EnduringSense

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Posts Tagged ‘Government’

Failing Progressive Policies

Posted by Steve Markowitz on March 30, 2017

One of my Progressive friends and I recently discussed the pros and cons of Liberal socio-economic policies. During that discussion my friend questioned my empathy for the less fortunate stating: “”There are a lot of arguments as to why we are short and where the jobs are but the fact remains we have people who cannot survive. I simply don’t understand how making people’s lives miserable somehow makes my life better. Their plan (conservatives) is akin to just yelling ‘Get a Job.’”

It is disappointing that liberals believe, or at least profess to believe, that those with different policy opinions are somehow less empathetic than they are. Inherent in their view is the belief that government and governmental programs improve the lives of the less fortunate. This decades old view had the potential for being correct during the 1960s when the great experiments were initiated. But history has since made its judgment and it concludes the programs have been a failure.

Posted is a graph of the US poverty rate since 1960, but prior to Obama and Trump. Going back a few years helps remove the current partisan political rancor. These numbers and the trajectory of this graph indicate that the poor have fared worse under Progressive policies initiated in the 1960s through the Great Society programs. Many these programs continue to this today.

While this graph does not answer the question of cause and effect, it at least raises a red light. At best, these unacceptable results emanated from bad socio-economic policy. The alternative is that things have turned out just as the political-elites designed. Conclusion; those who promoted the feel-good economic policies of the past five decades, both Democrats and Republicans, own the results. Continuing these Progressive policies will offer the same trends, which will also give the political class the ability to grab more power through offering economic solutions for problems their policies created.

It is time for society use object results instead of feel good talking points to determine public policies. However, this logical approach would usurp power from the ruling political class, which they will not give up easily.

Posted in economics | Tagged: , , , , , | Leave a Comment »

The Tyranny of Governmental Bureaucracies

Posted by Steve Markowitz on September 16, 2016

Irrespective of good intentions, once started, government agencies and bureaucracies take on a life of their own in never-ending attempts to gain power, influence, and money.  A poster child for this is the US Department of Energy formed in 1977 during the presidency of Jimmy Carter.  Its primary mission was in response to the oil crises of the 1970s and America’s need to become less dependent on imported oil.

oil-importsAs indicated in the chart, at best the DOE could claim some early success in its primary mission. However, between 1985 and 2005 net imports of oil surged.  That did not stop the DOE’s employment from increasing from its initial 20,000 to today being over 100,000, when contract employees are included.

Progressives, who never find a government program they don’t like, would point to the significant drop in net oil imports since 2005.  That decrease, however, was the result of private industry ingenuity, specifically fracking technologies.  Since the election of Barack Obama, the federal government has done all it can in efforts to actually increase America’s dependence on imported oil, putting coal out of business, increasing drilling regulations, stopping pipelines, etc.

Steve Forbes published an op-ed in Forbes titled The Latest in the Never-Ending Assaults on Our Freedoms.  One of These Is Lethal that appropriately attacks the tyranny of government.  Forbes states that: “Even in democracies the natural tendency of government, unless stopped, is to expand its powers and extend its tentacles into every facet of its citizens’ lives–always in the name of helping them”.

Forbes uses the tobacco industry as an example of governmental overreach.  This includes:

  • The FDA’s (US Food and Drug Administration) has implemented regulations that will ultimately put out of business small manufacturers of premium cigars and makers of e-cigarette.
  • E-cigarettes, which are a safer alternative to cigarettes, will now be less safe by the new regulations that subjects all devices designed after February 15, 2007 to FDA approval. Prior to 2007, e-cigarette’s were crude and inferior, both in convenience and safety, to those produced today.  As a result, these regulations will limit consumer choices for safer and superior devices.
  • The smaller, boutique cigar manufacturers are been basically run out of business with the new regulations. The requirement of 5,000 hours of testing takes several years to complete, an expense the smaller companies cannot afford.
  • Pipe smokers are not immune to from the FDA’s lunacy. Tobacconists who mix special blends of pipe tobacco will have to go through an FDA registration process as if they were a tobacco manufacturer.  This added expense will put many of the blunders out of business.

