Ron Amundson’s Political Blog

MN finally has a budget… its sort of balanced too, at least within the bounds of the state constitution, thus holding off on the nuclear option, ie mandated property tax increases. The thing is… $2 billion dollars magically appeared by simply not paying what was agreed to.

Granted, such occurs daily, whether it be an average Joe who defaults on loans, or a big business that puts the squeeze on their creditors and/or vendors. Strategically, if your business has the bank or vendor by a hangman’s noose, it can make sense to do so. Ie, if you squeeze their cashflow to the point that get concerned whether they will remain a going concern, almost always they will re-negotiate for better terms (better for you, not so good for them). This is not rocket science, its just negotiation 101. By the same token, if you dont have your vendors or creditors in a noose… then will put the screws on you to try and collect.

Thus, the state has the schools by the noose… and as a result, many schools are going to have to take out loans to cover their operations, which then proceeds to put the schools in a worse financial bind. On the other hand, Pawlenty wins via no new taxes, and the DFL wins because they didnt have to make massive cuts. The banks win, as they get to write new loans. And of course, the taxpayer looses, as they will have to pay interest on such loans… and yet,few if any see any problems with this.

Some yahoos have told me to run for office… lol, its not going to happen. However if I did, I’d propose legislation to end this BS of accounting gamesmanship. Few legislators like paygo, or tabor, as they hamstring the ability to play games (both parties), limit lobbyist influence, and they often force all the cards on the table. Despite the dangers of such, I think MN is in much greater danger with the status quo of doing the same thing over and over, all the while hoping the budget miraculously fixes itself.

Its been a few years since I left the Republican party… but the same BS continues. The political words continue on forever, say no to tax increases, say no to bigger goverment, say no to encroaching on liberty… and then do just the opposite via gamesmanship.

Case in point… Republican Gov Candidates Dual over Tax Votes

“I voted to fill the hole. I didn’t do any new spending. Nothing,” Emmer said. “Our city stayed right where it was. Whether you want to say they were paying it into the state and then hoping to get it back, or they were paying it into the city to pay for those services. I made the vote to keep our budget right where it was, because it was very lean at the time.”

and

“Is Marty suggesting that somehow his signing a tax pledge, breaking a tax pledge, vowing he’ll never sign a tax pledge and then signing a tax pledge again, and my saying, ‘Look, I give you my word that we don’t have to raise taxes on a state level,’ which is what I said consistently,” Emmer said.

Instead… they might want to think of the following… my arms length summary of what I think the tea party folks would like to see.

Look, we wont raise taxes on a state level, nor will we play accounting games to shift tax increases to the local level, nor will we shift them into the future, nor will we shift them around via delaying payments here or there. We will not increase our debt ceiling. If we dont have the revenue, and we are at our debt ceiling… we WILL shrink government as needed. If federal funds are used, and they require state increased state spending, we WILL shrink government as needed, or we WILL decline said federal funds. The only exception to the above is voter referendum, and potentially an index to inflation, both positive and negative.

In effect, such a stance would be an integration of paygo, and TABOR… it would truly result in smaller less intrusive government, greater liberty, and static, or perhaps even future tax reductions depending upon economic growth. On the other hand, such a stance would be political suicide, and might not even be feasible, since so much of state government spending is far beyond the control of current state government to do much of anything about…. But it most certainly would put at least some action behind BS rhetoric, trivial arguments, and weasel words.

Ben Bernanke brought this analogy up yet again as concerns bailing out AIG. However, it doesn’t hold water at all anymore, let me expand on it.

The situation:
The neighbors apartment complex is still burning after an extensive effort to put it out. So far, only minor fire damage has been occurred to the neighborhood. However, the reservoir is nearly empty, and the stress on the water table has resulted in homes in the city shifting, and drywall is cracking.

Only a few are noting the following:

1. The neighbor’s apartment complex if it was legit, would have either burned out, or water would have put it out long ago.

2. The council is concerned about the reservoir, but they think they can get neighboring towns to transport water, should it run dry. None have experienced in trucking, albeit there is some experience in firefighting, and significant experience in real estate.

