Tag: budget

Obama to Find Budgetary Sobriety?

The White House is hinting that its fiscal year 2011 budget due out in February will be “austere.” White House Press Secretary Robert Gibbs didn’t provide any specifics but recently said that “it will not look as it has in the past.” Well that’s a relief because the FY2010 appropriations process finally wrapped up and spending continues to be anything but austere.

The “minibus” appropriations bill signed by the President last week jacked up funding by a combined 8 percent for programs ranging from education to housing to transportation. And that’s at a time when inflation is low. Further, funding hasn’t been passed yet for the president’s recently announced troop surge in Afghanistan, which will cost around $40 billion per year.

President Obama will be probably be announcing in his new budget a FY2010 deficit that’s even larger than FY2009’s massive $1.4 trillion deficit. He’s blowing the bank on his stimulus bill, giant health care bill, and large increase in FY2010 appropriations. He’s also looking at the polls, which show his plunging popularity and rising concerns over federal spending and debt.

He’s got to pretend to introduce an “austere” budget for his political survival and the political survival of Democrats up for election next year. That’s why I’m wondering whether the Democrats are purposely jacking up FY2010 spending so high so that they can show a freeze or even “cuts” for FY2011.

Taxpayers need to consider any such austerity budget in the context of the massive increase in discretionary spending over the past decade. In FY2000, total discretionary spending was $615 billion. So if FY2011 discretionary spending is just half of the decade’s average annual increase of 8.7%, total discretionary spending will be $1.474 trillion. If Obama imposes a hard freeze for FY2011, discretionary spending will still be about $1.412 trillion, still far more than double the level a decade ago.

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How to Fix County Budget Problems

I’m wrapping up a paper on the real cost of public education, the total price tag per student, not just the stripped down version they typically trot out to show voters. One of the districts is Arlington, VA, which is the one I  happen to live in.

Though the district is an unusually big spender, their most recent budget, for fiscal year 2010, contains hand-wringing typical for school districts across the country. “FY 2010 will present unique challenges and hardships for staff, however as stated earlier, these reductions are taken so that there is minimal impact on classroom instruction.”

Arlington is planning to spend over $23,000 per student this year according to the Washington Area Boards of Education (WABE). That’s a 33 percent increase in constant dollars since 2000.*

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And yet the county is still talking about tax increases to cover the expected $80-$100 million shortfall the county expects next year.

Here’s a great alternative; fund the schools at 2000 levels and we’re left with an extra $108 million. Voila, no tax increases!

* The WABE listed per-pupil figure leaves out some k-12 spending and provides a number that is significantly less than that in more comprehensive, but older, state records or that can be compiled from district budgets, so I’ve divided the total expenditures listed on p.23 by the enrollment to get real total per-pupil spending.

FEHBP Plan Is No ‘Moderate Compromise’

Senate Majority Leader Harry Reid (D-NV) has announced that he has reached a super secret compromise on how to deal with the so-called public option for health reform.  While Reid said the agreement was too important to actually tell anyone what is in it, most of the details have been leaked to the press.

Rather than set-up a completely government-run insurance plan to compete with private insurance, Congress would establish a program similar to the Federal Employees Health Benefit Program (FEHBP), which currently covers government workers, including Members of Congress.  The FEHBP offers a variety of private insurance plans under a program managed by the US Office of Personnel Management (OPM).  Each year OPM uses the Federal procurement process to solicit bids from insurance companies to be one of the plans offered.  Premiums can vary, but participating plans operate under stringent rules.   As a model, the FEHBP is apparently acceptable to moderate Democrats because the insurance plans are private rather than government entities, while liberals like it because it is government regulated and managed.

In addition, the compromise plan would expand Medicare, allowing workers ages 55 to 65 to “buy in” to the program, and may also expand Medicaid.

