he has repeatedly increased).  But it is reductions in marginal tax rates that provide incentives for increased productive activity and growth, because it is the marginal tax rate, or the rate on the last dollar earned, that determines how much of the increased income resulting from increased productive activity the taxpayer is allowed to keep.

Tax credits do nothing to improve incentives for increased production.  They increase government control over the public by providing an effective government payment for some activity the government wants to direct the recipients to do.  But after the credit payment, taxpayers face the same economic incentives and tax rates as before.  Tax credits are consequently true tax expenditures, the equivalent of additional government spending rather than a tax cut.

Deficit Doubletalk

Despite all the tax increases, President Obama’s budget proposal would never balance the budget, by Obama’s own admission.  His own budget admits that after 10 years, the deficit would still be $439 billion, still about the highest in history before President Obama.  Congressman Paul Ryan’s House Republican budget, in sharp contrast, would balance the federal budget within 10 years, with no tax increases, as scored by CBO.

President Obama’s budget claims to reduce federal deficits by $1.8 trillion over the next 10 years.   But that only results from calculating the effect on deficits from an “adjusted baseline” used by the Obama budget, and not the CBO baseline.  That adjusted baseline assumes that the war in Afghanistan would never end without Obama’s proposed budget, and that we would otherwise be spending as much by 2023 fighting that war as during the recent War on Terror.  That adjusted baseline also does not include the sequester cuts under current law that the Obama budget would reverse, so the $1 trillion in increased spending resulting from reversing the sequester cuts as in Obama’s budget is not counted in the effect of Obama’s budget on the deficits.

If the impact on deficits under Obama’s budget is calculated from the projected deficits under current law or policies, then the net reduction in deficits proposed by President Obama’s budget is only a comparatively negligible $119 billion over 10 years.  That compares to deficit reductions of $5.7 trillion under Ryan’s budget as scored by CBO, almost 50 times as much.

President Obama’s own budget confesses to $5.3 trillion in additional deficits over the next 10 years, almost 5 times the deficits in Ryan’s proposed budget, which zeroes out the deficit entirely after 10 years.  Obama’s budget proposes to increase federal debt held by the public by $8.2 trillion over the next 10 years, 6 times what would result under Ryan’s budget.  Obama’s budget proposes to increase Gross Federal Debt to $25.3 trillion after 10 years, which would require increasing the national debt limit to that amount.  That Gross Debt would cross 100% of GDP, equal to our entire economy, in 2020.

Moreover, these results assume federal revenues more than double over the next 10 years.  That does not account for the likely result that Obama’s tax increases would not increase federal revenues as projected.  For example, in the last 45 years, every time the capital gains tax rate has been increased, capital gains revenues have declined rather than increased.  But Obama’s budget assumes that doubling the capital gains tax rate from when Obama entered office would nearly double capital gains revenues.

In addition, Obama’s budget assumes a suddenly booming economy to result from these policies, with real GDP growth in 2016, the end of his second term, at 3.6%, more than four times the average of his first term.  That is highly unlikely, given that all of his policies are decidedly anti-growth, such as rocketing tax rates, explosive government spending, exploding regulatory burdens, costs, and restrictions, and cheerleading political cover for the Fed’s unanchored, ultimately destabilizing monetary policies.

At the same time, Obama’s budget inconsistently assumes sustained negligible interest rates (1.2% in 2016).  That is further incompatibly assumed with sustained minimal inflation (2.2% in 2016), leaving real interest rates woefully negative at -1%.  Given the Fed’s current policies, a rapidly growing economy would likely mean surging inflation and soaring interest rates.  Both would raise spending, deficits and debt sharply as well, as federal interest expense is already projected in Obama’s budget, with the lowest interest rates in history, to be $763 billion (more than three quarter trillion) in 2023 alone.

