NH “Wins” With Latest Government Giveaway

Thoughout the debate over the stimulus, STEWARD reminded Granite Staters that the package was not a fair deal for New Hampshire taxpayers with regards to return on investment.

Cash for Clunkers, however, has turned that around, the Boston Globe reports:

It’s official: New Hampshire is the “The Clunker State.’’

More commonly called the Granite State, with the motto “Live Free or Die’’, New Hampshire had the highest number of rebate dollars per capita in the Cash for Clunkers program, which gave drivers a $3,500 to $4,500 discount on a new car in exchange for an older, less fuel-efficient vehicle.

The state had $23 million in rebate applications, or $17.51 per person, through the $3 billion, three-week federal program that ended Monday, according to several reports that used data from the US Census and US Department of Transportation.

Of course, the logic behind wasting three billions of dollars to destroy perfectly good assets still alludes most Americans.

"Absolutely" Working?

Earlier this month, Christina Romer, the Chair of the President’ Council of Economic Advisors, gave a speech at the Economic Club of Washington during which she assured us that, “absolutely” the stimulus is working.

As evidence for this “clear eyed assessment” of the $800 billion spending package, Romer cited a slower rise in unemployment and better than predicted GDP numbers.

Throughout her speech, Romer referred to the economy as a plummeting sky diver and the stimulus bill as his parachute. Since her speech, however, a number of economists have argued that the ‘chute is far from fully open.

Yesterday, an article from Forbes’ Thomas Cooley attempted to sum it all up. Here are the highlights:

Now understand that, no matter what point of view you start from--whether you believe stimulus is effective or that it is the voodoo economics of the new millennium--the Economic Recovery Act is a grand fiscal experiment. It is a bit like throwing the baby in the swimming pool to see if it swims.

At some future time, after careful parsing of the data and studying people's decisions, we may have a much better estimate of the effectiveness of debt-financed government spending of this sort. One should keep in mind, however, that the effectiveness (or ineffectiveness) of the programs to combat the Great Depression in the 1930s is still a matter of great debate. Of course it would be a lot easier if the stimulus programs were better designed and more focused.

To claim, however, that the evidence suggests it is working--and that we need more of it--is nonsense for two reasons. The first, which ought to be obvious, is that we only get one observation on events. To draw a causal connection between the stimulus and the fact that we haven't plunged into another Great Depression seems bold, to say the least. Since we don't have a parallel universe in which to play out events without the stimulus, we can't refute it.

The other reason why it is illogical to claim a boost from the stimulus is that, for the most part, it hasn't gone out the door yet. In a recent presentation made at the International Monetary Fund, Doug Elmendorf, director of the Congressional Budget Office, presented the rates of spending for different pieces of the stimulus package. He estimates that by the end of fiscal year 2009, which falls on Sept. 30, just a month from now, 32% of the income transfers for things such as food stamps and extended unemployment benefits will have been spent and 31% of the tax cuts will have been disbursed. And by the end of fiscal year 2010 just 73% of the money allocated to these programs will have been spent. …

But the most important stuff--the discretionary spending on infrastructure--has hardly started. By the end of the fiscal year, only 11% of the budgeted discretionary spending on highways, mass transit, energy efficiency and medical infrastructure will have gone out the door. This is the really direct government spending that many associate with the stimulus. By the end of fiscal 2010, Elmendorf estimates that only 47% of the infrastructure spending will have occurred.

Check out the full article which contains a couple of informative graphs comparing this downturn, and supposed recovery, to others over the last 30 years.

Senator Gregg on Health Care

Senator Gregg, the only member of NH's Congressional Delegation to hold a health care town hall meeting so far this August, has a column in today's Union Leader further discussing the most pressing issue in DC, NH and around the nation:

We must step back and work in a bipartisan way to produce thoughtful legislation that gives each American access to affordable, high-quality insurance options. To do this in a way that does not bankrupt our children's future, it is critical that we adopt these five quality-enhancing, cost saving measures. We must:

--replace our out-of-date payment system with a system that rewards quality over quantity in order to provide effective health care for less.

