Another ghost of Christmas yet to come

Anyone following the meltdown of public employee benefits plans in the states has heard a lot about New York, New Jersey, and California. And I have been trying to blow the whistle on Kentucky's growing crisis for a while now.

As Kentucky gets closer to making really tough decisions to cope with our now $35.7 billion and growing problem, a glimpse at North Carolina may be instructive:

"The health plan that covers teachers and state employees across North Carolina has been bleeding so much money that it is set to run out early next year, and officials say it needs an immediate $300 million cash infusion."

No tax increase will pull Kentucky out of its hole when -- not if -- this happens to us.

The bad-policy multiplier

Kentuckians are sure to hear much more in 2009 about how everything will work better in the state if only taxes and spending go up. Following the path of most of these schemes is far more likely to result instead in more of the same decline in our common fortunes.

Take, for example, Gov. Steve Beshear's plan to hit up charitable organizations for donations to the state's General Fund. Before we know what hit us, we will be spending projected future donations only to need more revenue enhancement when that house of cards comes crashing down.

Same goes for President-elect Barack Obama's "stimulus" plan, which will have to "work" to avoid creating yet another house of cards.

From the Philadelphia Inquirer:

"President-elect Obama's economic recovery package will create jobs. But until those jobs exist, welfare reform as we know it must be changed."

Given the well-established pattern of failure for this kind of two-step policy sales pitch, one might think more of us would respond skeptically to such a game.

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Another thing the cigarette tax won't do

Seemingly forgotten in the discussion of Kentucky's fiscal woes is the state employee public pension disaster, whose price tag is now $33.4 billion.

Maybe we should all start smoking now.

It should be increasingly clear that there are not enough tax revenues to grab in Kentucky to make up for decades of overspending, especially if we are going to keep overspending.

Gov. Beshear doesn't have the support in Frankfort to keep denying the reality that tax hikes aren't going to right-size bloated government in Kentucky.

A Kentucky educrat strikes back

A big reason nothing changes in Kentucky is that too many of the people who get theirs based on the status quo work very hard to cook up rationale for them keeping it and for you to keep your mouth shut.

Take, for example, The Gatton Academy of Math and Science on the campus of Western Kentucky University. Kentucky taxpayers have spent several million dollars -- we don't know how many because of the way the money is tucked into the state budget -- to send sixty boys and sixty girls from across Kentucky each year to gain a superior learning experience not available at their home schools. The students can gain up to sixty hours of college credit by the time they graduate from high school. Taxpayers pick up the cost of tuition, room, and board.

This is a fantastic opportunity for these young people. The program functions as a charter school, publicly funded but able to operate outside the control of the education bureaucracy.

The only problem is that the opportunity is not more widely available. Kentucky law prohibits charter schools. In fact, The Gatton Academy operated for a full year without legislative approval, but with the support of House Speaker Jody Richards. That's something else the rest of us couldn't do.

An upcoming legislative effort to make similar educational opportunities more widely available will earn the wrath of the education bureaucracy. In fact, just pointing out this discrepancy on The Bluegrass Policy Blog caused an anonymous commenter to come unglued:

This is pretty good example of the noise you get from the status quo crowd trying to protect their turf. It would be nice if we could have a spin-free conversation about improving education opportunities for more than just a handful of people.

As America moves to the left

Interesting post from native Canadian think tanker home for the holidays reading about healthcare reform north of the border:

"Here's a question to mull over the holiday season: By giving a tax-break to families instead of employers, could the Canadian government be en route (very tentatively) to more patient-friendly health care than the American government, which appears wedded to the goverment-corporate status quo?"

Read the whole thing here. Canada has done a fair bit of socialism the last few decades. Might be worth considering why they are looking in the opposite direction.

Keeping it simple would help Kentucky

An essay out today could almost have been written for Kentucky (the numbers are different and we don't have ports, but the rest fits well). It has great advice we can apply in Kentucky:

"It might well have been better to implement these budget savings several years ago, when the economy was stronger and policymakers had the luxury of taking their time. But such foresight appears to be contrary to human nature, or at least to the nature of those who wield political power in our state (and beyond)."

The rest of the essay is here. Zero-based budgeting would require the state to justify everything it spends. (Imagine that!)