Obama’s budget consequently assumes that there will not be another recession within the next 10 years, though some predict that Obama’s anti-growth policies will cause another recession as early as this year.  That would cause revenues to collapse, spending to soar further, and deficits and debt to further explode.  The second great vulnerability of the Obama, and Senate Democrat, budgets is the potential for soaring interest rates, as market rates spike out of the Fed’s control, after the longest period of near zero rates in U.S. history.  With national debt approaching $20 trillion or more, sharply increasing interest rates would be extremely costly.

With these assumptions, the deficit and debt projections in Obama’s budget cannot be taken seriously, and most likely will turn out to be grossly underestimated.

Entitlement Reform Charade

President Obama has his propagandist flacks out there touting his supposed entitlement reforms in this budget as a grand gesture of compromise with Republicans.  But there is no real entitlement reform of any significance in Obama’s budget at all.

Obama has gone back to proposing to cut promised benefits for seniors again, by arbitrarily changing the cost of living adjustment formula to reduce Social Security benefits by $130 billion over the next decade from what they would be otherwise.  The argument that the new formula more accurately measures inflation is fallacious.  The most accurate inflation formula depends on what you are trying to calculate.  If you are trying to calculate how what consumers must pay for a fixed basket of goods and services changes over time, arguably even the currently used inflation index understates inflation.

Ten years ago, when President Bush was giving at least rhetorical support to the idea of personal accounts for Social Security, I argued against those who were still arguing for cuts in Social Security benefits by noting that no such cuts would ever be allowed by liberals without tax increases as well.  President Obama is now proving me right about that all along.

Obama’s proposed change to the Social Security inflation index would produce tiny, negligible reductions in runaway Social Security spending increases, especially as compared to personal accounts.  Over a generation, depending on how big the personal account option was and how many workers exercised it, such accounts would shift Social Security benefits entirely off of the federal budget, to private savings, investment and insurance instead, resulting in higher rather than lower benefits for those seniors who individually did choose the accounts.  That would ultimately mean the biggest reduction in government spending in world history, equal to about 10 percentage points of GDP, if the option was ultimately expanded to all Social Security and Medicare payroll taxes, given ultimate projections of currently payroll tax financed benefits.

Obama’s proposal, by sharp contrast, would only reduce Social Security spending increases by one-fourth of one percent.  Even with Obama’s “reform,” his own budget projects Social Security spending to soar over the next decade by 85%, from $768 billion last year to $1.427 trillion in 2023.

But Obama’s change in the Social Security inflation index would also apply to the index adjusting income tax brackets for inflation.  That would mean still another tax increase of $100 billion over the next 10 years, which would also apply to the middle class and working people as well, again in direction violation of Obama’s campaign promise not to raise taxes on such taxpayers “in any form.”

The only real entitlement reform solving all the problems of Social Security is to shift to a fully funded system based on real savings and investment, with zero unfunded liabilities.  That is what personal accounts do.

Obama’s other big, supposed compromise, entitlement “reform” is to again cut Medicare payments to doctors and hospitals serving seniors by another $250 billion over the next 10 years, in addition to the Obamacare cut of three quarters of a trillion in such Medicare cuts, making a nice round trillion in such Medicare cuts altogether.  While Democrats talk such a good game of Republicans wanting to slash and burn Medicare, it is Obama and the Democrats who have already done it.  And now they are celebrating doing it again.

Imagine what would happen to our national defense if the government refused to pay the builders of the Navy’s ships, the manufacturers of the Air Force’s planes, and the makers of the Army’s tanks.  That is what is going to happen to health care for seniors under Medicare, given Obama’s so-called “reforms.”

Real Medicare entitlement reform would involve expanding the more modern and successful Medicare Parts C and D to the old-fashioned Medicare Parts A and B, which is all that House Budget Committee Chairman Paul Ryan has proposed.  Seniors would get better benefits than under Obamacare’s Medicare with those real reforms, at major savings to taxpayers due to market competition and incentives, as we have already experienced under Medicare Parts C and D.  Those reforms would “end Medicare as we know it” only to the extent that C and D are not part of the alphabet.