--implement tort reform to reduce frivolous lawsuits, which increase costs and drive doctors and medical professionals out of practice.

--focus on encouraging Americans to live healthier lifestyles by creating incentives for exercising and getting preventative screenings and other wellness measures that reduce the cost of care.

--focus on areas that we know account for significant health care spending, such as Alzheimer's and obesity.

--reduce our long-term health care costs and reform unsustainable entitlement programs that threaten to strangle our economy.

The Oracle Speaks

President Obama’s economic advisor and friend Warren Buffett had an interesting op-ed in yesterday’s New York Times. In it, he echoed Senator Gregg’s “Banana Republic” concerns and warned that our current crop of elected officials, often more concerned with reelection over good government, may not be best suited to get us out of this mess:

Slowing [the Treasury’s printing presses] down will require extraordinary political will. With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap.

Legislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election. To avoid this fate, they can opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes. In fact, John Maynard Keynes long ago laid out a road map for political survival amid an economic disaster of just this sort: “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.... The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

57%: The Stimulus Has Done Nothing...or Worse

Support for the President's stimulus package continues to slide, according to a new USA Today / Gallup poll released today.

57% of adults say the stimulus package is having no impact on the economy or making it worse. Even more —60% — doubt that the stimulus plan will help the economy in the years ahead, and only 18% say it has done anything to help improve their personal situation.

House Republican's quickly jumped on the new numbers, tying them to the costs associated with the President's health care overhaul. Rep Eric Cantor (R-VA) said, "This is a wake-up call for the administration. People see the stimulus hasn't worked, and now you want to lay on over $1 trillion in a health care plan."

Check out the full results of the six-question poll here.

Send the Money Back!

Forty-four percent of respondents in a recent Fox News poll say "the worst is over" with regards to the economy. Still less than a clear sign of confidence, but way up from the 27% who thought so four months ago.

While this is likely good news for the administration, the increased confidence have also resulted in more stimulus skeptics who would like to see the remaining funds returned to the taxpayer:

With improvements in the economy and only a fraction of the stimulus money having been spent so far, most Americans -- 72 percent -- say returning the unused portion of the $787 billion dollar stimulus to taxpayers would do more to boost the economy than having the government spend it. Majorities of Democrats (59 percent), Republicans (87 percent) and independents (70 percent) think the money should be returned to taxpayers.

Despite Obama's campaign pledge that 95 percent of Americans would "not see their taxes increase by a single dime," some administration officials have recently refused to rule out tax increases. More Americans -- by a 43-point margin -- think Obama is not going to be able to keep this campaign promise on taxes (69 percent to 26 percent).

In fact, the consensus is taxes will go up. Most Americans -- 75 percent -- think their taxes will increase under the Obama administration. That's up from 60 percent who thought so at the beginning of the year (13-14 January 2009).

WSJ: The Recession is Over

A Wall Street Journal survey of 47 economists offers some non-politically motivated signs that the worst of this recession has passed:

After months of uncertainty, economists are finally seeing a break in the clouds. Forecasts were revised upward for every period, with 27 economists saying the recession had ended and 11 seeing a trough this month or next. Gross domestic product in the third quarter is now expected to show 2.4% growth at a seasonally adjusted annual rate amid signs of life in the manufacturing sector, partly spurred by inventory adjustments and strong demand for the "cash for clunkers" car-rebate program.

A better-than-expected employment report for July, where employers cut 247,000 jobs and the jobless rate fell for the first time in 15 months, suggests the worst is over. The unemployment rate is still expected to rise to 9.9% by December, but economists forecast that the economy will shed far fewer jobs over the next 12 months than they had forecast last month.

What's $181 Billion Between Friends?