3. The drywall cracks in town are getting worse, the council see’s this a bit, but takes a blind eye. Better to have cracks and a home, rather than none at all, not realizing if major sinkholes develop, the town will be worse off than had it been burned off the planet. A few on the council see this, but they are over powered.

4. Some think the neighbor had phosphorous and hazmat stored in his apartment complex. He was going to get rich in the fireworks business.

5. Why is the fire not out, something fishy is going on. Is the neighbor seeing the reservoir going empty, and diverting / stockpiling water for the future where they will make a killing selling it back to the town, even if his apartment complex finally ends up burning to the ground.

6. The neighbor sent a confidential message to the council, as he noted he was loosing support. Basically he said, keep up the water effort, or the town is gone, the residents will be hurt, the neighbors will be hurt. Your reputation will be ruined. Pretty much said, do this or else. The memo was leaked, and few if any were outraged.

7. While the neighbor knows he should move the contents of some apartments, and even put up a few barriers, just as good operating practice, he wont spend any money. Say’s its too hard to find good workers he can hire in this market for a song, and he would loose money. He did move a couple things, but its a slow process he says.

Some thoughts of an even smaller number of people early on:

1. We are sure their was hazmat in the apartment complex.

2. If we let if burn down, and loose half the town, we could rebuild pretty fast.

3. If we deplete the reservoir, trucking in water is not going to work. We may loose the town, and rebuilding after sink holes appear everywhere is a huge problem, it will take years to fill those in.

4. It would be a good idea to build barriers around the neighbors apartment complex, but to do so, we would need to dedicate much of the fire staff to barrier building, rather than water and hose work. Perhaps we would loose 50% of the complex, so we need to provide new housing for some of the residents. The towns residents will complain, why did those residents get help, their not getting any, plus we’d ask the neighbor to pay for the relocation. He is a good old boy, we owe too many favors too, we really can’t ask him.

5. It may be possible to bring in movers, and relocate the unburned parts of the neighbors apartment complex, as well as the adjoining neighborhood. Of course, that will require major council intervention in the apartment complex operations, as well as the adjoining neighborhood. The business community would have a bird, who gives the city the right to upend a business, irrespective of whether storing hazmat was ok or not. The city just doesn’t have the resources or skill to move houses, they best not touch this. Also if they outsource to the experts, the movers will make a fortune and it will cost the neighbor plenty both in cash and PR. We can’t do that to him.

6. Some guys on the council thought maybe they should put a watchman in place to make sure water is not diverted. Most of the council thought, no, if we do that, it will slow down our efforts to put out the fire, and to even suggest it could damage the neighbors reputation. Remember we owe him a lot already. Also, his friends will talk of this all over the county.

What should we do now? The neighbors house on fire analogy doesn’t hold water anymore…

The program was killed off in the house yesterday as part of the budget vote. There are some detailed studies out, and there is a ton of spin. I decided to take a look at the academic part of the studies to see if I could sift through things a bit.

From National Review Online:

Academic researchers evaluating the program have found that parents of voucher students are more satisfied with their children’s schools. Initial evidence suggests that children who were offered vouchers are performing better academically than their peers who were not, though the results so far aren’t statistically significant.

More satisfied parents and test scores that appear to be rising — not bad for a government program. Why, then, are congressional leaders so intent on terminating this relatively tiny expenditure?

The results of the first couple years dont seem to indicate much of a difference in academic performance.

After 2 years, there was no statistically significant difference in test scores in general between students who were offered an OSP scholarship and students who were not offered a scholarship. Overall, those in the treatment and control groups were performing at comparable levels in mathematics and reading.

The main difference is that after 1 year, the non-SINI and higher performing groups of students appeared to experience statistically significant positive impacts on math achievement, while in the second year the impacts were on reading achievement. Adjustments for multiple comparisons suggest that both sets of results may be false discoveries.

