Sharing Ideas for a Better Michigan

New Legislator Blog

2011-02-27T16:27:00.000-08:00

Please join me at my new legislator blog at http://repolson.blogspot.com.

Thanks for being a follower.

Rick Olson, State Representative, 55th District

Manufacturing: The Missing Element in the Policy Discussions

2010-09-02T12:57:00.000-07:00

The manufacturing of products is critical to the economic prosperity of our country and our state. While talking to voters in my campaign, the loss of jobs in manufacturing has been particularly commented upon, in large measure because our state and region have been hit hard by the loss of jobs in the auto and related industries.

Manufacturing products which are sold outside of the country or state is important to replenish the wealth in an area. Money which circulates in a state economy changes hands over and over again, because an expense to one party is income to another. However, to the extent that we import more products (and services as well, but services tend to be more localized) than we export, money leaks out of the system, leaving less and less money to be shared among the area’s residents, making the area poorer and poorer – unless the money is replenished by sales outside the country or area. On the local level, this fuels the “Buy Local” efforts of chambers of commerce and other groups.

But what can we do to encourage manufacturing? The report Manufacturing Strategy for Jobs and a Competitive America, National Association of Manufacturers, June, 2010, lays out the NAM recommendations, which in general are:

“Tax policies to bring America more closely into alignment with major manufacturing competitors and foster innovation
Government investments in infrastructure and innovation
Trade initiatives to reduce barriers, open markets to U.S. exports and protect intellectual property
A dynamic labor market that allows companies to attract the best, most talented workers from around the world to work in the United States
A common-sense, fair approach to legal reform
A regulatory environment that promotes certainty and economic growth
A comprehensive energy strategy that embraces an “all of the above” approach to energy independence
Health care reform that drives down costs.”
2010 NAM Labor Day Report, National Association of Manufacturers, September 1, 2010.

The 2010 NAM Labor Day Report raises another very important point, when it says that

“[N]ow is not the time for policymakers in Washington to focus on an agenda that will increase costs, further elevate uncertainty and reduce the ability of our workers and companies to successfully compete in the global economy.”
. . .

“The current level of business uncertainty is illustrated by the funds available to invest by companies sitting on the sidelines. As of the first quarter of 2010, net corporate cash flow (mainly undistributed profits and funds set aside to replace depreciating capital) stood at $1.5 trillion, or 10.5 percent of GDP. This level is significantly higher than any similar period (three quarters into an economic recovery) during the past 60 years and a clear sign that firms remain hesitant to expand operations due to concerns about the U.S. business climate.
. . .
Asked if uncertainty about the business outlook is delaying their plans to expand employment or capital spending, nearly three-quarters (74 percent) responded “yes.” Of those who reported that uncertainty is affecting their expanding capital investment and hiring, the main areas of concern were the state of the U.S. economic recovery (46 percent) and possible regulatory or legislative changes from Washington (37 percent).

Businesses, workers and the American public simply have no clear sense of how actions by Congress and the Obama Administration could reshape the economy, employment and our country’s ability to successfully compete in the global economy.” [Emphasis added.]

Specific legislation, laws and regulations identified in the report as magnifying the uncertainty that afflicts the economy and negatively affecting American workers included:

“Expiration of the 2001 and 2003 tax cuts
The Environmental Protection Agency’s (EPA) proposed new regulatory regime to control greenhouse gas emissions and raise energy costs
Government implementation of the new health care laws, with their numerous mandates on employers, insurers and consumers as well as a myriad of unintended consequences
Failure to achieve an ambitious trade agenda necessary to ensure and expand global market share for U.S exporters
Labor policies, such as the Employee Free Choice Act, that could rob the U.S. economy of its dynamic growth potential.”

In other words, much of the Obama/Congressional Democrat agenda is creating the uncertainty which is retarding economic recovery, while at the same time spending billions in “Stimulus money”. This is equivalent to sitting in a car pressing on the gas pedal and the brakes simultaneously, and wondering why the car won’t go.

“Instead, policymakers should focus their efforts on progrowth, pro-worker and pro-manufacturing policies that structurally improve the competitiveness of the U.S. economy and increase the certainty that our country will remain the most competitive, dynamic and innovative economy in the world.
. . .
Our economy stands at a crossroads. The path our country takes will determine the long-term competitiveness of the U.S. economy and the American worker. With more competitive tax policies that encourage innovation and investment, lower and more certain costs in the areas of regulation, litigation and energy, and a committed effort to lower trade barriers overseas and support U.S. exporters, the prospects for a competitive U.S. economy that supports highly productive and compensated workers are very real. Without the right policies in place, the U.S. economy and the American worker will lose out to fierce global competition. The choice is ours to make.”

Increasing Our International Competitiveness

I had the opportunity to discuss our international competitiveness with David Huether, the NAM Chief Economist today. Besides the points discussed above, highlights of the discussion were:

We need to be very careful about legislation, regulations and other actions that increase our costs which cannot be offset by productivity increases. To the extent that wages in the state have been negotiated lower and unemployment has lessened wage demands, we have thereby increased our competitiveness. We must guard against complacency as the auto industry recovers, or that improvement may be quickly lost.

The cost of fringe benefits is another factor we must control. One of the elements discussed in the need for “health care reform” was the possibility of shifting the cost of health care from employers to a broader set of participants (i.e., taxpayers) to put our employers and manufacturers on a more equal footing with our international competition which are not saddled with the same health care costs. The effects of the National Healthcare Reform, aka “Obamacare” are still unknown, with most sources believing that employers’ health care costs will actually increase due to the act, rather than being helpful.
The devaluation of the U.S. dollar will put our manufacturers in a better position to compete, as our exports will be cheaper for others to import and imports into our country will be more expensive. Challenges remain with the Chinese Yuan being pegged to the U.S. dollar, but it is expected that the Yuan will ultimately be allowed to appreciate, which would be an improvement in our manufacturers’ competitiveness. Of course, our leverage to influence Chinese policy is limited, given the amount we owe the Chinese government due to our enormous national debt.
We must continue to work for free trade agreements with numerous countries (such as Columbia, Panama and South Korea), because if we do not, the free trade agreements by the European Union effective January 1 will begin to push U.S. exports out of the market. Even if these negotiations are successful, the US will have FTA’s with only 22% of the global economy vs. 37% by the European Union.
We must fight to redress violations of existing trade agreements.
Last, but not least, we must increase our productivity. This can be accomplished to some extent by investing in basic research and infrastructure. But, we can do more by having a more educated work force in science, technology, engineering and math, as well as promoting a greater work ethic and eliminating job rules that include featherbedding (paying people for doing nothing productive) and other such nonsense.

Some of these elements are out of the control of the Michigan Legislature, but we certainly can have an impact on the avoiding unnecessary cost increases for our businesses and working to increase our productivity. That will be part of my focus on improving the environment for businesses to prosper, grow and create jobs here in Michigan. After all, businesses create jobs, not government. The best government can do is create the environment in which businesses can emerge and flourish.

Why Focus on Improving the Environment for Small Business Job Providers?

2010-08-18T14:50:00.000-07:00

There are two competing philosophies regarding economic development:

Empower the bureaucrats in Lansing to pick the winners from the losers, subsidize the expected winners with tax credits and hope they create jobs.
Improve the environment for all businesses, encourage innovation and entrepreneurship and hope jobs are created and revive the economy.

First, it probably goes without saying that creating jobs and reviving the economy is the most critical issue Michigan faces. If we can get the economy going again:

State tax revenues will rise, making balancing the budget much less painful.
The budget priorities, such as education and public safety will more easily be funded.
Home foreclosures will fall. Home values will stabilize.
The severe budget problems facing local governments will subside so as to allow funding of critical public services such as plowing snow, fixing roads, and police and fire protection.
Kids will be able to find jobs here and stay in the state, making not only them happy, but thrilling the parents and grandparents who want to maintain close contact with their family.

Creating jobs is the key to solving many, many issues.

Bureaucrats Fail. I don’t favor the first method, as studies have proven that the bureaucrats simply are not that good at predicting business success. Only 29 jobs have been created for every 100 announced with great fanfare with the granting of the tax credit by MEGA, and at enormous cost per job. In short, this method is great for publicity for the politicians and bureaucrats, not so good for the workers. See The Michigan Economic Development Corporation: A Review and Analysis

Startups Are the Key to Job Creation. Small business creates well over the majority of new jobs. (64% by one report, but a higher percentage by other reporters) Further, the Kaufman Foundation Research Series: Firm Formation and Economic Growth, “The Importance of Startups in Job Creation and Job Destruction”, July, 2010, says: “[W]ithout startups, there would be no net job growth in the U.S. economy.” Startups create most new net jobs in the United States, and the job creation is less dependent on the business cycle, whereas existing firms’ employment varies dramatically with economic expansion and contractions.

“Policymakers tend to reflect common media stereotypes about job changes in the economy, which is to say a focus on the very large aggregate picture (such as the national or state unemployment rate) or on news of very large layoffs by individual companies. That attention is almost certainly misplaced. Nationwide measures are a blunt tool for analysis, and net employment growth reveals little that policy can affect.

Similarly, the common zero-sum attempts to incentivize firm relocation are oblivious to the important pattern of gross job creation revealed by the [study]. States and cities with job creation policies aimed at luring larger, older employers can’t help but fail, not just because they are zero-sum, but because they are not based in realistic models of employment growth. Job growth is driven, essentially entirely, by startup firms that develop organically. To be sure, Survivors create zero to 7 million net jobs (half of which are at establishment births), while Deaths account for a net loss of 4 million to 8 million jobs, which are large flows for the context of the steady job creation of 3 million startup jobs. But, in terms of the life cycle of job growth, policymakers should appreciate the astoundingly large effect of job creation in the first year of a firm’s life. In other words, the [study] indicates that effective policy to promote employment growth must include a central consideration for startup firms.” Page 6.