The federal deficit has risen to a record $1.3 trillion after jumping by $181 billion over the month of July alone, the Hill newspaper reports:

Bailouts for financial firms and billions in tax revenue lost because of the recession drove the deficit to a record $1.3 trillion in July, according to the independent Congressional Budget Office (CBO).

Tax receipts that have fallen due to the poor economy and increased spending to save car companies, banks and mortgage firms were major contributors to the federal deficit, according to CBO, which provides official budget numbers for Congress. The federal deficit grew by another $181 billion in July. ...

Spending through July of 2009 has increased by $530 billion, which is 21 percent over the same period in 2008. The bailout money for Freddie Mac and Fannie Mae accounted for almost half of the spending increase. Unemployment benefits have more than doubled, Medicaid spending has grown by a quarter and Medicare spending has increased by 11 percent.

New Hampshire's Senator Gregg weighed in the on the increases, saying, “To allow the deficit to hit these previously unthinkable levels – while still planning to implement massive new spending programs – shows an incredible lack of fiscal responsibility, especially toward the future generations who will be saddled with the consequences of today’s actions.”

Some Good News

Defying predictions, the unemployment rate dropped .1% in July. The first drop in the rate in 15 months and possibly the best signal yet that the recession may be slowing or reversing:

The U.S. unemployment rate fell in July for the first time in 15 months as employers cut far fewer jobs than expected, providing the clearest sign yet that the economy was turning around.

Employers shed 247,000 jobs in July, the Labor Department said Friday, the least in any one month since last August, taking the unemployment rate to 9.4 percent, down from 9.5 percent in June. ...

The easing in the unemployment rate could have been the result of the labor force shrinking by 422,000 in July, far more than the 155,000 decline in June, suggesting jobless workers may have given up looking for new work.

In the U.S., for the purpose of calculating the unemployment rate, the labor force is defined as those with a job plus those out of a job but actively looking for work.

Still Waiting to See Signs of Recovery

Reuters is reporting that, for the sixth month in a row, the number of American’s receiving food stamps has set a new record:

For the first time, more than 34 million Americans received food stamps, which help poor people buy groceries, government figures said on Thursday, a sign of the longest and one of the deepest recessions since the Great Depression

Enrollment surged by 2 percent to reach a record 34.4 million people, or one in nine Americans, in May, the latest month for which figures are available.

It was the sixth month in a row that enrollment set a record. Every state recorded a gain in participation from April. Florida had the largest increase at 4.2 percent.

In the three months after passage of the stimulus bill, over 1.8 million additional Americans have begun receiving food stamps.

Raiding Non-Profits

As Democratic leaders in Concord continue to avoid offering a “Plan B” with regards to the state budget in light of the JUA court decision, an editorial in today’s Union Leader raises interesting, if mostly rhetorical, questions as to how they plan to fill the budget hole:

To seize money held by the medical malpractice insurance fund known as the Joint Underwriting Association, the state used a troubling argument: The fund is a nonprofit that exists to provide a public service.

The JUA "was established -- and given tax-free status as a state entity -- in order to provide a service, not a windfall, to doctors," Gov. John Lynch said in a statement justifying the state's raid of the authority's surplus funds.

House Speaker Terie Norelli used the same language, noting that in granting the organization "tax-exempt status, the Legislature certainly did not intend for the taxpayers to subsidize a windfall for doctors."

Citing the group's nonprofit status was intended to buttress the state's claims, but it is concerning. If the state Supreme Court overturns last week's Superior Court ruling and allows the state to take the JUA's money, it could encourage the state to look at other nonprofits. Granted, that would be a stretch. Unlike most nonprofit groups, the JUA was created by the Legislature and its board is appointed by a state department head. But legal precedent is legal precedent. If the court validates the argument that the organization's nonprofit status was one justifiable reason for the state to take its cash, that would give legislators cover for expanding such raids in the future.