A few reasons to believe this is yet another truly bad idea:

  1. In choosing the FEHBP for a model, Democrats have actually chosen an insurance plan whose costs are rising faster than average.   FEHBP premiums are expected to rise 7.9 percent this year and 8.8 percent in 2010.  By comparison, the Congressional Budget Office predicts that on average, premiums will increase by 5.5 to 6.2 percent annually over the next few years.  In fact, FEHBP premiums are rising so fast that nearly 100,000 federal employees have opted out of the program.
  2. FEHBP members are also finding their choices cut back.  Next year, 32 insurance plans will either drop out of the program or reduce their participation.  Some 61,000 workers will lose their current coverage.
  3. But former OPM director Linda Springer doubts that the agency has the “capacity, the staff, or the mission,” to be able to manage the new program.  Taking on management of the new program could overburden OPM.  “Ultimate, it would break the system.”
  4. Medicare is currently $50-100 trillion in debt, depending on which accounting measure you use.  Allowing younger workers to join the program is the equivalent of crowding a few more passengers onto the Titanic.
  5. At the same time, Medicare under reimburses physicians, especially in rural areas.  Expanding Medicare enrollment will both threaten the continued viability of rural hospitals and other providers, and also result in increased cost-shifting, driving up premiums for private insurance.
  6. Medicaid is equally a budget-buster. The program now costs more than $330 billion per year, a cost that grew at a rate of roughly 10.7 percent annually.  The program spends money by the bushel, yet under-reimburses providers even worse than Medicare.
  7. Ultimately this so-called compromise would expand government health care programs and further squeeze private insurance, resulting in increased costs and higher insurance premiums, and provide a lower-quality of care.

No wonder Senator Reid wants to keep it a secret.

Thursday Links

  • Prepare to pay more: Today, an average insurance policy can cost about $2,985 for an individual or $6,328 for a family.  Under the Senate bill, those premiums will increase to $5,800 for an individual worker and $15,200 for a family plan by 2016.

A Free Press Only Counts if It’s on Dead Trees

newspapersThe Associated Press reports:

The federal government is wading into deliberations over the future of journalism as printed newspapers, television stations and other traditional media outlets suffer from Americans’ growing reliance on the Internet.

With the media business in a state of economic distress as audiences and advertisers migrate online, the Federal Trade Commission began a two-day workshop Tuesday to examine the profound challenges facing media companies and explore ways the government can help them survive.

Media executives taking part are looking for a new business model for an industry that is watching traditional advertising revenue dry up, without online revenue growing quickly enough to replace it. Government officials want to protect a critical pillar of democracy—a free press.

“News is a public good,” FTC Chairman Jon Leibowitz said. “We should be willing to take action if necessary to preserve the news that is vital to democracy.”

Language mavens, observe the lede: The federal government is “wading into deliberations.” I infer that in Newspeak, this may mean something like “trying to spend more money.” Perhaps I should look forward to the federal government wading into deliberations over my salary? (On second thought, maybe not.)

Some of the proposals aimed at saving traditional journalism are relatively innocuous, like letting newspapers become tax-exempt nonprofits. At least this wouldn’t do too much harm, and, given recent performance in the industry, it approaches being fiscally neutral.

Other ideas, like forcing search engines to pay royalties to copyright holders, would have far more serious consequences. It’s hard to see whom this proposal would hurt worse, the search engines, socked with massive fees, or the copyright holders themselves – if search engines don’t index you, you don’t exist anymore.

The surest loser, though, would be the rest of us. Restricting the flow of news for the financial benefit of Rupert Murdoch seems a far cry from our Constitution, which allows Congress “to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Burdening search engines seems only to inhibit the progress of science and the useful arts, while enriching a small number of people. It might pass the letter of the law, but I doubt that this is what the founders had in mind.

But anyway…. shame on Americans for our “growing reliance on the Internet”! Don’t we realize that, as the article notes, “a free press is a critical pillar of democracy” – and that a free press only counts, apparently, if it’s on dead trees?