Now, whats goofy, is that in some cases, some research shows that private schools do provide a better education than public schools. Certainly in other areas of the country, voucher programs have shown significant success. Then add in the description of the public schools in Washington DC…

Despite the system’s spending more than $14,000 each year per student, barely half of all students ever graduate high school. One out of every eight D.C. students reported being assaulted or injured with a deadly weapon during a recent school year. That’s equal to the percentage of D.C. eighth-graders who scored “proficient” in reading on the National Assessment of Educational Progress.

I went whoa on this, so I had to look it up, and the are correct… scary.

And if all the facts are on the table, something doesnt add up at all, thus there has to be something seriously skewed here. Any private school that has such a low performance in reading would loose all their students in a flash. However, the NAEP is likely a drastically different evaluation, than what was used in the study.

Some possible explanations (its my guesses, no data to back them up, just my thoughts:)
1. The public schools taught to the tests used in the study, where as the private schools focused on a well rounded education.
2. Standardized testing in K-12 edu is pretty worthless as a sole metric of comparison.
3. Involved parents traditionally have more to do with education than funding, Scholarship students parents would be involved, so performance should be better. Why doesnt the study show this, ie parental approval is very high, but student performance is comparable.
4. Two years of data is too little to make a call.
5. The transition in schools may have caused a temporary drop in achievement.

I think it was a bad call to end this program at this time. It was supposed to run through 2012, and then there would hopefully be enough solid data to make the call. Granted preliminary data is not very good, but that could be due to other factors. In fact the next eval will be out this summer, at least they could have moved forward with this for another year. By then, the reports could have been looked at with a fine tooth comb. If it was indeed not effective, perhaps they could find out why, ie what are the other factors contributing to this. As a anti standardized test guy, obviously I blame the measurement methodology, but I really would like to understand what the real deal is. Also, to upend kids education over ideology, which does appear to be the case, is way uncool. I dont care which party does it… kids education has to be a priority, not the parents, not the unions, not the school district, nor Washington ideology.

From the Star Tribune:

If another budget cut of 5 percent or more comes down, Magnuson will recommend dramatic action — shutting down conciliation court, cutting hours and suspending prosecution of 21 types of cases, including property damage, harassment, probate, and more than 1 million traffic and parking cases a year.

Magnuson said that shutting down traffic cases is no small move, “but we’re running out of choices here, and I will not compromise the prosecution of criminal cases.”

Another 5% would bring us back closer to the 1970′s as a percentage of the state budget, and I’m not sure that’s such a bad thing. Criminal cases must be a priority, and if there is no money for the others, there isn’t. Obviously some of this is real, and some is political spin for more money. There has to be a cost/benefit analysis done, granted criminal prosecution costs are much higher than they were years ago. Now, this may mean limited court access or alternative means of resolution for other matters, and in some cases, laws would need to be repealed or changed. When it comes down to prosecuting, and keeping a non violent individual in prison, or hiring/retaining a few teacher(s), or getting medical care to those in need, I would error on the later two over the first one. That’s how things worked years ago, that’s how they can work again. The exception of course is if the citizens want to spend a lot more on taxes, and if they do, fine, but be open as to what the tradeoffs would be.

I do however agree with Chief Justice Magnuson as well as concerns the erosion of the rule of law and its impact on society, but with a different spin on it. If the govt cannot afford the rule of law they created, than the rule of law needs to be changed to make it affordable.

No matter what, once efficiency is wrung out, then no more cuts can be made… and wringing efficiency out of the legal system is a very slow process with tons of unintended consequences. Changing the rule of law would be less expensive, faster and likely less prone to counterproductive consequences.

Neither change of course is politically friendly, but the days of Cadillac rules of law for cheap must end. Either pay through the nose while carefully going after efficiency gains, or change the law, I’d go with change the law as I’m cheap, its faster, and I fully believe history shows it works. Others will view this differently.

House Journals – Minnesota House of Representatives

Being this session should be pretty interesting, I’m posting the Journal link here so I can find it on any machine. Its interesting to see the magnitude of proposed legislation, especially legislation that adds to the budget that has already been presented. I sort of get the feeling, that few if any want to propose bills which reduce the scope of government, move services to the volunteer sector, or reduce spending. I may be exceedingly liberal in a lot of areas, but when it comes to govt size, or govt spending, I’ve seen the waste and overkill (granted it was years ago), the solution is to stop now, address the problems, all the while “keeping the least of these mind” and go forward… not just spend on whatever lobbyist of the day wants a deal.