The last successful, cost-saving, entitlement reform was the bipartisan 1996 welfare reforms of the old, New Deal, AFDC program.  Under the incentives of those reforms, two thirds of those dependent on the program left the rolls, with their incomes documented to increase by 25% as a result.  Yet, taxpayers saved 50% of the costs of the program after 10 years, compared to where it would be otherwise under prior trends.

Real entitlement reform would involve expanding those President Clinton compromising reforms to the rest of the nearly 200, federal, means tested welfare programs, projected to cost $10 trillion over the next 10 years.  CBO has scored such reform applied to just one program, Medicaid, as saving nearly $1 trillion over 10 years, while possibly vastly expanding access to health care for the poor, to their great benefit.  But there is exactly zero compromising leadership from President Obama on such reform.

Real entitlement reform would involve providing health care for all unlike Obamacare (still scored by CBO as leaving 30 million uninsured after 10 years – a gross underestimate) with the reforms proposed by John Goodman and myself in , “Health Care for All Without the Affordable Care Act [Obamacare],” NCPA Issue Brief No. 116 (October 17, 2012).  Those reforms would assure universal health care with no individual mandate and no employer mandate, at a savings to taxpayers of at least $2 trillion over the next 10 years alone.  But there is exactly zero compromising leadership from President Obama on such reform.

What’s It All About

Federal law requires President Obama to propose a budget for the next fiscal year by February 4 of each year, before the House and the Senate adopt their own budget resolutions.  But President Obama released his budget for next year just last week, after the House and the Senate had already adopted their budget resolutions.  So what is the point of the President issuing a budget proposal now?

The point is to simply posture for all those low information, Twitter voters in the 2014 elections, who will hear only from all the Democrat Party propagandists at the New York Times, the Washington Post, and MSNBC and brethren.  They will hear only about President Obama’s “spending cuts,” his grand, compromising, entitlement reforms, and how he is fighting for the middle class, with declining median incomes throughout his Administration, for the poor, with record, soaring poverty, and for “equality,” even as inequality has actually risen throughout his Administration.  Is this generation of Americans in the process of proving America’s more than 200 year experiment with democracy a failure?

[First Published at Forbes]

At the start of this year makers of medical devices became subject to a federal excise tax on their products. It’s an especially bad way to fund Obamacare, says the Tax Foundation’s Kyle Pomerleau, because it could reduce innovation, raise costs of medical care, and cause conflict within the medical industry over who should ultimately bear the burden of the tax.

Listen to Heartland’s Steve Stanek interview Kyle Pomerleau, an Economist for the Tax Foundation’s Center for Federal Tax Policy.

The Big Government, Never-Enough-of-Your-Coin-Coalition – Internet Division – is at it yet again.

The Barack Obama Administration has since it’s inception been very active in over-regulating the Web – for instance, Network Neutrality and Socialist-esque wireless price caps, to name but two huge power grabs.

Net Neutrality is in legal jeopardy – there are lawsuits pending to overturn it.  So President Obama’s Federal Communications Commission (FCC) has kept open the possibility of – again, without any authority to do so – over-regulating the Web further still:

President Obama will move the Internet from Title I to Title II.  Title II is how the FCC over-regulates landline telephone lines – you know, that bastion of innovation lo these last seventy-plus years. Title II opens up the Pandora’s Box of uber-regulation of the Internet. 

But wait – there’s more.  By so doing, the federal government is also looking to open yet another vein.

Under Title II, President Obama can also begin to tax the Internet – just as the Feds tax landlines.

Of course they are already uber-taxing your Internet use – on your wireless phones:

Checked your cell phone bill lately? (The Universal Service Fund tax) is 17.4% – an $8 billion total take in 2010 – and hurtling ever upward. 

And now they are looking to let the states pile on.