It is not coincidental that the FDA’s tobacco regulations hurt small and newer producers of products and benefit the larger suppliers.  This is but another example of crony capitalism that inflicts our economy.  The incumbent suppliers have the mass in the political clout to push through laws that hinder potential competition.  Politicians benefit from this incestuous relationship through political contributions.  The bureaucracy and their governmental agencies profit through increased control, larger employee counts, and funding.  This is not a new phenomenon, but one that has been repeated throughout history in many countries and governments.  Following the money ultimately leads to the actual motivations behind governmental interventions in society and the economy.

Posted in Government Ineptness, Governmental Intervention | Tagged: , , , , , , | Leave a Comment »

April’s Employment Numbers Miserable, Yet Unemployment Rate Drops

Posted by Steve Markowitz on June 4, 2016

The April jobs report has been released by the US Department of Labor and it is not pretty.  According to CCNMoney, a mere 38,000 jobs were created in the US, the lowest monthly rate in six years. To put this into perspective, in the past two years the monthly increased averaged about 200,000 new jobs and the number required just to keep up with new entrants into the job market is in excess of 200,000 monthly.

Commenting on the job’s number, Curt Long, chief economist at the National Association of Federal Credit Unions, correctly said, “It’s a pretty gloomy report, hard to find a silver lining in this one“.  Contrast this realistic assessment with the Department of Labor’s unemployment number released indicating that the unemployment rate dropped to 4.7%, the lowest level in 9 years.  How does the Labor Department come up with such rubbish?  They merely stop counting those Americans who have given up the job search for lack of success.  Now that’s banjo accounting!

There are many reasons behind the US economy’s poor performance with government being a major factor.  Included in this list is the government’s willingness to create false reports to further its own political and bureaucratic agendas that often in conflict with those of the American people.

Posted in Unemployment | Tagged: , , , | Leave a Comment »

Government is the Problem

Posted by Steve Markowitz on February 28, 2016

The Left and Right both believe they have the answers to America’s economic downward spiral.  Those on the Left are sure the problems relate to income inequality, racism and/or too much spending on the military.  My friends on the Right are just as strong in their convictions that the problems are caused by an efficient tax system, excess entitlement programs, illegal immigrants, and of course the Left itself.

To this Blogger the cause America’s economic issues, as well as those of the greater world, is government itself, the world’s largest special-interest group.  The video below share some facts proffering the danger of the growing government elites and their minions that includes:

  • During the past 10 years the number of private sector jobs in America has grown by only 1% while during the same period the number of federal government employees has grown by 15%.
  • Prior to the economic meltdown approximately eight years ago, the US Department of Transportation had only one employee earning over $170,000 annually.  That number is now about 1,700.
  • At the beginning of the economic meltdown the US Department of Defense had approximately 1,700 employees making $150,000 or more annually.  That number is now over 10,000.
  • During the first two years after the beginning of the economic meltdown the number of federal employees earning in excess of $100,000 annually doubled.
  • In 2009 the average compensation package including salary and benefits in the private sector was approximately $61,000 per employee.  During that year the average total compensation package for federal employees was over double that or $123,000.

There are currently about 21 million government employees in the United States, approximately 16% of potential voters.  This is a huge voting-block, especially considering how few votes often separate winners and losers in important elections. However, add to this number families of government workers and the potential influence this voting-block rose enormously.

There is a growing anger and disillusionment among American voters that has not been seen in many decades.  On the Left this is expressed by the surprising strength of Socialist Bernie Sanders in the Democratic primaries.  On the Right this is seen through the strength that Donald Trump has within the Republican primaries, even though his views have historically been in conflict with basic Republican ideology.

The electorate’s growing disillusionment has occurred during a time of historic growth in government power and spending.  Those who believe that giving more power to government or allowing them to spend more money change this direction ignore historical precedent.

Many Democrats are on enthused by their likely candidate, Hillary Clinton.  Similarly, many Republicans are aghast at the thought of Donald Trump being their party’s standard-bearer.  Here’s a consolation for both: Not to worry, the special interests groups, including those who make a living on the public payroll, will ensure that the Country continues in the same direction that it has been taking for the last 50 years no matter who is president.  Yikes!

Posted in Government Ineptness | Tagged: , , , , , , | Leave a Comment »

Federal Government to Require Transgender Shelters

Posted by Steve Markowitz on November 20, 2015

BathroomJust when you thought that the Feds could not outdo themselves with ridiculous ideas, they come up with one that leaves many stunned.  According to the Washington Free Beacon, the Department of Housing and Urban Development (HUD) will be requiring special shelters to accommodate transgender people that would include sleeping and bathing facilities of their choosing.

