Archive for August, 2012

Municipal bankruptcy

Sunday, August 12th, 2012

UPDATE: That didn’t take long.

Moody’s credit rating service issued a report stating that the plummeting financial condition of many California counties, cities, school districts and other government agencies will soon result in large numbers of municipal bankruptcy filings. Concerned about their own potential liability for providing high ratings that encouraged conservative elderly Americans to invest in risky bonds; Moody’s announced they will undertake a wide-ranging review of municipal finances because of the growing insolvencies.
The Moody’s report comes just two days after we reported that “CALIFORNIA SALES TAX REVENUE NOSE-DIVES BY 33.5%.” Stock brokers have often recommended California municipal bonds as very safe investments, due to historically low default rates and relatively stable finances. But Moody’s said that outlook is changing after the Chapter 9 Bankruptcy filings of Stockton, San Bernardino and Mammoth Lakes.

I’m watching a Fox News program on municipal bankruptcy. The obvious examples are in California but Jefferson County, Alabama is the largest example in the country. An earlier example was Harrisburg, PA. Both cases involved insurance companies which had guaranteed the municipal bonds.

San Bernardino, CA is the latest California example and public employee unions are a big part. The real estate collapse was the other big factor but the San Bernardino area was always very susceptible to these problems because that area had become a commuter bed room community for Orange and Los Angeles Counties. People who could not afford homes in the communities where their jobs were located are a recent phenomenon in California. Nobody wanted to live near a steel mill or an old fashioned industrial plant. If they could afford it, they commuted.

I moved to Mission Viejo, CA in 1972. At the time, this was a small bed room community for Los Angeles. The commuter traffic was northbound in the morning and southbound in the afternoon. About 1980, this began to change as Irvine, CA was developed after Mission Viejo and wisely included industrial parks for light industry. The city of Irvine is located in an old land grant from the days when California was part of Mexico. The Irvine family, who owned the land (two of whom attended USC with me in the 50s), got Donald Bren, the son of actress Claire Trevor, to run the company that developed the land and somebody wisely donated land to the University of California for a new campus.

Donal Bren has become a billionaire and the city of Irvine became a center for high tech industry, partly based near the new university. The commuter patterns changed and, now, southbound traffic from Los Angeles is in the morning. Home prices in Irvine went way up and those whose incomes did not allow them to buy a home in Irvine or Mission Viejo, bought homes in San Bernardino and other “eastern empire” communities. That meant they were less able to weather a real estate collapse with the loss of value in those homes. The problems are not limited to California but they have been severe here.


It’s apparently Ryan.

Friday, August 10th, 2012

I am a big fan of Paul Ryan and hope that Romney choose him as VP tomorrow.

The Ryan budget is here.

Health care–
Provides a refundable tax credit – $2,300 for individuals and $5,700 for families – to purchase coverage in any State, and keep it with them if they move or change jobs.
Provides transparency in health care price and quality data, making this critical information readily available before someone needs health services.
Creates state-based health care exchanges, so individuals and families have a one-stop marketplace to purchase affordable health insurance without being discriminated against based on pre-existing conditions.

Equips states with tools like auto-enrollment programs and high-risk pools, so affordable health coverage can be accessed by all.
Addresses health care’s growing strain on small businesses, by allowing them to pool together nationally to offer coverage to their employees.
Encourages the adoption of health information technology and assists states in establishing solutions to medical malpractice litigation

The critical factor here is price transparency. All health care now is discounted with the discounts secret. Even Medicare is discounted and the discounts are concealed from patients.

It preserves the existing Medicare program for those currently enrolled or becoming eligible in the next 10 years (those 55 and older today) – So Americans can receive the benefits they planned for throughout their working lives. For those currently under 55 – as they become Medicare-eligible – it creates a Medicare payment, initially averaging $11,000, to be used to purchase a Medicare certified plan. The payment is adjusted to reflect medical inflation, and pegged to income, with low-income individuals receiving greater support. The plan also provides risk adjustment, so those with greater medical needs receive a higher payment.
The proposal also fully funds Medical Savings Accounts [MSAs] for low-income beneficiaries, while continuing to allow all beneficiaries, regardless of income, to set up tax-free MSAs.
Based on consultation with the Office of the Actuary of the Centers for Medicare and Medicaid Services and using Congressional Budget Office [CBO] these reforms will make Medicare permanently solvent
Modernizes Medicaid and strengthens the health care safety net by reforming high-risk pools, giving States maximum flexibility to tailor Medicaid programs to the specific needs of their populations. Allows Medicaid recipients to take part in the same variety of options and high-quality care available to everyone through the tax credit option.