Ranking 48th Out of 50 States Will Not Revive the Michigan Economy. Michigan ranks very low in terms of attractiveness for businesses to locate here. Whether we wish to encourage outsiders to come locate here of grow organically, we need to make it as easy and attractive as possible to establish themselves here. Otherwise, why shouldn’t they go where it is more favorable?

What Causes Michigan to be “Unattractive”? What can be done? There is no one cause, but the Michigan Business Tax with its 22% surcharge does not help. Neither does the labor climate, with Michigan’s reputation for strong unions, particularly when there are other state’s without the same adversarial labor-management attitudes. The uncertainty about our current and future tax structure is also a deterrent, as uncertainty increases risk for investments and discourages lenders from making loans to emerging enterprises.

If I had to pick one group of ideas proposed by any one group about what to do to improve the environment for creating jobs, it would be the Business Leaders for Michigan, with its Michigan Turnaround Plan: (in great measure along the lines of Rick Snyder's Reinvent Michigan: Rick's 10-Point Plan). See a more extended discussion on my website at http://voiceforthepeople.net/issues.htm

I must admit that this set of ideas is no “quick fix”. It will not be easy and it will not be quick. Anyone who suggests his or her method will be quick and easy is just trying to sell you on smoke and mirrors, similar to “hope and change”. But, we can do better. We can revive Michigan.

The bottom line is that we are not helpless or hopeless. And, as Edward Everett Hale is credited as saying,

"I am only one, but I am one. I cannot do everything, but I can do something. What I can do, I should do and, with the help of God, I will do."

This apples equally well to all who seek to serve this great state of Michigan in getting it back on its feet. That is what I am committed to doing.

Reinventing Michigan for Our Future vs. Protecting the Past and Special Interest Groups

2010-08-18T12:06:00.000-07:00

You may have heard about the 7-year-old entrepreneur named Julie Murphy whose business as a lemonade stand at the July Multnomah County, Oregon monthly art fair was shut down and threatened with a $500 fine. The government regulation she violated? Failing to get a $120 temporary restaurant license. Inspectors Shut Down Girl's Lemonade Stand

This serves as an extreme example of government interference with job providers which is stifling our economic recovery. We have a clear choice in this election for State Representative in the 55th legislative district of Michigan.

I favor getting government out of the way and cut taxes to let small businesses create jobs. There should be no bailouts for union bosses, or dollars for special interests not tied to real job creation. I favor workers’ choice in the workplace.
My Democrat opponent? As a AFL-CIO Community Service Liaison to the United Way, a long time member of the United Steelworkers local 2511 District 2 AFL-CIO who has served as Chief Steward, Trustee and President of the local and currently represents local 2511 as a Delegate to the Monroe/Lenawee County AFL-CIO Central Labor Council, he can be expected to protect the past, opposing necessary reforms related to labor laws (although none of his publicity is specific enough beyond buzz words to know just what he stands for). (And his “Issues” page on his website is blank.)

Currently, labor laws allow unions to collect membership dues from workers covered by a collective bargaining agreement, regardless of whether or not they support the union, and with precious few checks and balances to assure that union money and power is actually used to further the interests of workers.

An August 2002 EPIC/MRA survey commissioned by the Mackinac Center for Public Policy, reported in Michigan Voters Support Labor Reforms, g. 28, 2002, http://www.michigancapitolconfidential.com/4571 showed that there was support to make the union bosses more accountable.

A financial disclosure bill, e.g. House Bill 6226 of 2002, would require public employee unions to open their financial records to members. When asked whether they would favor a bill requiring annual financial reports from government employee unions, 73 percent of those polled indicated they would do so, with 47 percent saying they would “strongly favor” such a bill. Of those who identified themselves as union members, 72 percent expressed their support for union financial disclosure. Only 15 percent of those questioned expressed opposition to the financial disclosure law. Only with full disclosure can workers fully exercise their right to choose whether to support the continued existence of the union. This is clearly a “union bosses” vs. “the workers” issue. I side with the individual workers.

A paycheck protection bill, e.g., House Bill 4252 of 2002, would require unions to obtain authorization from individual union members before using those members’ dues money for purposes other than bargaining or implementing an existing collective bargaining agreement. Such a law, if implemented, would prevent union dues money from being spent on political activities or lobbying without the approval of workers. Sixty-three percent of those polled expressed support for such a law. Twenty-five percent were opposed. The number of union members favoring paycheck protection fell just short of a majority, at 49 percent. I support the workers’ right to choose whether to support any political parties or ballot measures, and not leave it to the sole discretion of the union bosses.

"Right to Work” laws are state statutes or constitutional provisions which ban the practice of requiring union membership or financial support as a condition of employment. Twenty-two states have enacted Right to Work legislation. Michigan is not one of these states with right to work protection of the employees. Instead, Michigan has a union shop provision allowing employers and unions to negotiate rules that mandate that employees join a union or pay union dues and fees. See http://www.nrtw.org/ Few employers can withstand the union pressures to agree to those provisions.

Senate Bill 945, sponsored by Sen. Nancy Cassis, R-Novi, is a bill that would allow local governments to create the right-to-work zones. (This is different from House Bill 4454, introduced by state Rep. Jack Hoogendyk, R-Portage, in 2008 which would have given workers in a union shop an opt-out of participating or paying dues to a union, in other words, a state-wide implementation.)

“Within these proposed zones, employers would be prohibited from compelling an employee to join a union under threat of either being fired or never hired in the first place. Free-market labor analysts have repeatedly noted that there is a strong correlation between a state's economic growth and whether it provides right-to-work protections to its workers. And polling data has indicated strong public support for Michigan becoming a right-to-work state.” [A June 2002 poll of likely Michigan voters indicated that 62 percent would favor a Michigan right-to-work law. Only 22 percent of those polled were opposed to this idea.] . . .

“A 2007 analysis by Mackinac Center labor policy director Paul Kersey examined the correlation between a state's economic success and its adoption of a right-to-work law. Looking at the five-year period from 2001-2006, Kersey reported that states with right-to-work laws increased their gross state product by 18.1 percent, while states without a right-to-work law saw GSP grow by just 13.6 percent. Michigan was one of the worst non right-to-work performers, growing by just 3.4 percent.

Even Louisiana and Mississippi - two right-to-work states that saw massive economic damage due to being hit by Hurricane Katrina during the period under examination - were still able to substantially exceed the GSP growth of Michigan.” http://www.michigancapitolconfidential.com/12537

Republican gubernatorial candidate Rick Snyder has opted not to make Right to Work a plank in his platform, likely recognizing that in addition to a massive voter education campaign, any successful workplace freedom initiative would require a population that has learned to dismiss the demagoguery of self-serving special interests who benefit from the status quo.

When Mike Bouchard announced his support for Michigan becoming a Right to Work state in his unsuccessful candidacy for Governor, he said, "The union bosses and special interests may be upset, and will probably target me, but I'm ready and willing to take on the tough challenges to turn our state around." I second that emotion. If we are going to pull the state out of our doldrums, we must take dramatic action to show that “Michigan is open for business.”

“University of Michigan economist Don Grimes said, “the state will have trouble competing for manufacturing jobs against states from the South that are almost all right-to-work. . . . If Michigan wants to go after manufacturing jobs, it should consider right-to-work laws.” Role of unions in Michigan during recession disputed

Prevailing Wage Laws. Under Michigan’s prevailing wage law, all contractors participating in a state or state-sponsored school construction project must compensate their workers b paying wage and fringe benefit rates found in local union collective bargaining agreements. While I was a school business manager at Adrian Public Schools supervising the $50 million bond project to renovate our schools, the contracts that fell under that provision cost us about 20% more than contracts that we could competitively bid out without that provision. With scarce dollars, we must do all we can to get the biggest bang for our buck, and that includes eliminating this budget busting provision.

Minimum Wage. The federal minimum wage is set at $7.25 per hour. With some exceptions, this amount is the lowest amount that a worker is able to make in the United States. States are entitled to pass higher minimum wages. Michigan’s minimum wage is currently $7.40 per hour.

No one will argue that $7.25 is a wonderful wage rate, but studies have shown that setting minimum wages reduces the number of people employed. Further, Michigan setting a minimum wage rate higher than the federal minimum wage is one more example of Michigan being antagonistic to employers. Small wonder we rank 48th out of 50 states in attractiveness for businesses to locate in Michigan.

“Card Check”. “The current method for workers to form a union in a particular workplace in the United States is a sign-up then an election process. In that, a petition or an authorization card with the signatures of at least 30% of the employees requesting a union is submitted to the National Labor Relations Board (NLRB), who then verifies and orders a secret ballot election.

. . .

Under the proposed Employee Free Choice Act (EFCA), if the NLRB verifies that over 50% of the employees signed authorization cards, the secret ballot election is bypassed and a union is automatically formed.” http://en.wikipedia.org/wiki/Card_check

The tension here is the workers’ freedom to choose without coercion as guaranteed by the confidentiality of a secret ballot versus the unions’ desire to more easily form new unions. I view the secret ballot to be a right we must protect, yet most Democrats favor the card check bill.

Other Miscellaneous (but important) issues related to labor: The Democrats in Lansing:

Overwhelmingly opposed blocking the 3% increase for unionized state employees even when a $1.7 billion deficit was projected.
Oppose revision of PA 312 (which requires binding arbitration for police and fire fighters if agreement with the municipality cannot be reached) to require the arbitrator to consider the municipalities' ability to pay. Contracts awarded by arbitrators in the absence of that requirement have granted retirement pay and other benefits grossly out of line with reason. See Center for Michigan
Oppose revision of the Urban Cooperation Act (which requires consolidating municipalities to pay the highest wages and the highest benefits of the consolidating entities, which results in higher costs after consolidation rather than lowering costs, and thereby discouraging consolidation rather than encouraging cooperation).