I just saw one of Norm Coleman’s commercials and went ouch… they must be in cost cutting mode, as the media quality was subpar and then some. They used a green screen, and a profile shot of Norm talking, rather than an on location shoot. Well, they messed up. Norm got a halo. Granted, that was somewhat common back in the old days of analog chromakey if the electronics module drifted, or lighting was very bad. Today, unless someone really really messed up the lighting, there is no excuse for it. Makes me wonder what the Republican party is thinking. It wasn’t a time critcal issue ad either… Go figure

So how critical is this? apparently its not very critical if exec compensation is on the line.

from yahoo news.

Treasury Secretary Henry Paulson stressed that time was critical to get the proposal passed and that changes to the administration’s measure, which was sent to lawmakers on Saturday, could delay that approval, further unsettling global financial markets, which have already seen a number of stomach-churning days as the result of the biggest upheaval on Wall Street since the Great Depression.

I agree with John McCain on this one…

“I notice at Lehman … some $2.5 billion in compensation,” McCain said. “If they’re bankrupt, where did they get that? But the major point is that no CEO of any corporation or business that is bailed out by us, that is rescued by American tax dollars, should receive any more than the highest paid person in the federal government.”

Paulson’s response….

“If we design it so it’s punitive and institutions aren’t going to participate, this won’t work the way we need it to work,”

Granted, $400,000 is a paltry sum when it comes to executive compensation, and even more so, when the numbers are this large. However, for the most part, these are the guys who ran things into the ground. They can either choose to take a huge paycut, be replaced…. or maybe govt intervention is not really that important to their firm.

Now, some would say, putting a low bid exec in charge is not so good… on the other hand, the high dollar execs have failed in a huge way. I think such restrictions on compensation are a reasonable risk to take, but apart from that. If indeed a govt bailout is needed, the execs compensation in this case is not so much the salary, but the ability to salvage what remains or even grow their investment. Congress should hold fast to this one… its not unlike playing Chicken. If this is the right move, and it is the right time, and it needs to be done quickly, then it will happen. If not, the markets will decide… and if it ends up it is really super time critical, the markets will decide likely way before legislation is ready to roll anyhow.

I’d also gather there is some level of patriotism on Wall Street…. some execs will step forward irrespective of the pay issue, and thats to say nothing of the intangibles and networking for the future that occurs. Its not unlike when a high school buddy who after graduating Harvard clerked for the supreme court, rather than jumping into the big bucks right away. One cannot readily set a price on such, its just too valuable.

ts interesting to note the differences of opinion over FAA user fees. From MPR: News Cut: Blaine setting for Palin speech highlights a difference with McCain

Senator McCain…. “I wanted to get at, which we should get at, the wealthiest people in America who are flying corporate jets around this country and not paying an extra penny for doing so, while average citizens, average middle income, lower income American citizens are paying, again, an increase in their cost of air tickets, while your fat cat friends pay nothing. ”

McCain stressed that user fees would only apply to business aircraft. The general aviation interests insist that a user fee-funding system would only expand.

Gov. Sarah Palin…..signed a resolution in Alaska in 2007 that opposed “the enactment of the provisions in the Next Generation Air Transportation System Financing Reform Act of 2007 that impose user fees, increase aviation fuel and aviation gas taxes, reduce airport funding, and reduce Congressional oversight of the Federal Aviation Administration.”

“Aopa… says the surplus in the Aviation Trust Fund, paid for by taxes on general aviation fuel, airline passenger tickets, and cargo, should be used instead, and argues that the skies will be less safe because pilots won’t use air traffic control and other services designed to keep flying a relatively safe exercise.”