The Medicare option has been denounced as “vouchers” but it also allows price negotiation using honest prices.

Preserves the existing Social Security program for those 55 or older.
Offers workers under 55 the option of investing over one third of their current Social Security taxes into personal retirement accounts, similar to the Thrift Savings Plan available to Federal employees. Includes a property right so they can pass on these assets to their heirs, and a guarantee that individuals will not lose a dollar they contribute to their accounts, even after inflation.
Makes the program permanently solvent – according to the Congressional Budget Office [CBO] – by combining a more realistic measure of growth in Social Security’s initial benefits, with an eventual modernization of the retirement age.

This is similar to the Bush attempt to reform Social Security. Again, keeping the benefits unchanged for those (like me) who cannot modify our plans, is wise and will add only minor costs.

Romney finally strikes back

Friday, August 10th, 2012

The past week has seen an amazing series of lies by the campaign of Barack Obama. First there was the steelworker ad, accusing Romney of complicity on his wife’s death even though the steel mill closed seven years before her final, short illness. Romney’s career at Bain Capital is the centerpiece of his campaign as he is not running as a professional politician but as a businessman who knows how to get the economy going again.

Obama is obviously ignorant of business, especially of the entrepreneur type. His ignorant riff of you didn’t build that ! is an example. Then we got the Harry Reid claim that he got a phone call from a former Bain investor who told him Romney hadn’t paid taxes for ten years. There was no evidence, or even the name of the accuser, provided. It is a felony for IRS employees to disclose tax records and a Bain investor would have no reason or method for determining Romney’s tax records.

Now we have the sad story of Joe Soptic who was featured in an Obama ad, then featured using the same video in a super PAC ad this summer. Campaign law requires that campaigns and PACs have no relationship so the recent ad is a felony.

The Obama staff has denied knowing anything about the new ad but there is a conference call including Stephanie Cutter, an Obama campaign staffer, who is clearly involved in the conference call. This is a felony.

The plot thickens. A new Romey ad briefly described the fisaco., including more an Axelrod’s involvement. They will be holding campaign meetings in federal prison soon.

Bourgeois Dignity

Saturday, August 4th, 2012

I was struck yesterday by a post on Ann Althouse’s blog, and by a Virginia Postrel piece that makes the same point, how wrong Obama was to say “You didn’t build that..”

The incident, so characteristic of this leftist ideologue president, is the stimulus for theorizing about how economies work, and perhaps why this one is so stuck with Obama in the White House.

There is an excellent analysis by David Warren printed last years in Canada and which I have saved. It is a comparison of Obama with Gorbachev and brings considerable light on the subject of success of nations.

Yet they do have one major thing in common, and that is the belief that, regardless of what the ruler does, the polity he rules must necessarily continue. This is perhaps the most essential, if seldom acknowledged, insight of the post-modern “liberal” mind: that if you take the pillars away, the roof will continue to hover in the air.

Gorbachev seemed to assume, right up to the fall of the Berlin Wall and then beyond it, that his Communist Party would recover from any temporary setbacks, and that the long-term effects of his glasnost and perestroika could only be to make it bigger and stronger.

There is a corollary of this largely unspoken assumption: that no matter what you do to one part of a machine, the rest of the machine will continue to function normally.

This brief discussion fits well with the book that was recommended by the Postrel piece.

The Bad History Behind ‘You Didn’t Build That’
By Virginia Postrel Aug 2, 2012 4:05 PM PT

The controversy surrounding President Barack Obama’s admonishment that “if you’ve got a business — you didn’t build that. Somebody else made that happen” has defied the usual election-year pattern.

Normally a political faux pas lasts little more than a news cycle. People hear the story, decide what they think, and quickly move on to the next brouhaha, following what the journalist Mickey Kaus calls the Feiler Faster Thesis. A gaffe that might have ruined a candidate 20 years ago is now forgotten within days.

Three weeks later, Obama’s comment is still a big deal.