Where will my Democrat opponent come out on these issues? All relate to protecting the current practices which discourage controlling spending and creating an environment in which small business job providers can prosper and create jobs. My bet is that with his strong union background (and probable financial support for his campaign) he would vote with the liberal majority of the Democrat caucus and against job creation.

The choice is yours. I would appreciate your support.

Embryonic Stem Cell Research and Answering Questions on the Fly

2010-07-24T07:15:00.000-07:00

I wish to clarify and/or amend my statement concerning my support for allowing embryonic stem cell research reported in "Field Of Conservative Republicans File For Angerer's Seat, Volume #49 Report #137 Friday, July 16, 2010".

Proposal 2 of 2008 added a constitutional amendment allowing embryonic stem cell research to the Michigan Constitution. As an elected State Representative, I would be bound by my oath of office to uphold the Constitution.

However, under the belief that life begins at conception, the use of embryos in research is morally wrong, especially where alternative sources exist for research, such as adult stem cells. I would support legislation which provides reporting and oversight of human embryo research and prohibits the expansion of such research into areas such as creating human-animal hybrid embryos, buying and selling human eggs or human embryos and cloning technology.

Any confusion on this issue demonstrates the hazard of answering questions “on the fly” on my cell phone while in my vehicle, similar to legislators voting on bills they have not seen or had a chance to read and thoroughly review, and consult with others more expert in the subject matter. This particular issue is not one in which I am an expert, with my focus on the economic issues, as we must get Michigan back to work.

State and Local Governments Fiscal Issues Intertwine – No Quick Fix on the Horizon

2010-06-11T07:52:00.000-07:00

At the Leadership Summit conducted by the Business Leaders of Michigan on May 17, Robert Daddow, Deputy County Executive for Oakland County pointed out several areas related to local government solvency that he believes are being overlooked. His comments reinforced the idea that the fiscal fortunes of the state and local governments are truly linked.

My take on his comments are:

Foreclosures are on the rise again. Declining property values will continue to drop assessed values, which in some places remained above taxable values, but now will begin to drop below taxable values, such that property tax revenues will drop even more than in the past years.
The assessed values of properties are determined by the increase or decrease in the average price of property sold in the previous year (at least for residential property). The lag in the drop in assessed values will result in past years’ property value drops now showing up in assessed values. In other words, the taxable values will continue to drop even after the actual property values level off until the lag time is worked through.
Recourse payments (aka “chargebacks” by county treasurers) are expected to be larger than normal as tax delinquencies rise.
Michigan Tax Tribunal losses will finally begin to show up as backlogged cases start being cleared in late 2011, causing not only a drop in taxable values for current and future years, but also refunds for previous years.
Many schools and other municipalities have passed millages and issued unlimited general obligation bonds. These were approved on the assumption of increasing property values, but as property values drop, the debt service must still be paid. The municipalities will have two choices: increase the millage rate or cover the property tax shortfall from the already stressed General Funds.
Debt issued by DDA’s, TIFA’s and LDFA’s were projected to be paid from property taxes collected on assumed increasing property taxable value. Even if the debt is solely backed by the entities’ revenues, will defaults affect the local government’s bond rating? Will local governments need to step in to prevent default?
Lag in funding due to different fiscal years results in need for borrowing which is increasing as fund balances drop. For example, school districts are paid in 11 convenient installments (August is skipped), two months late. Will there be adequate borrowing capability by the municipalities on their own via tax anticipation notes or for schools, “state aid notes”? If access to the Michigan Municipal Bond Authority will be needed, what about the state’s credit rating and ability to access money? Municipal bond insurance is more difficult to get at reasonable rates. How will this impact the interest rates municipalities will need to pay?

Result: Taxable values are expected to decline by roughly a third in the next several years, such that even with optimistic economic forecasts, it will take until 2020 – 2025 to return property tax revenues back to the 2007 collection levels. When these property tax impacts are added to the huge unfunded liability for pensions and retirees’ healthcare and declining revenue sharing payments to the municipalities from the state, you can see why local governments are truly in peril. Local governments will need to significantly tighten the belt, and get all the help they can get in controlling its wage and benefit costs. But, even given that, state revenue sharing or local millage increases will be needed to maintain essential services.

Further:

with the state 6 mill school tax based on taxable values, the state property tax collections will decline.
the per pupil foundation grant received by school districts is comprised of the amount per student collected from the 18 mills levied on non-homestead property in the district plus whatever additional the state needs to make up. With taxable values declining, the amount extra the state will need to make up will continue to increase.

We truly are in this together – state and local fiscal issues intertwine. We need to work together to reposition the state to turn this state around economically. To get more tax revenues, we need to get more businesses making money, more workers earning pay checks and paying taxes, fewer homes in foreclosure, and stabilizing property values. There is no quick fix, and attempting to get the quick fix by simply raising taxes and making the state even less competitive in attracting and encouraging businesses will only prolong the agony.

The good news is that there are plenty of very smart people who have put together a collection of ideas or proposals that can turn the state around economically - to make Michigan a Top Ten state again. That was the impetus for the Leadership Conference, to promote the Michigan Turnaround Plan proposed by the Business Leaders for Michigan. We can and must do better. Daddow’s presentation is valuable, for the first step to finding solutions is a brutal recognition of the facts.

Double Dipping Permitted Under New Retirement Law and Should be Stopped

2010-06-10T03:40:00.000-07:00

“School administrators in metro Detroit districts are considering whether to retire and then return to their jobs as independent contractors . . . . Retiring allows them to begin drawing a state pension, while being rehired privately for the same job allows them to continue to collect a salary . . . .

Drawing both a pension and a paycheck was once considered "double dipping," but is allowed under Michigan's new pension reform law . . . . School districts save money when they re-hire the retiree privately, because the district typically does not offer benefits and is no longer required to contribute to the state retirement system on behalf of that employee . . . . “ Michigan Education Digest, June 8, 2010

This process has been called “retire-rehire” and has been a tactic some school districts have used to save money, by, in effect, dumping the benefit costs onto the retirement system. When an administrator retires and then is rehired on a contract, the district avoids not only the about $16,000 per year health insurance cost and the 2010-11 MPSERS rate of 19.41% (minus the 3% the employees will need to pay under the new law), but the district also avoids the 7.65% combined Social Security tax, the unemployment tax and workers compensation insurance costs.

This all adds up, with most superintendents and many other administrators earning over $100,000 per year. For example, as cited in the Michigan Education Digest report, the “retiring” Clawson Public Schools Superintendent will continue to receive her $140,000 annual salary, but the district will no longer pay $65,000 in benefits.

Many will ask, “Well, if the school districts are saving so much money, what’s wrong with that? It sounds like good management to me.”

The problem is that the benefit costs are not avoided, but merely shifted. That is, the stressed MPSERS system now absorbs the cost, and this cost is then paid by higher contribution rates paid on wages by all school districts for their employees. This practice has been under attack as “abuse” by the MPSERS system for years, and while not completely legal, many districts continued to do it. The “retired” employee is hired on a contract through a third-party employer, rather than directly. That, in itself, should be a red flag that something is not right with the tactic.

The tactic appears to have been less effective with hiring back teachers than with administrators. The excuse is that “good school administrators are hard to find”, but often this is just a smoke screen for protecting the good ole boy system within the current and former school administrator ranks. Many teachers are ready to step into principal roles when given a chance. And, with all of the laid off management skill in Michigan today, there is ample transferable talent available to run our schools at the superintendent level.

While the school district retirement system reform law recently enacted was a step in the right direction, it could be improved by eliminating the double dipping it still allows.

A Tribute to Our Veterans

2010-05-30T07:49:00.000-07:00

I give thanks to our veterans who served our country this Memorial Day weekend. Protecting our freedoms has never been free, and many of our brave servicemen and women have paid dearly so that we can live free. Mere words can never express the gratitude which we owe them.

Many others - men, women and children - have not served during the Vietnam era, or any of our other wars or conflicts, for that matter. We who have been spared owe a terrific debt of gratitude for those who have.

Special Tribute To:

My dad, Alfred Olson, who served in World War I in France – “Lafayette, We Remember”
My wife’s dad, Gerald Ruckle, who served in World War II, in the awful island hopping in the Pacific. He suffered nightmares until the day he died on my birthday in 1971.
My brother, Jim, who served as a medic during the Vietnam Era, fortunately all stateside
Our son, Kirk, who served 10 years in the U.S. Navy, as a nuclear electrician
My high school buddy, David Paavola, who served valiantly in Vietnam and lives to NOT talk about it.
Our brave young men and women who currently voluntarily serve our country all around the world, preserving our safety and our freedoms. Few will forget the images we saw on 9-11-2001 and the days following, or forget that we still live in an unsafe world, where people are willing to martyr themselves to destroy our way of life.

Thank you!

For the story of my personal journey with regard to serving our country in the Armed Forces, see: A Tribute to Our Veterans

Public Employee Benefits? "That's where the money is."

2010-05-26T08:01:00.000-07:00

The Center for Michigan article Special Report: Public worker benefits under scrutiny puts the issue of controlling the cost of public sector employee retirees’ health care costs in perspective. Unfortunately, any effort to deal with this gargantuan cost is labeled as “unfair” and “anti-people”.

“Why the clamor over health benefits for people once they’re no longer in the workforce?

Money. And lots of it.

The cost of pension benefits is astronomical for both the private and public sectors. . . .