This is another example of the Federal government creating classifications of people.  Ten years ago most Americans never heard of the term “transgender”.  Now, the Federal government is making laws to protect them.  There is nothing in the Constitution that gives the government the power to take such actions.  It would be bad enough if the government’s intent came from compassion, but it is likely more to do with money and power.  HUD’s annual budget is $6.5 billion.  By creating subgroups of disadvantaged Americans it gives itself more power and larger future budgets.  The only way to put a stop to this lunacy is by forcing the government to operate within a balanced budget.

Posted in Government Waste | Tagged: , , , , | Leave a Comment »

Public Pension Funds Crisis Looming

Posted by Steve Markowitz on September 10, 2015

Defined benefit pension plans are a thing of the past for most private companies.  Those plans guarantee payments to retired employees based on years of service.  While a wonderful concept that was viable when American industry had little competition following World War II, these plans became untenable as worldwide competition increased.  As a result, most American businesses that offer pension plans have moved to 401(k) &plans whose funding requirements are more flexible and can be kept in line with a company’s economic realities.

In defined benefit pension plans, the real costs are hidden within complex actuarial tables that require assumptions on long-term returns.  Should the assumptions be overly optimistic, which they often are, what may look like a financially healthy company quickly become insolvent.

While most of the private sector has addressed its pension responsibilities, the public sector still offers many governmental employees defined benefit pension plans.  This has created a dangerous economic model for many municipal and state governments, which is being exasperated by decreasing returns for pension plan investments.

Timothy W. Martin’s recent article in the Wall Street Journal highlights the growing problem of public-sector pension plans.  The problem is being brought to a head as long-term plan assumptions by necessity are being decreased due to the long term economic downturn and low interest rates available on fixed income investments.

Historically, annual pension return assumptions have been set at 8%.  This assumption was used to calculate the rate of growth of pension fund investments.  This rate of return has not obtainable for some years.  However, the 8% return rate assumption was maintained by pension fund managers as a way of masking problems within their funds.  As a result, states and municipalities were able to underfund their plans and push liabilities off to a future time.  That time is rapidly approaching.

Martin points out that:

  • Over 60% of state retirement systems have cut their assumptions in the past seven years with the average now being just under 7.7%. This Blog proffers the view that even this lower assumption is overly optimistic.  In fact, it has been reported that for the first half of this year the average annual return for pension funds was less than 4%.
  • Last week one of the nation’s largest public pension funds, the New York State Common Retirement Fund, cut its return rate a half a point to 7%. Similarly, the San Diego County Employees Retirement Association cut its assumption quarter point to 7.5%.  The Oregon Public Employees Retirement System and Texas Municipal Retirement System have also lowered their forecasted return rate by a quarter point.
  • America’s largest public retirement fund, The California Public Employees’ Retirement System, is considering dropping its current return assumption rate from 8%.

While lowering the return assumptions by state and local governments is ultimately a positive step, forcing governments to adequately fund their pension obligations, there is significant pain associated with this action.  Increased taxpayer dollars will be required to fund the pension plans.   This will decrease funds available to support governmental services.  For example, Martin reports that Boulder, CO has eliminated 100 positions and cut services in order to add $1.7 million to its pension fund.

States and municipalities have increased their funding of pension programs by over $120 billion in the past 10 years.  That would pay for a lot of government services!

*******

Pension problems for state and municipal governments will grow significantly since even the new lower assumptions are overly optimistic.  In the 1960s, for example, return assumptions were less than 4%.  Should pension fund returns approach those levels, the result would be catastrophic.  As Martin points out, every 1% decrease in a fund’s returns leads to a 12% increase in the pension’s liabilities.

While the looming public pension crisis was created by state and municipal governments using unrealistically high return assumptions and offering benefits that they could not afford, the problem has been exasperated by the low interest rate policies of the Federal Reserve that further depresses fund returns.  This is one example of the significant consequences of the Fed’s interventionist policy that has distorted expenses for some, cajoled investors into higher risk investments as they seek returns, and created bubbles including overpriced equity valuations. These problems are just now beginning to percolate.  When they boil over, books will be written on the fallacy of the Federal Reserve’s low interest rate policies.

Posted in Pension Funds | Tagged: , , , , , , , | Leave a Comment »

Governmental Errors in Headlines

Posted by Steve Markowitz on July 13, 2015

July has not been a good month for government and those that look to it to resolve societal challenges.