Indeed, I think this is a safety issue. GA pilots are cheap, and will do pretty much anything to save a buck, esp when they figure it cant happen to me. 25 years ago when I worked on GA airplanes, man the stories I could tell. As a flight instructor for nearly 20 years, my mechanic experience was continually reinforced. If pilots start having to pay for services, its likely the vast majority will choose to not use them, and safety will be affected. Its not unlike the reluctance of pilots to declare an emergency… with the end result being a crash and potential loss of life, and thats over the paper work burden. Imagine if they had to spend $25 to do so…. Declaring early brings a wealth of resources, waiting until the end, it can be too late, and or the number of remaining options end up being severely limited.

Now, some might say, pilots need to take responsibility…. ie if you go cheap, and something happens, its your problem. The issue is, things dont operate in isolation and the public is affected. A runway closure due to a crash can put an airport out of service for hours, if not days of reduced capacity. A search and rescue effort costs tons more than a weather briefing. A midair is a lot more expensive than a years worth of flight following/radar services. to say nothing of loss of life.

The other issue is FAA services for the most part are a fixed cost. Ie, once weather services, air traffic control, and airports are in place… they are fixed costs pretty much with the exception of usage. The exception being peak hours at busy airports and terminal areas where additional technology and staffing are needed. Yet for the vast majority of airspace, and airports the costs are pretty much fixed. Since the largest user base contributing to the peak times are the airlines, it only makes sense they should cover a majority of the costs. Now, whether the 97% figure is the appropriate number, that’s another story entirely.

Granted… McCain states this would be for business aircraft only, but just as the NRA is against some seemingly reasonable restrictions as concerns gun control… its not the initial concept as presented, its the slippery slope which can lead to huge problems later on which is the issue. The last thing general aviation needs is a user fee taked onto small training aircraft, which likely would increase operational costs by 30-50%, to say nothing of the negative safety aspect. Sure, a lost flight student is going to use ATC services… but again, some ATC radio help is a ton cheaper, than the manpower, fuel, and aircraft needed in the event search and rescue is needed.

Its been 25 hours since Lehman brothers announced their bankruptcy, and the fallout is already occurring, even reaching main street. Yep, a friend lost her job at a mortgage firm yesterday, a thousand miles removed from Wall Street.

Aldon Hynes, a fellow I used to have spritely discussions with in 2004, being I was a Republican and he was a Democrat has some interesting things to say, as it hit very close to home for him too, but in a different way. His blog entry entitled My Role in the Collapse of Lehman Brothers is pretty powerful.

How many of the people that will lose their jobs at Lehman Brothers or at Merrill Lynch, will end up in similar financial difficulties? How many will need to sell their houses at a loss, adding to a further slide in housing prices? From a Wall Street perspective, how much will the debts of Lehman drag down other financial services firms?

Well, being it hit my friends employer already, its likely to have some pretty wide ranging effects. I can only imagine the headaches which are going to occur in a wide range of sectors, as lines of credit get pulled in. Everything from manufacturing to retail is likely subject to difficulty. And those effects are 2nd and 3rd order. I imagine there will be a wealth of east coast real estate taking a real header as the 28,000 employees directly affected by the bankruptcy have no place to go, to say nothing of those who will loose their jobs as a result of the Mer-BoA deal… and that assumes that AIG, WAMU, and others remain afloat which is not looking too likely. It may not be today, but it likely wont be long… and those ripples are sooner or later going to hit mainstreet.

I twittered something earlier… as concerns the average Joe, who may just be sitting back, and saying, they got whats coming to them… and in many ways, deregulated financiers did themselves in.  Otoh if Joe ends up not gettig his full paycheck, as a paycheck depository failed… its going to get real very fast. Ie FDIC guarantees $100,000… which is fine for a small employer payroll, but what about the bigger entities, or worse yet, massive payroll processors. Joe could certainly find himself in a real bind, if those entities fail. No doubt govt would step in… but its rare indeed for things to happen quickly in such domains.

The other ripple is likely to be healthcare… employees may find navigating the complexity of COBRA most disheartening, to say nothing of the real cost. I’ve been down that path before, its not a fun one, but it is an eye opener.

Yet…. what we have is determination to dig ourselves out, we have ideas, creativity, and a will to succeed, with or without the financial sector. It wont be easy for sure, and there will be damages and bruising along they way… yet, we will get through this one way or another.