Health (including dental and vision) benefits cost the Michigan Public School Employees Retirement System $795 million in fiscal year 2009, a 70 percent increase since the start of the decade.

At that rate, longtime Michigan education leader Tom White isn't far off when he says anticipated retiree health care costs for school employees could total $15 billion in the next 20 years.
And that's just for retirees. That doesn't cover medical expenses for current staffers, let alone pensions.

Total retiree expenses (including health care and pensions) is expected to comprise nearly 20 percent of school districts' payrolls next year, White says.”

This issue is similar to the question Willie Sutton, the famous bank robber was asked, “Why do you rob banks?”, and he replied, “That’s where the money is.”

Public employee wages and benefits make up the vast majority of government expense. Why look here for savings? Well, “That’s where the money is.” Couple that with the fact that public employee benefit costs far exceed the cost of comparable private sector employees.

Legislators serious about balancing the state budget do not look here because they do not like state employees or public school employees. On the contrary, they see them as providing essential public services.

The issue is not whether we like them; the issue is whether the costs have gotten out of control. When Michigan was a rich state, we could afford them. Now that we rank 37th among the states in per capita income, we no longer are a rich state, and we simply can’t afford them any longer.

I am sorry if this offends the public sector unions and their members. Many are my friends, teachers who I have seen work very hard to give their students the same opportunities that lifted me out of poverty. Many dug into their own pockets to provide extra classroom supplies. As individuals, I love the teachers. Collectively, however, through their unions, public employees are trying to protect the past, rather than look to the future our state could have.

Adopting the Michigan Turnaround Plan, or at least most of its provisions, can make Michigan a Top Ten state again. But, we must let go of the past and reposition the state to seize the opportunities the future will bring.

We can do it!

Dismal Forecasts and Possible Light on the Horizon

2010-05-22T13:10:00.000-07:00

Sobering information was presented at last Monday's Leadership Summit sponsored by the Business Leaders for Michigan. The presentations may be downloaded from the Business Leaders for Michigan website, on the left margin. Further news from the Summit: The bell is tolling for Michigan Detroit News, Business leaders face Michigan's fiscal reality Detroit News and Budget experts predict economic dire straits Detroit Free Press.

The conclusion from the Summit was that as dismal as some of the forecasts are, there are plenty of ideas that collectively can turn the state around. All that is needed is the political will to make the decisions. (And a few more Republicans elected wouldn’t hurt either!)

A step in the right direction is the passage of Senate Bill 1227 which amends the Michigan Public Schools Employee Retirement System (MPSERS). The Senate Fiscal Agency estimates the plan will save $650 million in the first year and $3.1 billion over 10 years by increasing employee contributions and requiring that new employees are placed in a more cost-effective hybrid defined benefit/defined contribution retirement plan. Newly Passed Retirement Bill a Step in the Right Direction

Friday’s Revenue Estimating Conference brought mixed news:

“. . . [S]chool aid revenue is up $292 million above January estimates. General fund revenue, however, is down nearly $244 million below estimates because income and business tax revenue has come in lower than expected. Senate Fiscal Agency director Gary Olson estimates that will leave a shortfall of about $219 million in the general fund budget for the current fiscal year, which ends Sept. 30.” MI school cuts not expected in 2010-11

“The three fiscal experts also agreed that based on a slightly improving economy, the state will have $128 million more in the general fund and $352 million more in the school aid account for the budget year that starts Oct. 1 than they initially estimated in January.” State revenue fund deficit: $244M: Economists say solutions include borrowing, making cuts or using one-time federal money

The state's economic future is still in jeopardy, but here is a bit of optimism in the midst of gloom. Salute!

My Origins and How They Affect My View of Public Policy Issues

2010-05-22T13:06:00.000-07:00

The recent death of my 98 year old mother created a flood of memories of my childhood. With this coinciding with my candidacy for State Representative, it represented a great opportunity to consider how those early impressions affect my thinking on a number of today’s state and national issues.

"What one sees depends on where one stands.” This surely has meaning to an exceptionally short or exceptionally tall person in the physical sense, but also has meaning in one’s outlook in life. That is, our past experiences color how we see the world today. Two people with different backgrounds can see the exact same thing and interpret the occurrence entirely differently.

Because of this, Peter Senge in “The Fifth Discipline” promotes dialogue to explore such differences in backgrounds and perceptions, with the goal to more often arrive at collaborative solutions to problems and issues. He also advises exploring our own perceptions and their origins, and scrutinizing them to see whether they square with reality.

This phenomenon of how external stimuli are filtered by our past experiences to create our current perceptions partly explains our political differences. In the hopes that my views can be better understood and thus make finding common ground more possible, I have given some thought to and hereby share My Origins and How They Affect My View of Public Policy Issues of the Importance of Education, the Welfare State and Poverty, Medical Care as a “Right”, Our “Dependency Culture” and Immigration.

Federal Budget: Spending and Taxing Revisited

2010-05-13T10:17:00.000-07:00

A. A Preventable Crisis: Exploring Fiscal Crisis Scenarios for the United States is a sobering report regarding the rising National Debt and potential disastrous scenarios we face unless we tackle the problem soon. From the Committee for a Responsible Federal Budget, April 21, 2010.

B. The Man With the Plan is a long and relatively heavy article, but insightful and worth reading. The article is about Congressman Paul Ryan's "Roadmap for America's Future," a sweeping plan to stave off the nation's looming economic and fiscal collapse by changing the tax code, overhauling the health care system, and reforming the nation's major entitlement programs. Its debt-reducing claims aren't based on mere fantasy -- the Congressional Budget Office has determined that the plan would boost economic growth while making Medicare and Social Security solvent. And it accomplishes these aims without raising taxes or affecting the benefits of current retirees. From The American Spectator, April, 2010.

C. Value Added Tax Update: The VAT is exactly what I have been warning people about with the huge and growing deficits and the enormous national debt. (See National Value Added Tax Considered - Tax Increases Ahead , posted October 2, 2009) This invisible tax (imposed on each stage of production) must be opposed, as once in, can all too easily be increased. The VAT is a prescription that treats the symptom (deficit) rather than the cause (spending) of the disease (national debt).

“As the night follows the day, the value-added tax cometh.

With the passage of Obamacare, creating a vast new middle-class entitlement, a national sales tax of the kind near-universal in Europe is inevitable.” Health bill brings higher taxes, by Charles Krauthammer, from the Detroit News, April 8, 2010.

“Pay attention to the growing chatter about a value added tax. It's how we'll likely pay for our new health care entitlement, and the vehicle that will turn America into a colony of worker bees sweating and slaving to sustain Queen Government. . . .” Welfare state will demand a new VAT tax, from the Detroit News, April 22, 2010.

“. . . the liberals' lunge to maximize government's growth depends on quickly creating a crisis that can be called a threat to the entitlement menu. Then the public can be panicked into accepting the addition of a VAT to the existing menu of taxes.” Social programs have real costs, By George Will, from the Detroit News, April 30, 2010.

Nuclear Power Tidbits

2010-05-13T09:03:00.000-07:00

A. Here is an interesting article from the Heritage Foundation about an attack on nuclear power under a hidden "environmental" label.

“The New York Department of Environmental Conservation rejected Indian Point’s request for a water-quality certificate, which the plant needs to keep operating one reactor running after 2013, and the other after 2015. . . . The State denied the certificate largely because Indian Point’s water-intake system, which draws water from the Hudson to cool the reactors, kills about 1 billion aquatic organisms annually — mostly eggs, larvae and plankton.”

Indian Point’s two nuclear reactors provide about a third of Gotham’s power (and nuclear plants overall generate 31 percent of electricity statewide). . . .

“[The regulators] are demanding a system that would require the construction of cooling towers — a process of up to 15 years. Thanks to various regulatory delays (see below), these wouldn’t be online until about 2030. The system would cost more than a billion dollars and take the power plant offline for a year. . . .

Bottom line: The Department of Environmental Conservation is basically imposing hurdles that Indian Point almost certainly can’t clear — which suggests what the real agenda is here. . . .

That is: The decision to deny Indian Point its water-quality certificate is a bid to close the plant down — possibly with an eye on then shuttering other nuclear plants with similar cooling systems across the state or even nationwide.

This isn’t state bureaucrats doing their job — it’s an ideologically-driven move that could cost New York a vital source of clean, affordable energy.” A Sneak Attack on NYC’s Electric Bill The Foundry: Conservative , April 8th, 2010.

B. George Will makes the case for the safety of nuclear power as compared with the coal industry. He also proposes that we recycle nuclear waste as is done safely in France.

“The 29 people killed last week in the West Virginia coal-mine explosion will soon be as forgotten by the nation as are the 362 miners who were killed in a 1907 explosion in that state, the worst mining disaster in American history. The costs of producing the coal that generates approximately half of America's electricity also include the hundreds of other miners who have suffered violent death in that dangerous profession, not to mention those who have suffered debilitating illnesses and premature death from ailments acquired toiling underground.

Which makes particularly pertinent the fact that the number of Americans killed by accidents in 55 years of generating electricity by nuclear power is: 0. That is the same number of Navy submariners and surface sailors injured during six decades of living in very close proximity to reactors. . . .” This Nuclear Option Is Nuclear, by George F. Will, April 9, 2010.

C. Safe disposal of nuclear waste (and Yucca Mountain being the best site) has been scientifically proven since at least 1984 when I served as a management consultant for the High Level Nuclear Waste Management Office in the WA DOE overseeing the US DOE research in selecting the nuclear waste repository. Recycling the waste is a better idea. It is time to get building the plants we will need to meet future electrical energy demand.

“The amount of used nuclear fuel currently in storage in this country is not an enormous amount by volume. It could be stacked on one football field to a height of ten feet, and this used nuclear fuel is being stored safely and securely in engineered water pools and dry casks at nuclear plant sites.