The governor, speaker of the House and president of the Senate should clarify that their claim on the JUA's cash reserves rests entirely on their interpretation of the group's status as a state-created entity. A joint statement that the state has no claim on the reserves of private nonprofits would work.

Another Budget Lawsuit

For the second day in a row, the Concord Monitor is reporting on another previously unrecognized fiscal issue facing the State. This time, Lauren Dorgan focuses on yet another lawsuit claiming provisions of the recently enacted State budget are unconstitutional:

Retired state employees plan to file suit against the state today, claiming that a provision of the new state budget requiring young retirees to pay $65 a month for their formerly free, state-provided health care is unconstitutional.

The heart of the complaint centers on the way the state is taking the insurance premium, rather than the premium itself: Starting last week, a charge of $65 per single retiree or $130 per couple was deducted directly from the pension checks of hundreds of retired state employees who are under the age of 65.

The retirees claim that the deduction is an "illegal 'encumbrance' and 'diversion' " because the retirees' rights to a full pension payment is "contractually vested," according to a draft version of the lawsuit provided to the Monitor. State and federal constitutions "forbid legislation that impairs vested rights," the lawsuit reads. …

The lawsuit is the latest in a string of filed or threatened legal challenges to the new budget. Last week, a judge ruled against the state's attempt to seize $110 million from a medical malpractice fund; the state is appealing that decision to the New Hampshire Supreme Court. Earlier this summer, a judge froze a $9 million fund that both the state and a coalition of nursing homes claim to rightfully own.

Further proof the Democrats' state budget is balanced at best by gimmicks and at worst by theft and lawlessness.

$3.4 Billion More in Shortfalls

Since Judge Kathleen McGuire’s ruling last week that Governor Lynch and State House Democrats could not raid the Joint Underwriters Fund in order to balance the state’s books, the talk around Concord has been how to close this $110 million budget hole.

Democrats in the House are suggesting new sources of revenue, in the form of either an estate or capital gains tax, to fill the gap.

An equally pressing issue receiving significantly less attention concerns the mounting deficits within the New Hampshire Retirement System.

A piece in this morning’s Concord Monitor shines some light on the problem:

The sinking economy has taken a billion-dollar bite out of the state's already-ailing pension system, leaving the New Hampshire Retirement System with about 59 percent of what it needs to pay its long-term liabilities, according to preliminary calculations, for a shortfall of $3.4 billion. …

The pension system's troubles aren't new: The New Hampshire Retirement System ranked sixth from the bottom of the 50 states in terms of pension system health in 2006, when there was a funded ratio of 61 percent, according to a compilation by the Pew Center on the States. Rhode Island was the worst off, with a funded ratio of about 54 percent.

The woes in the New Hampshire Retirement System date to 1991, when state lawmakers adopted an unorthodox accounting method that, lawmakers now say, led to years of overestimating the system's health and undercharging employers for their portion of the costs.

In 2007, as part of a broad effort to reform the pension system, the Legislature voted to return to the standard accounting system used by most pension systems nationally. Lawmakers at the time said the changes would put the retirement system on a long-term course toward restoring its health.

Since then, stock markets have dropped significantly; the Dow Jones, for example, shed about 39 percent of its value between the end of June 2007 and the end of June 2009, when the latest assessment of the retirement system's value was taken.

To Carroll's mind, the reforms should continue. Right now, employees pay in a fixed percent of their pay - 5 percent for most state and local employees and 9.3 percent for police officers and firefighters - while employers' rates are set by the board to make up the difference.

"I think we need to look at the employees sharing more of the risk," Carroll said. She noted that employee representatives hold eight of the seats on the 14-member board, while municipalities have one representative. "If only one party has a risk and that party is literally not at the table, then there's something about the system that doesn't work correctly."

No matter who is saddled with the increased fees to cover the massive shortfall, it will mean more money out of the pockets of New Hampshire’s citizens at a time when we can all least afford it.