I’m all in favor of the good the press can do, but it strikes me as shortsighted to think that this good can only be done in the traditional media. It also seems foolish to me to think that tying the press more closely to the government will make it more critical and independent. Often, the very best journalism comes from complete outsiders. I’m reminded of Radley Balko’s recent (and excellent) takedown of the claim that Internet journalists are basically parasites:

In 20 years, the Gannett-owned Jackson Clarion-Ledger never got around to investigating Steven Hayne, despite the fact that all the problems associated with him and Mississippi’s autopsy system are and have been fairly common knowledge around the state for decades. It wasn’t until the Innocence Project, spurred by my reporting, called for Hayne’s medical license that the paper had no choice but to begin to cover a huge story that had been going on right under its nose for two decades.

… That’s when the paper starting stealing my scoops. Me, a web-based reporter working on a relatively limited budget. Like this story (covered by the paper a week later). And this one (covered by the paper weeks later here). Oh, and that well-funded traditional media giant CNN did the same thing.

Tell me again, who’s the parasite here? And why should taxpayers bail out yet another industry that isn’t delivering what we want?

Monday Links

  • Nancy Pelosi: “The power of Congress to regulate health care is essentially unlimited.”

Defending Obama…Again

I caught a lot of flack from my Republican friends for my post blaming the FY2009 deficit on Bush instead of Obama. Well, I must be a glutton for punishment because I can’t resist jumping (albeit reluctantly) to Obama’s defense again. I’m venting my spleen for two reason. First, FoxNews.com posted a story headlined “Obama Shatters Spending Record for First-Year Presidents” and noted that:

President Obama has shattered the budget record for first-year presidents – spending nearly double what his predecessor did when he came into office and far exceeding the first-year tabs for any other U.S. president in history. In fiscal 2009 the federal government spent $3.52 trillion …That fiscal year covered the last three-and-a-half months of George W. Bush’s term and the first eight-and-a-half months of Obama’s.

This story was featured on the Drudge Report, so it has received a lot of attention. Second, Bush’s former Senior Adviser wrote a column for the Wall Street Journal eviscerating Obama for big budget deficits. Given Bush’s track record, this took considerable chutzpah, but what really nauseated me was this passage:

When Mr. Obama was sworn into office the federal deficit for this year stood at $422 billion. At the end of October, it stood at $1.42 trillion.

I’m a big fan of criticizing Obama’s profligacy, but it is inaccurate and/or dishonest to blame him for Bush’s mistakes. At the risk of repeating my earlier post, the 2009 fiscal year began on October 1, 2008, and the vast majority of the spending for that year was the result of Bush Administration policies. Yes, Obama did add to the waste with the so-called stimulus, the omnibus appropriation, the CHIP bill, and the cash-for-clunkers nonsense, but as the chart illustrates, these boondoggles only amounted to just a tiny percentage of the FY2009 total – about $140 billion out of a $3.5 trillion budget.

There are some subjective aspects to this estimate, to be sure. Supplemental defense spending could boost Obama’s share by another $25 billion, but Bush surely would have asked for at least that much extra spending, so I didn’t count that money but individual readers can adjust the number if they wish. Also, Obama used some bailout money for the car companies, but I did not count that as a net increase in spending since the bailout funds were approved under Bush and I strongly suspect the previous Administration also would have funneled money to GM and Chrysler. In any event, I did not give Obama credit for the substantial amount of TARP funds that were repaid after January 20, so the net effect of all the judgment calls certainly is not to Bush’s disadvantage.

Let’s use an analogy. Obama’s FY2009 performance is like a relief pitcher who enters a game in the fourth inning trailing 19-0 and allows another run to score. The extra run is nothing to cheer about, of course, but fans should be far more angry with the starting pitcher. That having been said, Obama since that point has been serving up meatballs to the special interests in Washington, so his earned run average may actually wind up being worse than his predecessor’s. He promised change, but it appears that Obama wants to be Bush on steroids.