However, it is important to recognize that 95 percent of the nuclear used fuel could be recycled. In fact, countries that recycle their used fuel include France, Great Britain, Russia, Germany, Belgium and Japan. Instead of continuing to store 65,000 tons of used fuel at nuclear plant sites, we should turn the Yucca Mountain site into a national recycling center. Recycling, which is also known as reprocessing, reduces the volume of so-called nuclear waste by 97 percent.” U.S. needs nuclear waste recycling, by Gary Wolfram, from Detroit News editorials, May 5, 2010.

D. This National Center for Policy Analysis article says that “until the government meets its legal obligation to provide storage for spent nuclear fuel and high-level radioactive waste, only a few new nuclear reactors are likely to be built. . . .

With waste building up, Congress passed the 1982 Nuclear Waste Policy Act (amended in 1988) to ensure proper long-term storage. The act required the U.S. Department of Energy to develop and maintain an underground storage facility for nuclear waste.

The Energy Department determined that Yucca Mountain, Nevada, was a satisfactory storage place. However, despite scientific evidence that Yucca Mountain is safe, lawsuits and political wrangling have prevented use of the site as a storage facility.” Nuclear Power Development: Removing Roadblocks, March 29, 2010. See http://www.ncpa.org/pub/ba700 for full report.

Quick Hits Regarding Unions

2010-05-12T12:48:00.000-07:00

Here are a few article qoutes and links that I think are instructive:

A. It is time for all Senators and State Representatives to do what is right, instead of being scared of or beholden to the government employee unions. This article chronicles several attempts to control costs that have been derailed by the public sector unions.

“Michigan has the ninth-most heavily unionized state and local government workforces among the states. In a recent article about the rise of public-sector unionism, New York professors Fred Siegel and Dan DiSalvo described how government employee unions are "bankrupting states and municipalities" because they "achieve influence on both sides of the bargaining table by making campaign contributions and organizing get-out-the-vote drives to elect politicians who then control the negotiations over their pay, benefits, and work rules.

In Michigan, one can add preventing the legislature from adopting reasonable public employee pay and pension reforms to that list.” Analysis: Government Employee Political Clout Obstructs Budget Reform, April 13, 2010

B. Here is some insight into what is happening with SEIU, one of the strongest government employee unions in the country and how they are extracting wealth from taxpayers and redistributing it to government workers.

“It is no coincidence that under Stern’s tenure the number of government union members surpassed the number of private sector union members for the first time in our nation’s history. There are two reasons for this: 1) Unions kill private sector jobs, and unionized companies earn profits 15% lower than those of comparable non-union firms. This makes unionized firms less competitive, which is why unionized manufacturing jobs fell 75% between 1977 and 2008, while non-union manufacturing INCREASED 6% over that same time. 2) Government union jobs face no competition. Public sector unionization has exploded in the past decade as leaders like Stern realized politics paid much better than the free market. Under Stern’s leadership, SEIU has become the nation’s second largest government union with over half of its membership drawing a paycheck on the taxpayers dime.” Morning Bell: Andy Stern’s America The Foundry: Conservative Policy News. April 13, 2010

C. More political payback from Obama for the unions' support in the 2008 elections. Elections to approve a new union would only require a majority of those voting, in contrast to prior law which required a majority of workers affected. Rule change aids union workers in airline, rail industries, from The Detroit News, May 11, 2010

D. Responsible contractor" provisions must be rejected, whether they be in federal law, state law or local municipality policies, as they drive up taxpayer costs, the last thing we need now with stretched public budgets. A "responsible contractor" policy allows bidders that provide higher pay and richer benefits for their workers to get an advantage in winning government contracts. In practice, the plan would favor firms whose workers are members of unions. Editorial: Fed contracts should favor best price, not unions, from the Detroit News, March 16, 2010

E. “The government class enjoys higher salaries, richer benefits and far better job security than the citizens they are supposed to be serving. . . . The 'public servants' have become the masters over taxpayers.” Good times still roll for government employees, from the Detroit Free Press .

F. We will not have a sustainable long-term budget plan without addressing public employee wage and benefit issues. The legislature, meanwhile, was not able to get the 2/3 vote needed in the State Senate to rescind the 3% raise for unionized state employees. With no Democrat support in the Senate, the Senate could not send the measure to the Democrat controlled House of Representatives, where it would have been even harder to get the necessary 2/3 vote. If we can’t even block pay raises to public sector union employees, is there hope to get cuts? State pay issue will get worse, from the Detroit News, April 2, 2010

G. “Public Labor Union claims of $700 million in concessions by state employees are a comparison of itself to itself. It pales in comparison to the sacrifices made by private sector taxpayers in Michigan that are being asked to foot the bill for their unrealistic benefit and pay levels. They have been shielded and protected from reality for far too long and it is a luxury that taxpayers in this state can no longer afford.” $700 Million in Concessions By State Workers? Really? Where Did That Number Come From? From the NFIB, March 18, 2010.

H. “State Sen. Nancy Cassis has introduced legislation in Lansing that would allow localities to set up what might be called “right-to-work zones. . . Among nearly all private-sector workers, labor relations are governed by federal law: the National Labor Relations Act. The NLRA is fairly exhaustive, and the courts have consistently interpreted it as “occupying the field” of private-sector labor relations, leaving very little room for states to act. But there’s one big exception carved out of federal labor law: States can regulate union membership and agency fees. This is where state right-to-work laws come into play.

“Right-to-work” prohibits unions and employers from signing contracts that force workers to join or financially support a union, leaving union membership and support to the conscience of individual workers.”

This local approach to Right-to-Work could be the means to bit by bit improve the image of the state as anti-business/anti-jobs, and make the state more competitive. Local Right-to-Work: Yes we can! Well, maybe. If we set it up just right..., October 28, 2009.

I. “Place the blame for the loss of the much-needed [Race to the Top] grants squarely on the Michigan Education Association. It sabotaged the state's application at every step. . . . But real change in Michigan's public schools will only come when parents and others concerned about the future of the state decide they've had enough of the Michigan Education Association's obstructionism. “ MEA's sabotage kept Michigan out of Race to Top finalists, From The Detroit News, March 7, 2010.

Reform of MPSERS Retirement System Necessary – But Only Wisely

2010-05-12T11:57:00.000-07:00

Governor Granholm proposed changes to the Michigan Public School Employee Retirement System (MPSERS) in her budget proposal. With the contribution rate public schools and community colleges needing to pay going up to 19.41% for the coming school year, it is obvious that the system is unsustainable. Changes must be made to keep the program actuarially sound, and yet affordable by the education system.

Governor Granholm’s proposal was aimed to create cost savings to help balance the budget, but also contained a sweetener to entice long tenured employees to retire (and allow lower cost new employees to be hired) by raising the multiplier of 1.5% to 1.6%, for a 6.6% increase. The multiplier is multiplied by the number of service years credited to the employee. For example, with 30 years of service, and if the highest 3-year average salary were $60,000, at a multiplier of 1.5, the retirement payments would be 1.5% x 30 x $60,000 = $27,000 per year, while at 1.6% they would be $28,800.

The Senate chose not to include the sweetener in Senate Bill 1227, while adopting the bulk of the Governor’s proposal. Significant savings would result. On the other hand, the Democrat controlled House of Representatives amended the bill to send back to the Senate the bill increasing the sweetener from 1.5% to 1.7% or a 13.3% increase, plus a plethora of additional sweeteners.

The worst change made in the House is changing the lifetime health coverage to a constitutionally protected fringe benefit, which it is not now classified. The Michigan Capitol Confidential estimated the added burden to the State would be a new $25.9 Billion liability for the taxpayers.

When the State is having trouble adopting a balanced budget, does it make sense to be adding to the State’s costs and liabilities? Well, to the Michigan Education Association bankrolled and controlled House Democrats, apparently it does.

I say “NO, IT DOES NOT!”

With the bill thrown into a free conference committee, the Senate Republicans would be better off coming out with no bill than a poor one, just to get something agreed upon. With the state the state is in, we cannot afford to saddle the taxpayers with even more costs and liabilities.

Sources:

Executive Proposed Reforms for the Michigan Public School Employee Retirement System (MPSERS), February, 17, 2010
MEA Wounds Governor’s School Pension Reform, May 1, 2010
Analysis: Senate GOP Fumbles, May Approve $25.9 Billion Taxpayer Liability to Satisfy MEA, May 10, 2010

The Ann Arbor Airport Expansion Is Not Justified Now

2010-05-11T13:54:00.000-07:00

On March 20, 2010, I took a position opposing the expansion of the Ann Arbor Airport. My statement to the news media was as follows:

“I oppose the proposed expansion of the Ann Arbor Municipal Airport as described in the “Preferred Alternative” in the recent draft Environmental Assessment. The changes proposed neither greatly increase safety nor sufficiently enhance the operations of the airport to justify spending taxpayers’ money on the proposed changes now.

None of the stated objectives individually (or even collectively) is sufficient to justify the spending of public taxpayer dollars now. If State Road is widened in the future, then a shift of the runway to the SW would be appropriate, which would achieve objectives 2, 3 and 5.

But wait, “Isn’t this money free, that is, federal money from the Airport and Airway Trust Fund, and if we don’t spend it, someone else will?”

97.5% of the estimated $1.3 million cost would come from that fund, and 2.5% from the airport’s operating fund. However, we need to take a principled view of this “free” money. Everyone acting as if federal money is free is exactly what has gotten us into the U.S. Congressional “earmark” game, as everyone tries to “get their share”, to the point that the whole country suffers from budget deficits and an exploding national debt. If a project is not a good expenditure, it should not matter what the source of the funds are, as ultimately we all are paying the cost.