And if we got the government to focus on a few things, there would be fewer painful and expensive mistakes from which to recover.

Perspective on Toyota's "operating" loss

The sky isn't falling on Toyota and the difference is as simple as operating versus actual losses.

Toyota yesterday predicted its first annual operating loss since 1938. That means the company's primary business operation -- making and selling cars -- cost more than the revenues gained from the same. For one year. In a down economy.

Some are comparing this to the Big Three as a way to take heat off the United Auto Workers union. Bluegrass Roots exults:

"Yes, today Toyota with no union workers and what so many try to say is such a superior product is posting a loss for the first time in 70 years themselves."

This is inaccurate. Toyota didn't post a loss and they are not likely to any time soon. When you combine Toyota's operating loss with the surplus from their investments, fringe benefits, and all the other financial activity outside of their core business, Toyota is still profitable.

Ford, Chrysler, and General Motors can't say the same thing and the main difference is labor costs. That is why no one at Toyota is talking about needing a bailout from anyone and GM and Chrysler are now being bailed out by Canada.

By the way, The Lexington Herald Leader's coverage of this operating loss is only slightly better than the left-wing blogs. And that is only because the Herald Leader left the word "operating" in their story. They still could have easily given the rest of the story, though that may have conflicted with an agenda.

What's going on at The Bluegrass Institute

The Bluegrass Policy Blog will stay active all through the holiday season. Please check it out. Kentucky Votes is temporarily a mess. Stuck in the middle of a major upgrade. I believe it will be a super great site sometime before the General Assembly goes into session. Could be any day now. I'll keep you posted.

Pushing all levels of government in Kentucky to open up and show taxpayers what's going on will be our main theme in 2009.

Stay tuned...

Bad news inside the bad news

Kentucky's state government announced November's unemployment estimate reached 7%. The worst part of the news release was not about where jobs are being lost, however. It's about where jobs are being gained.

You have three guesses and the first two don't count:

"The government sector, which includes public education, public administration agencies and state-owned hospitals, gained 500 positions in November 2008. The sector has added 10,000 jobs since November 2007."

This is why Frankfort politicians get so mealy-mouthed when you ask them why they don't just cut government spending.

The time to shrink the government sector is now.

Why transparency is needed in Kentucky schools

Kentucky Education Commissioner Jon Draud has been a disaster.

His taxpayer-provided luxury car is still in his driveway. His sneaky sick day grab was caught and returned to the taxpayers only to be given back to him by the General Assembly.

And now we find out he is being given a glowing review based on two do-nothing task forces he set up. From the Courier Journal:

"The state board evaluated Draud in August and was supposed to present him with the findings at its October meeting, which was postponed because of his stroke."

"In his evaluation, board members applauded Draud's effort in starting two major task forces: one on improving low-performing schools and another looking at the state's assessment and accountability system."

If Kentucky school systems and the Kentucky Department of Education were required to post every single expenditure of taxpayer money within a week of contracting to spend it or, in the absence of a contract, writing the check, it would be much easier for taxpayers to keep track of what is being done to them.

We can talk about good government all we want to. But until the blinders are taken off, nothing will stop this kind of thing from happening over and over.

Ripped from The Lane Report

Kathy Gornik, president of THIEL Audio in Lexingon, sets the record straight on the silly idea that bureaucrats should be picking winners and losers in our economy and how market incentives, rather than government favors, would increase prosperity:

Read the whole article here.

Worse than the obesity epidemic

Projections

I was reading about President-elect Barack Obama's healthcare reform proposal tonight in a book called "Obamanomics." Found a very interesting passage about his plans to pay for universal coverage that sheds light on the idea of predicting the fiscal impact of most policy changes. I've marked portions of the paragraph and provided my thoughts below. All the numbers in parentheses and the italics were added by me:

"Obama expects that the (1)premiums paid by most Americans will decline and subsidies will be offered to more moderate-income people to allow them to buy into the plan. Of course, this is not all free. Obama's team estimates it should cost approximately (2)$100 billion a year. Obama does not intend to raise average Americans' taxes to pay for the plan, but rather intends to fund the plan from the government savings he expects we will get by pulling our troops out of Iraq and (3)ending the war, from the tax increase he proposes for (4)Americans earning over $250,000 per year, and from the money he raises by instituting a (5)carbon tax on carbon dioxide emissions. In addition, Obama will mandate that employers who are not currently paying for quality healthcare coverage for their employees will (6)have to contribute a percentage of their payroll costs to the plan."