After the carnage in a South Carolina church that resulted in the death of nine African-Americans at the hands of deranged racist, Progressives sought to use the tragedy to push a gun control agenda. Then, last week it was announced that the accused shooter, Dylann Roof, was not legally able to purchase the gun used in the massacre.  Admitting that the background check of Roof is not properly handled, FBI director James Comey said: “This rips all of our hearts out“.  This is also an indication that America does not need more laws, but competent enforcement of current laws.

In San Francisco, 32-year-old Kate Steinle was murdered on Pier 14.  Any murder of an innocent is a tragedy, but it becomes especially troubling when it could have been prevented had authorities acted responsibly.  Ms. Steinle was reportedly shot by Francisco Sanchez, who is not only an illegal alien, but had been deported multiple times and had multiple felony arrests in the United States.  Adding an explanation point to this avoidable tragedy, it was reported by the Associated Press that the gun used in the murder belong to a federal agent, but was reported stolen.  Again, additional gun control laws would not have prevented the murder.  However, had the city of San Francisco reported to the federal government that Sanchez was being released from jail, as requested by the federal government, he would have been deported Incometenceprior to the killing.

Finally, last week the Country learned of a very damaging, but less violent event involving governmental incompetence to the max.  Over 25 million Americans had their personal information stolen from a governmental computer system.  This led to the resignation of Katherine Archuleta, the director of the Office of Personnel Management.  Ms. Archuleta’s resume included working for the Obama administration’s reelection team.  It is little wonder that she lacked competence computer/personnel security.

Over the years those with a Libertarian view of government have railed at the crony capitalism, waste and incompetence of government.  As the government has grown, increasing its reach deeper into the economy and society, the opportunities for incompetence and abuse increases.

Posted in Government Ineptness | Tagged: , , , , , | Leave a Comment »

Department of Homeland Security Focusing on Global Warming

Posted by Steve Markowitz on July 10, 2015

In another sign of government gone wild, The Hill has reported that the Department of Homeland Security (DHS) is giving high priority to “protecting” the American people from global warming.  DHS’s quarterly report report lists climate change as one of its top priorities saying it “present major areas of homeland security risk”.

Evidently DHS has greater concern about the potential effects of climate change than ISIS.  No wonder the terrorists are growing in strength throughout the world.

The Department of Homeland Security started under the Bush Administration in response to the 9/11 attacks.  It has since grown to approximately 240,000 employees with an annual budget of nearly $40 billion.  These huge numbers are just another indication of how government agencies grow after being seeded.  These agencies become self-perpetuating, as they grab for power and taxpayer funds.  DHS’s jump from protecting America from terrorists to potential climate change affects is a prime example of the corruption of government.

There are various arguments that can be made that would indicate that the theory of man-made global warming is suspect.  However, assuming for the moment that man is radically changing the environment, one indication that science is not being appropriately used in the discussion is the one sided conclusions offered concerning the potential climate change.  All effects are promoted as negative, which in itself is absurd.  Any climate change has positive and negative impacts on different parts of the globe.  To suggest otherwise is an indication of the fallacy of the science and the bias of the argument.

Posted in Global Warming, Government Waste | Tagged: , , , | Leave a Comment »

Government Again Pushing Mortgages to Those Who Cannot Afford Them

Posted by Steve Markowitz on May 18, 2015

In 2008 the world economies encountered the worst financial crisis since the Great Depression.  In a supposedly effort to repair the economies, governments transformed them through huge stimulus spending, low interest rate policies and bailouts.  These interventions have contributed to the ongoing weakness in economic recovery since.

The main cause of the 2008 meltdown was the subprime mortgage lending practices that led to loans being hustled to millions who could not afford to pay them back.  When the housing market slowed leading to depreciated housing values, homeowners could no longer refinance, further eroding housing demand that led to many homeowners owing more on the homes than they were worth.  Many walked away from the loans leading to the meltdown, putting at risk nearly most of the world’s largest financial institutions.

Given 2008 is only eight years ago, logic would dictate that we learned a lesson about imprudent financial behavior, at least for a generation.  However, once governments intervene, logic and economic reality take a backseat.  In fact, we are currently traveling down the same road, again fermented by governmental policies.