In this case, the shift of the runway 150’ SW may be needed in the future, but not now. The extension of the runway might never be justified. We ought not to spend these funds now.”

The full statement submitted to the Michigan Department of Transportation can be found here.

Several responses to the statement warranted the following Q and A:

Q: The project would be paid from user fees paid into the Airport and Airway Trust Fund. Why are we worried about the cost?

A: The fact that the cost of the project would come from the Airport and Airway Trust Fund actually creates less of an objection than ordinary Congressional earmarks in that the users of the airport contribute into the fund through their aviation fuel tax. Airplane owners can say that they have already paid for the project through their user fees. For me, the bottom line is that if a project does not generate more benefits than its cost, it does not make economic sense to do the project, no matter what the source is. The fact that the money is “free” does not increase the project's benefits nor decrease its cost.

Q: Doesn’t this endanger the survival of the airport?

A: I support the continued operation of the airport. Nowhere in this discussion have I heard that the proposed improvements are needed to ensure the survival of the airport. The proposed improvement would be nice, but not required by any current FAA regulation for continued operation. The Ann Arbor Municipal Airport serves a useful function, especially for student pilots (which I was one back in 1975 flying out of a grass strip near Mason, MI) which you really want to keep away from the busier airports. If you read the full analysis, you will also see that I would support the shift of the runway 150’ to the SW at such time as State Road is widened, but doing so now with no widening of State Road imminent would not be necessary now.

I would also work to receive funds from the Airport and Airway Trust Fund if the airport ever became in danger of closing due to lack of funds for necessary improvements. While little argument can be made that expansion of the airport would create measurable economic benefit, closure would clearly entail significant economic loss which should be avoided.

Q: If Ann Arbor does not get these funds, someone else will, so why not get our share?

A: That is an argument for every project in the United States, and for every earmark. My best response is to suggest you Google “tragedy of the commons”, which in short, means that when each individual pursues his or her own personal best interest in the use of a common resource, the common resource gets overused to the point that all lose. I know, this is a philosophical argument, but we need to start somewhere.

I understand the need for jobs in this area, and having taken 27 courses in economics over the course of my lifetime, I understand the “multiplier effect” of expenditures in an area (although one can argue just what the multiplier is, from 3 to whatever, depending on the “leakage” from the area economy). So, balancing a principles approach vs. a purely “what’s in it for me (or us)” get tough. On this issue, I have chosen the principled approach.

We will not agree on every issue in the future, but what I pledge is to be willing to take positions based on research of the facts and analyses, listen and consider alternate points of view.

Q: You say you are taking a “principled view” on this issue. Would your stance change if the amount of the project were $10 billion to be spent in our area, instead of the much smaller projected cost of $1.3 million for the proposed expansion?

A: This, like many questions that State Representatives face, is not a question subject to an easy “Yes” or “No” answer. Taking a principled view does not mean we should never take federal money. If the hypothetical case would show significant benefits in excess of the costs, then my answer might well be different. A $10 billion investment into our area would obviously result in a substantial positive economic impact for us, and would be extremely hard to not want.

What many people would miss in their thinking about the costs and benefits in this hypothetical (as well as most other well-meaning government programs) is that the taxes necessary to pay for these “free” projects also destroy as many jobs as they create, in very diffused secondary or indirect effects. Most “tax and spend” programs are zero sum games, in that there are winners and losers, with no net positive impact. The reason they are so popular among people (and their elected representatives) is that the winners are easily identified and vocal, while the losers are harder to identify because the costs are indirect, usually more in number, but each hurt only a little bit and therefore not as vocal.

The issues we face as a community today are often complex and not subject to easy answers. We need to have good dialogue on these important issues. “Politics” is, after all, conversations about important topics leading to ultimate decisions that affect virtually every aspect of our lives. (Although many people say it means "poly" (or many) and "ticks" (or many bloodsucking parasites). :)

I appreciate the opportunity to hear supporting and opposing views. Only by considering all points of view can we be sure we make decisions based on all the facts, rather than on uninformed, predisposed opinions.

Were home based child care workers unionized against their will? The controversy continues…..

2010-04-19T07:56:00.000-07:00

Once elected, I will fight forced unionization of independent private business owners who are receiving payments from the stateon behalf of their clients. Further, I will fight against high-handed executive branch diversion of funds contrary to the intent of the Legislature in its adopting the Appropriations bills.

Rick Olson, Candidate for State Representative, 55th Legislative District

In 2009, the Mackinac Center Legal Foundation filed a lawsuit (Loar v. DHS) against the state Department of Human Services on behalf of at least 40,000 home-based (business owners ) day care providers. The case challenges the union effort to designate the providers as government employees for unionization and dues-collecting purposes. The case is based on the grounds that state law presumes that no one is subject to public-sector bargaining unless state legislation has made them so, and in this case, there is no legislation — only an interlocal agreement. On December 30, 2009, the Michigan Court of Appeals dismissed the case without explanation. The public-interest law firm has appealed the case to the Michigan Supreme Court.

Several efforts to get the state Supreme Court to hear the case are underway.

“State Representative Dave Agema, R-Grandville, has submitted a resolution asking that the Michigan Supreme Court hear a case involving home-based day care workers who say they didn't realize they were unionized by the state.” State Reps. Joining Day Care Union Case, Tom Gantert article on Michigan Confidential, April 18, 2010.

The National Federation of Independent Business has joined the Mackinac Center for Public Policy in the legal arguments to go before the Michigan Supreme Court by filing a amicus brief. A show of public support for the Michigan State Supreme Court to hear the case is important, as the Court has discretionary authority on whether to hear the case or not.

Background Articles:

“A year ago in December . . . more than 40,000 . . . home-based day care providers statewide were suddenly informed they were members of Child Care Providers Together Michigan — a union created in 2006 by the United Auto Workers and the American Federation of State, County and Municipal Employees. The union had won a certification election conducted by mail under the auspices of the Michigan Employment Relations Commission. In that election only 6,000 day care providers voted. The pro-labor vote turned out. . . . [T]he state created an "employer" for the union to "organize" against. Of course, Michigan's independent day care providers don't work for anybody except the parents who are their customers. Nevertheless, because some of these parents qualify for public subsidies, the Child Care Providers "union" claimed the providers were "public employees."

Michigan's Department of Human Services teamed with Flint-based Mott Community College to sign an "interlocal agreement" in [September] 2006 establishing a separate government agency called the Michigan Home Based Child Care Council. This council was directed to recommend good child care practices — and not coincidentally, to serve as a "public employer." Although the council had almost no staff, no control over the state subsidies and no supervision of the providers' daily activities, it became the shell corporation against which the union could organize.

Thus the state created an ersatz employer and an ersatz "bargaining unit" against which what was essentially an ersatz union could organize. . . . “ Michigan Forces Business Owners Into Public-Sector Union, by the Mackinac Center for Public Policy, January 15, 2010.

“The Michigan Home Based Child Care Council . . . somehow -- became the intermediary between the department and a new AFSCME- and UAW-affiliated union called Child Care Providers Together Michigan.

In December 2006, AFSCME announced that the state had certified that a majority of home-based child care providers had chosen union affiliation. AFSCME said its drive to unionize child care providers encompassed eight other states, including neighboring Illinois, Minnesota, Ohio and Wisconsin. “ Forced unionization: Lawmakers should look into state's collusion in organizing babysitters, Editorial from The Detroit News, March 22, 2010.

“Last year in a complicated union deal, about 70,000 day care workers in Michigan learned they had joined a union known as Child Care Providers Together Michigan and were now working for Michigan Home Based Child Care Council. About 40,000 of those home-based day care workers have union dues to the tune of $3.7 million a year automatically deducted from their state subsidy checks. . . . State documents show that 6,396 day care workers voted and 5,921 were in support of forming a union. But the union supposedly represents the 70,000 day home-based day care workers in Michigan, not just the 40,000 who receive state subsidy checks, according to the Michigan Auditor General.” Minority Rules: Most Members of Child Care Union Didn’t Vote Themselves In, by Tom Gantert, article in the Michigan Confidential, March 1, 2010.

“Thirteen other states have pulled off the same shady scheme to surreptitiously subsidize unions in this manner and labor, with all its financial resources, would seem to have an unbeatable hand except for public interest groups like the Mackinac Center.

Individual care providers, who generally run low-budget operations, don't have the resources to fight back against such thuggery, sanctioned by their own elected representatives.

Answers needed . . .

Since the MHBCCC has indicated that it does not employ the care providers, how can these business owners be deemed employees in a labor union?
If the care providers need a license to operate a business, how can they be considered employees of a state council, which disclaims an employers' role?

And if the state does employ these people, should it also shell out the 6.2 percent federal payroll tax which employers are required to pay? [I.e., what supervisory functions does the council serve, when the “employee” vs. “independent contractor” criteria are applied, as for when Social Security taxes and Federal and state unemployment insurance taxes must be collected by the employer. Note that the day care providers file 1099 tax returns, which put them into the category of contractual workers.]”

The Mackinac Center lawsuit result is important for Michigan.

It will tell us whether our state will require transparent, fair treatment of its citizens in the future, or whether powerful special interest groups will continue to divert taxpayer dollars for their own benefit with the aid of those they helped elect.” Home Day Care Workers Should Have Fair Hearing, Frank Beckman editorial on Detroit News, April 9, 2010.

Meanwhile, the unions have responded with:

“Child care workers paid by the Michigan Department of Human Services in 2005 came to the UAW and AFCSME with a desire to bargain collectively to improve their wages and working conditions. Over the course of several months, a majority of these child care providers signed union cards. In the fall of 2006, they voted to form their union in a state-supervised election. . . . These workers followed state law in winning union representation and then went beyond that. They first organized by "card check," a legal procedure, and gathered more than 22,000 signatures of child care providers in favor of a union, or 55 percent of the state's 40,500 child care workers at that time.