(1) Really? With his plan to mandate no exclusions for pre-existing conditions, this claim is false by definition.

(2) Totally made up number. Like every other new government program, this probably understates the true cost dramatically.

(3) Ending which war? When? How? Might be interesting to see what the terrorists say about this one.

(4) This one already bit the dust.

(5) Significantly dumber and larger than Kentucky's cigarette tax increase but analogous in the sense that the stated purpose of the tax is for it to go to zero, but the dependence on the revenue will only grow.

(6) Swing-district Democrats probably will have to oppose this as it will be clearly seen as a heavy, new, widespread tax increase.

Making precise projections for the cost of starting a new program is a sure way to be proven wildly inaccurate by things that can't be predicted. Same goes for cutting programs. Might make for interesting conversation at cocktail parties, but the best you can really hope to do is get the direction of revenues and expenditures right.

And the bottom line is that the federal government and our state government are buying more government than they can afford. The only answer is to start deciding which programs we can live without and make plans to eliminate -- or at least shrink -- them.

China's thugs make a Kentucky move

The Wall Street Journal reports China is blocking the New York Times web site.

That's almost as bad as Kentucky Gov. Steve Beshear's move to take down web sites because he doesn't like their content.

Beshear's internet censorship case remains mired in a court battle. A Court of Appeals ruling may come in January.

The ACLU has joined the fight against Beshear because his actions violate the First Amendment. I'm not very comfortable being on the same side of an issue with the ACLU, but when they're right, they're right.

Sales of garlic skyrocket in Kentucky

Kentucky Gov. Steve Beshear wants to raise your taxes so badly, he can taste it.

Giving in to all his seductive cigarette tax increase nonsense is just like inviting Count Beshear into your house.

Where are my shoes?

President Bush is giving $17.4 billion to General Motors and Chrysler. That should get them through till spring. Then they'll be back for more and Ford will want their's, too.

Where we are headed

New York Gov. David Paterson has a plan to save the world one 65% fruit juice at a time. He wrote:

"Nearly one out of every four New Yorkers under the age of 18 is obese. In many high-poverty areas, the rate is closer to one out of three."

"That is why, in the state budget I presented last Tuesday, I proposed a tax on sugared beverages like soda. Research has demonstrated that soft-drink consumption is one of the main drivers of childhood obesity."

"For example, a study by Harvard researchers found that each additional 12-ounce soft drink consumed per day increases the risk of a child becoming obese by 60 percent. For adults, the association is similar."

"If we are to succeed in reducing childhood obesity, we must reduce consumption of sugared beverages. That is the purpose of our proposed tax. We estimate that an 18 percent tax will reduce consumption by five percent."

"Our tax would apply only to sugared drinks -- including fruit drinks that are less than 70 percent juice -- that are nondiet. The $404 million this tax would raise next year will go toward funding public health programs, including obesity prevention programs, across New York state."

Something tells me the only thing Gov. Beshear saw in that passage was the $404 million.

Biggest issue in Kentucky right now

Kentucky's two biggest newspapers have been relentless in their pursuit of a seventy cent per pack cigarette tax increase. There is no bigger issue in the state and it has nothing to do with whether you smoke or not.

It's all about making government bigger.

The huge revenue projections for the tax increase ignore the entrepreneurs who currently pick up low-tax cigarettes in Kentucky and deliver them to other, higher-tax states. When the cigarette tax goes up in Kentucky, that inflow of cash will reverse course.

So the spending projections related to passage of the cigarette tax are bogus. But that isn't the point.

The point of this exercise is getting state legislators on the record voting for a tax increase to "solve" a fiscal problem. Tax increases don't solve fiscal problems.

Prove me wrong.

As if...

Yahoo News has been talking all day about Barack Obama wanting to spend hundreds of billions of dollars to "save" the economy.

The silliness cuts both ways because, tonight, George Bush had this one:

"I'm not going to let this economy crater in order to preserve the free market system."

Sure would be nice to get a president with a realistic view of his office's powers and abilities.

And how the free market works.