Senate Edges Closer to Vote on Internet Sales Tax

Legislation giving states the power to compel retailers outside their borders to collect online sales taxes, a touchy subject for Internet merchants, is likely to move forward in the Senate next week.

I wonder why this would be “a touchy subject for Internet merchants?”

Current law dictates that a state can only require a business to collect its sales tax if it is physically present within its boundaries….

S.743 (the Marketplace Fairness Act [MFA]) would countenance an enormous expansion in state tax collection authority by wiping away the “physical presence standard,” a baseline protection that shields taxpayers from harassment by out of state collectors….

Dismantling this protection for remote retail sales would create a very slippery slope for states to attempt collection of business or even income taxes from out of state entities.

Why would anyone object to being taxed by forty-nine states with which they have no relationship?  Taxation without representation on stilts, perhaps?

And of course it doesn’t at all complicate compliance matters.

(The MFA will) forc(e) online retailers to calculate and remit to more than 9,600 distinct taxing jurisdictions.

Nothing like in these interminably tough times making things for businesses infinitely more difficult and expensive.

No problem – they can begin figuring out compliance to the Marketplace Fairness Act right after they finish doing so with ObamaCare.  And Dodd-Frank.  And the President’s all-encompassing, on-all-fronts regulatory overrun.  And….

After they pay all those new taxes, and plow through those thousands-of-pages-of-new-law and hundreds-of-thousands-of-pages-of-new-regulation, I’m sure they’ll have plenty of money, time, and energy left to, you know, actually concentrate on their businesses.

Though that last part really isn’t at all important important to the Big Government Coalition.  For them, ‘tis far better that you be paid up on their taxes and in compliance with their red tape.

No matter how much red ink ensues.

P.S.: You can contact Congress and let them know how incredibly foolish – i.e. D.C.-like – they’re being with this new Internet tax here.

[First Published at Red State]

My new policy brief urges the Federal Communications Commission to get on with the business of allocating the necessary spectrum to meet the burgeoning demand for wireless services.

The paper was finished before Chairman Julius Genachowski announced his resignation last month. At the risk of sounding harsh, that might be addition by subtraction. One of the big disappointments of Genachowski’s tenure was the lack of significant movement to get spectrum freed up and auctioned. In fairness, there were the interests a number of powerful constituencies to be balanced: the wireless companies, the broadcasters, and the federal government itself, which is sitting on chunks of prime spectrum and refuses to budge.

But that’s the job Congress specifically delegated to the FCC. We’d be closer to a resolution–and the public would have been better served–had the FCC put its energies into crafting a viable plan for spectrum trading and re-assignment instead of hand-wringing over how to handicap bidders with neutrality conditions and giving regulatory favors to developers of unproven technologies such as Super WiFi. Instead of managing the spectrum process, the FCC got sidetracked trying to to pick winners and losers.

A new chairman brings an opportunity for a new direction. Spectrum relief should go to the top of the agenda. And as I say in the policy brief, just do it.

[First published at Tech Liberation Front]

EPA puts out press releases like this one at least weekly. If you examine activities, you notice most activity is spent on advocacy. Much of this advocacy is peddling the notion that carbon dioxide is a pollutant that must be curtailed.

Carbon dioxide is an airbourne fertilizer essential for survival of life on this planet. Oxygen supports combustion and was responsible for the explosion in Texas last week that killed at least 14. Why doesn’t EPA declare oxygen a pollutant because numerous examples exist where oxygen’s support of combustion killed millions.

The federal budget will be in debt $1.1 trillion for Fiscal Year 2014. This is the same level of debt the preceding 4 years–for a five-year total exceeding $5 trillion. Can the United States really afford this frivolous waste of tax dollars expended by the EPA.

Has anyone heard of EPA threatening to pull back on their activities due to the budget sequestration? In Atlanta, Georgia, home of the world’s busiest airport, air traffic controlers are going to be furloughed starting this May due to sequestration. This is reported to cause flight delays at the world’s busiest airport.