But they also petitioned the Michigan Employment Relations Commission for an election. Under the state labor law system, most elections are done by mail.

In October 2006, ballots were mailed out by MERC to every eligible voter working at that time. Of those voting, 92 percent came back in favor of a union.” Special Letter: Child Care Workers Asked for Union, by James Settles, UAW, letter printed by Detroit News, April 15, 2010.

In an interesting and connected side note,

“The Legislature last year ended payments to the Michigan Home Based Child Care Council, a liaison between the state's Department of Human Services and a controversial labor union that, under questionable circumstances, came to represent people who receive government subsidies for providing day care in their homes for children of low-income working parents. Lawmakers recently learned that Human Services officials have defied them by shifting money within the department to keep the council's $200,000 contract intact.

A Human Services spokesman said this was done because the department has a contractual obligation to fund the council through the end of this year. The spokesman also claimed that the Legislature's action, taken as part of its approval of the department's budget for 2010, did not include a specific prohibition against further payments to the council from other funds. . . . “ Forced unionization: Lawmakers should look into state's collusion in organizing babysitters, Editorial from The Detroit News, March 22, 2010.

If this practice is allowed to stand, what would prevent the same thing from happening to home health care workers whose clients receive government assistance? Pharmacists? Others? This cannot be allowed.

Improving the Business Climate to Create Jobs

2010-02-25T14:15:00.000-08:00

None of these ideas include the government directly creating a job (which would have to be paid for by higher taxes) but improving the business climate to create the atmosphere for entrepreneurship, innovation and risk-taking by businesses trying new things.

This local approach to Right-to-Work could be the means to bit by bit improve the image of the state as anti-business/anti-jobs, and make the state more competitive. Local Right-to-Work [Mackinac Center] Feb. 25, 2010

This editorial clearly paints the difference between the parties' approaches to turning Michigan around. The "Spenders" (aka the "Tax and Spenders") plan does nothing to encourage job growth, but only supports the public employees' jobs. We must do better than that. It's Reformers vs. Spenders in state faceoff From the Detroit News. Jan. 28, 2010

Now here are some great New Year's resolutions worth making AND keeping. Michigan's 2010 New Year's resolutions State must say goodbye to its lost decade and start new year on a more productive path. From the Detroit News. Dec. 31, 2009

In this philosophical debate on how best to create jobs, I come down on the side of creating a better business climate for all businesses in Michigan, encouraging all businesses to flourish, to harness the entrepreneurial spirit and innovativeness that made Michigan the envy of the world years ago. I simply do not believe that bureaucrats in Lansing can pick the winners better than the best minds in business and finance who are risking their own money and careers with their investment choices. Sharing Ideas for a Better Michigan: Bureaucrats Should Not be Picking Winners and Losers in Our Fre Dec. 29, 2009

Posts to Facebook re Michigan's Budget Crisis

2010-02-25T11:32:00.000-08:00

Tax hike won't solve budget woes Governor's proposal courts failure by avoiding more long-term ref detnews.com Feb. 24, 2010

It is not my nature to be confrontational, but any cost cutting measures at the state level that do not address the excessively high cost of public employee wages and benefits will not be a long-term solution. They must be brought down to private sector equivalents.
School, Government Employee Unions Drain Their Host
By Jack McHugh, The Mackinac Center for Public Policy Feb. 23, 2010

The union's choice of retaining high salary and benefit levels instead of retaining service levels for Wayne County residents is not a viable long-term solution. It's time for public sector unions to wake up and smell the coffee brewing in Michigan. http://www.detnews.com/ Feb. 23, 2010

The Governor's Proposed Budget includes a tax increase without sufficient savings from salaries and benefits from state and public school employees. The Legislature must do better. Editorial: Balance Michigan budget with labor cost savings Feb. 14, 2010

Unions bleed taxpayers to help Democrats, http://www.detnews.com/ Feb. 9, 2010

For more, go to my Facebook page at http://www.facebook.com/#!/olson48176?ref=profile

Cheers! Rick

Taxes and Spending – the Perennial Issues

2010-02-25T11:17:00.000-08:00

Here is an excerpt from the February 2010 Washtenaw Republican Informer, of which I am a co-editor and which may be accessed on the Washtenaw Republican Party website:

Read “Where We Are and How We Got There”, Feb. 17, 2010, by Mitch Bean, with the House Fiscal Agency. This is not fun reading, but a good summary of the State's fiscal status. What is missing, however, are options for cost controls and job growth which help solve the revenue shortfalls. For good starts, see:

Republican Senate Reform Package which could potentially save the state more than $2 billion.
House Republican Strategic Task Force on Jobs
The Michigan 2010 Small Business Agenda
The Michigan Turnaround Plan, by the Business Leaders for Michigan

Both Republican caucuses and the business groups oppose the tax increases in Governor Granholm’s Proposed Budget. Where some difference of opinion exists among the Republican and Republican oriented groups is whether reforming Michigan to gain control of costs and a reforming the tax structure should occur simultaneously Consensus appears to be that cost control must come first, before reforming the Michigan tax structure is put on the table. Otherwise, the fear is that “restructuring” simply becomes a tax increase.

Defending the Constitution

2010-02-25T11:11:00.000-08:00

Here is an excerpt from the February 2010 Washtenaw Republican Informer, of which I am a co-editor and which may be accessed on the Washtenaw Republican Party website:

One of the unifying themes of the many “liberty” groups, whether they be Tea Party groups, Americans for Prosperity, Campaign for Liberty, etc., is the demand for a return of the reading of the U.S. Constitution as it was intended by the Founding Fathers, i.e., the creation of a limited government, chock full of checks and balances. Here are some useful resources.

Nullification: A curb on federal overreach - An interesting outgrowth on the debate of the Senate health care bill (and ObamaCare in general) is the renewed interest in nullification among state legislatures. The first instance of the use of nullification were The Virginia and Kentucky Resolutions of 1798 a direct response to the constitutionally offensive Alien and Sedition Acts of the same year. Whether it’s ObamaCare, federal gun laws or the REAL ID Act more and more state legislatures are turning to nullification to reassert their state sovereignty under the Tenth Amendment. For further viewing: Judge Andrew Napolitano: The Constitution and Freedom
On the humorous side, two eminent law enforcement officers (Barney Fife and Andy Griffith) weigh in on the Preamble of the Constitution in this YouTube video.
Michael Badnarik, a more credible source on the Constitution, provides a very informative 8 hour class on the Constitution & History which can be watched in short segments.
The webcast archives from the Hillsdale College’s January 30th “Constitutional Town Hall” are another excellent source (free, after registering online).

Thanks William Rushlow and Dave Pangborn for your submissions for this article.

Critics of members of the Tea Party: "What a quaint idea. The U.S. Constitution actually means what the words say? Pure madness." We all need to be concerned to the extent the limits on government written in the Constitution have been eroded by Supreme Court opinion after opinion over the years. We are to the point that many believe we are not the republic the Founding Fathers envisioned, but rather a democracy where 50% +1 can do anything they wish against the outvoted minority (typically the producers of society). Tea Partiers hold true to the 10th from the Detroit News.

Comments?

Rick

Parliamentary Procedure Interactive Workshop Available

2010-02-25T11:01:00.000-08:00

A Parliamentary Procedure Interactive Workshop was held on February 24 at the Monroe County Community College for community leaders and activists to conduct more effective meetings. I am willing to conduct this workshop for other groups upon request.

This is a fun, engaging way to learn the basics of Parliamentary Procedure, as you briefly hear the theory, put it into action through skits, and have a few laughs along the way. For more information, contact me or download the Fundamentals of Parliamentary Law.(PDF)

Rick Olson, 734-944-0794

Lowering the Cost of Public Safety Services

2010-02-25T10:33:00.000-08:00

Contracting with a lower cost department can make sense and avoids the stupidity of the Urban Cooperation Act's forcing the highest wages and benefits that occurs with consolidation of municipalities (and thus discouraging the very "cooperation" the name of the Act implies).

Municipalities stuck with excessively high costs imposed by arbritrators under PA 312 should definitely look at this alternative. The Center for Michigan » SPECIAL REPORT: Combining cop shops can save big bucks

An amendment to PA 312 without requiring the arbitrator to take into consideration the municipality's ability to pay is truly "hollow". A chance to control costs has been lost, but we will need to come back to this. Michigan Senate Bill 1072 Will Change Public Act 312, but May Have Little Effect [Mackinac Center]

As much as we love and respect our public safety employees (police and firefighters), PA 312 needs to be more balanced, to reflect the community's ability to pay. The Center for Michigan » Cities push hard on Act 312 and cost controls

These proposals make sense to control costs of corrections, without being "soft on crime". We also need to look further at the levels of wages and benefits of prison workers and privatizing support services to minimize costs. The Center for Michigan » Three things every citizen should know about state prisons

See also: Repeal PA 312 to Eliminate Binding Arbitration for Police and Firefighters? and
Michigan Laws that Impede Greater Efficiency through Collaboration

I welcome your comments. Cheers!

Is the Name of the Michigan "FairTax" a Sham?