News.investors.com reported that the US government is again cajoling financial institutions to give mortgages to those that cannot afford them.  Specifically, the Consumer Financial Protection Bureau warned (threatened) lenders that they would be investigated for discriminatory practices if they do not count government assistance payments to lower income individuals as real income.  In announcing this policy, Bureau Director Richard Cordray used the following incredible logic:

The bureau has become aware of one or more institutions excluding or refusing to consider income derived from the Section 8 HCV Homeownership Program during mortgage loan application and underwriting processes.”  …. “Consumers should not be put at a disadvantage just because they receive public assistance.”

So, using the government’s logic, individuals who need governmental payment assistance are worthy of obtaining mortgages.

Once again politicians and bureaucrats are manipulating economic practices and reality in order to further social goals.  Prudent financial practices not only protect financial institutions, but also borrowers.  Instead, the government is placing people in mortgages they are unlikely to be able to repay.  In addition, this policy leads to bad investments decisions for some consumers when housing prices depreciated in the future.  If this occurs on a large enough scale, it will create another housing bubble and melt down mirroring that which occurred in 2008.

There is a flaw in the premise used by the Consumer Financial Protection Bureau.  Inherent in this policy is the view that lending institutions discriminate on people based on noneconomic factors, which is economic lunacy.  Those in the mortgage industry make money offering mortgages.  The more they write the higher the profits, assuming that the mortgages are prudent.  Forcing lenders to make imprudent mortgages will improve the short-term profitability of the mortgage industry, but ultimately hurt those that invest in buying these assets on the secondary market; i.e. pension funds, etc.   That is precisely what in the meltdown of 2008.

Posted in Debt, Mortgages | Tagged: , , , | 1 Comment »

Voters and Government Waste

Posted by Steve Markowitz on November 2, 2014

pigJeff Jacoby, writer for The Boston Globe, posted an article titled “No wonder voters like a candidate who knows how to castrate hogs” about voter concern for government waste.  Jacoby points to one of the most successful political ads of this year by Joni Ernst that plays on her former farming background as a way to focus on government waste.  The catch lines of the ad included below is: “I grew up castrating hogs on an Iowa farm.  So when I get to Washington, I’ll know how to cut pork.”  She goes on to say, “Washington’s full of big spenders.  Let’s make ‘em squeal.”

Ernst is currently running for her first term in Congress against four term congressman Bruce Bailey.  Polls show the race to be a tight one.

As Jacoby points out, the Ernst advertisement has gone viral not only because of catchy words, but also because of voter discontent with Washington wasting the People’s money.  By way of example, Jacoby points to a recent General Accounting Office (GAO) report that included the following government waste:

  • From 2011 to 2013, the federal government spent $775 million to pay thousands of government workers for paid leave.
  • 57,000 government employees were on administrative leave for over 30 days. The GAO report covered only 3/5 of the federal government’s workforce so the actual number is higher.
  • Hundreds of government employees were on administrative paid leave for three years.

Government workers are typically placed on administrative leave when being investigated for some form of misconduct or criminal act.  Their superiors find it easier to use administrative leave rather than fire such workers given government mandated employment protections.  Oklahoma Senator Tom Coburn bluntly says: “Charging booze and personal trips on the office credit card.  Passing out on the job after a late night partying.  Wasting most of the work day surfing for smut on office computers.… Any one of these outrageous behaviors would be reason enough for most to be fired … unless, of course, you are on the federal government’s payroll, in which case you might instead get a paid vacation lasting months or even years.”

Adding insult to injury, The Washington Post reported that “while the employees stayed home, they not only collected paychecks but also built their pensions, vacation, and sick days, and moved up the federal pay scale.”

There was a time when working for the government, either on the local, state or federal levels, was considered public service.  That is no longer the case.  Today, many government workers’ pay and benefits are higher than comparable jobs in the private sector.  Add the bloated workforce and inability to discipline unsatisfactory employees and you have a recipe for corruption and waste.  While people working for the government industry prosper, the People are hurt due to higher taxes and lower quality services.

Greed and mismanagement occur within both the private and public sectors of the economy.  In the private sector such poorly managed companies ultimately go out of business with their employees and stakeholders damaged in the process.  Not so in the public sector.  When a governmental organization is mismanaged, it is typically given more employees and more tax dollars to fix the problems.  Unfortunately, this approach only feeds the government workers industry and makes government even less efficient.

 

Posted in Government Waste | Tagged: , , , , , , | Leave a Comment »