2010-02-25T10:11:00.000-08:00

In response to Facebook postings:

“David A. Dudenhoefer February 23 at 11:33pm Reply http://www.campaignforliberty.com/blog.php?view=32914 This is timely as some hacks in our state are pushing this "fair-thief" tax” and
Tony DeMott’s Facebook posting: “The Fair Tax simply changes who is the tax collector. It turns small businesses into tax collectors. The Consumer will still end up paying all the taxes. The tax burden will not be lowered at all. Michigan citizens care about lowering the tax burden, not who the tax collector is. The Fair Tax is a sham and if you believe our government is too big, too intrusive, and too oppressive, you should oppose this sham”

I respectfully disagree. But first, let me make clear that I totally agree that there are a lot of costs that can and should be cut out of government spending, both at the state and federal levels. Any serious look at my Facebook and blog postings would confirm that. Second, I am opposed to many of the government interventions into our economy and personal lives which go well beyond the limited government our Founding Fathers envisioned. So, I am onboard with the concept endorsed in Michigan by the Business Coalition that we must get the spending reforms first, then we can tackle the tax structure.

I also agree that the name “FairTax” is a misnomer, as any tax system is a transfer of wealth from somebody to government for transfer to someone else, and so will never be “fair”, whatever that means. But, it is a piece of the marketing of the FairTax idea, and I can understand that. A proposal needs to be evaluated on its content, and not by its name.

Having said that, now it is important to realize that taxation in one form or another is a reality, and one that is not likely to change. So, if we are to be taxed, the questions are, “What taxing mechanism is best? On what criteria should we judge a tax system?” In other words, one can distinguish between (1) the tax level, i.e., the total amount of taxes collected and (2) the taxing mechanism or structure.

It does matter what tax system is in effect, as different tax systems have different secondary or indirect effects. For example, economists will tell you that a business is a tax collector, and not a “taxpayer”, as the indirect impacts are: higher prices, lower wages to its workers, lower dividends to its owners, or fewer jobs, or some combination of these impacts. The consumer ultimately pays. Different tax schemes have different impacts, some which distort the free market economy more than others. An income tax, for example, discourages earning, savings and investing. With different direct and indirect impacts, it therefore does matter what tax system we use – given that we will have some tax system.

A consumption tax is one that distorts the free market the least, although even a consumption tax discourages consumption, and therefore lowers prices, and therefore less is produced in a free market society, in effect, lowering the standard of living in the society. Is it perfect? No. No tax system is. I just see it as better than the current tax system, whether it be called a “consumption tax”, “FairTax”, or whatever.

It also matters how easily a tax can be increased, as the easier it is to raise a tax, the more likely the politicians will raise it. The visibility of a tax is one deterrent to a tax being raised. Contrary to the claim that the FairTax would be hidden, it would be incredibly visible, paid on each purchase, and far more visible than an alternative I fear will be proposed to raise more revenue at the federal level – the Value Added Tax, which is collected at each level of production and hidden in the final price of a product.

I further disagree with the use of David’s term of calling those who support the FairTax as “hacks”. I understand the tactics espoused by Saul Alinsky in his book “Rules for Radicals” that calling people names is a good tactic for radicals. I believe it is offensive, however, when used against friends who happen to disagree with you on some point. Fact is, none of us will ever agree 100% with anyone else. Maybe I am too willing to leave the name calling to the radicals who we jointly oppose, but us freedom lovers should look to find common ground amongst us, rather than look to tear us apart. No one group in the “liberty” movement has a monopoly on patriotism.

Respectfully, your friend,

Rick

Bureaucrats Should Not be Picking Winners and Losers in Our Free Market Economy

2009-12-29T05:41:00.000-08:00

Everyone wants to reduce the near 15% unemployment in Michigan, so everyone is for “creating jobs”. But how to do so? Nobody except the most liberal folks think raising taxes to create public employment jobs makes sense. That just destroys as many jobs as it creates, at best. But what about spending tax dollars to subsidize some private companies that the bureaucrats think are worthy? Hmmm.

Well, that is what the Michigan Economic Development Corporation (the quasi-public agency that administers state economic development programs) through the Michigan Economic Growth Authority does by granting “tax credits” to encourage businesses to stay in or relocate to Michigan. Is this good policy?

In this philosophical debate on how best to create jobs, I come down on the side of creating a better business climate for all businesses in Michigan, encouraging all businesses to flourish, to harness the entrepreneurial spirit and innovativeness that made Michigan the envy of the world years ago. I simply do not believe that bureaucrats in Lansing can pick the winners better than the best minds in business and finance who are risking their own money and careers with their investment choices.

The businesses who don’t get the tax credits but who compete with those that do also don’t think that granting tax credits to some, but not all competing companies, is such a hot idea. For example, after 29 years as a nationally known niche business, Karl Pohrt closed his Ann Arbor bookstore Shaman Drum. Pohrt said he couldn’t compete with Walden Books (a subsidiary of Borders) after Walden Books was approved for $7 million in tax credits from the state of Michigan’s Michigan Economic Growth Authority since 1995 for bringing it headquarters to Ann Arbor.

“I think the idea of an agency picking winners and losers without making that a public decision, seems to me to be profoundly anti-Democratic,” Pohrt said. “It opposes the idea of the free market if they are underwriting certain companies. … “ Small business owner says larger companies getting tax breaks means “you don’t stand a chance” Reportingmichigan.org, Oct. 20, 2009

Another example is Cabela’s receiving tax credits to locate their store in Dundee, while Jay’s Sporting Goods in Clare didn’t. Now, living in Legislative District 55 where the Cabela’s store is located, and knowing that it has become one of the state’s largest tourist attractions, makes it seem like an exceptionally good idea. But, does it come down to principle or does it matter whose ox is being gored or being fed? As a matter of principle, Cabela’s should not have received a competitive advantage over Jay’s Sporting Goods.

Further, the Mackinac Center for Public Policy recently questioned the effectiveness of the program in its study report “The Michigan Economic Development Corporation: A Review and Analysis”. The Mackinac Center is a research and educational institute headquartered in Midland, Michigan, noted for its conservative positions on policy matters. The report says:

“[W]e describe the organization of the MEDC, enumerate its many programs and review the performance of several of them - such as the Michigan film incentive, the state's now-defunct Broadband Development Authority and the Michigan Economic Growth Authority. MEGA is the MEDC's flagship tax credit vehicle for "creating" jobs. We also describe the ongoing tax money used to support the MEDC.

MEGA is a 14-year-old authority that offers state business-tax credits to select companies that plan to invest in business facilities in Michigan and create or retain jobs here. In order to claim the tax credits, companies must provide a minimum number of jobs as detailed by state law. The MEDC also frequently arranges for MEGA recipients to receive additional incentives, such as state education tax abatements, job training subsidies or local property tax abatements. Some of these incentives may be awarded immediately, regardless of whether the business has created jobs at the facility.

The authors inspected credits awarded from 1995 to the end of 2004 and found that while MEGA deals were expected to produce 61,043 jobs, only 17,971 were ultimately created. Hence, the actual job count was just 29 percent of the expected total. [Note, however that if the firms getting the incentives only create 30 percent of the jobs they planned on, then they will only get 30 percent (or less because frequently there is a trigger minimum) of the incentives they were originally offered.]

The program has offered more than $3.3 billion in Michigan business tax credits since its inception.

This study makes a number of recommendations regarding this expensive and counterproductive program. Some of them are listed below:

Eliminate the Michigan Economic Development Corp. This department has, by all indications, failed to create new and retain existing jobs for Michigan workers. Killing it and the programs it administers outright would conceivably and directly save tens of millions of dollars that could be used to balance the budget without raising taxes.
Short of outright elimination of the MEDC, state lawmakers should eliminate the Michigan Economic Growth Authority and Michigan film incentive programs.
Mandate a full performance audit of each MEDC program. In addition, the Office of the Auditor General should provide a tally of "direct jobs promised" vs. "direct jobs delivered" by year, using independent sources wherever possible, for each program reviewed.
Require that MEGA use only direct jobs "created" as a measure of a program's success or failure. The MEDC and other state agencies should be prohibited from using hypothetical assertions of spin-off jobs.
Completely eliminate the "refundable" part of the film incentive tax credit. Tax credits against actual business tax liability are a better tack than disbursing cash from the state Treasury.
In many instances, the tax credits are used to induce businesses to come to Michigan instead of competing states. The state has approved about $5 billion in tax credits to about 530 projects from April 1995 to August 2009.
Those companies stated they would have directly created 136,700 jobs.” PDF Complete Document

The Mackinac Center’s recommendations warrant careful consideration. In this battle of philosophies about creating jobs, it appears the Mackinac Center is right both in principle and in practicality.

"Cool It" Changes the Climate Change Debate

2009-12-26T14:11:00.000-08:00

“Cool It: The Skeptical Environmentalist’s Guide to Global Warming” by Bjorn Lomborg (2008) is a debate changing book about climate change. He takes an entirely different approach from arguing whether global warming is real and whether mankind’s activities are a cause of the warming (although his starting point is “Yes” to both questions).

Bjorn’s approach is different because he asks, “Even if global warming is real and man is causing it, is focusing on reducing CO2 emissions the best way to improve the lot of mankind?”

He posits that even if we take the most aggressive measures to reduce emissions, the impact would be modest at best, although it may “feel good”. Further, he debunks many of the exaggerations made by the promoters of the hysteria about climate control, including claims about melting glaciers, rising sea levels, penguins in danger, polar bears becoming extinct, more extreme weather, rivers flooding, a new Ice Age over Europe, malaria in Vermont, more starvation, and water shortages. He decries the politicizing of science and the ignoring of solutions other then reducing carbon emissions.

Bjorn lists many of the claimed benefits of containing/reducing carbon emissions, and contrasts the costs of that approach with alternative approaches to facing the problems of rising sea levels, rising temperature, providing clean drinking water to impoverished nations, etc. The costs are significantly and dramatically less implementing these more direct methods and the benefits are generated now, rather than at some distant point in the future.

This clear headed cost-benefit approach to the climate change debate comes from an economist’s perspective, looking at the “opportunity costs” of trying to control carbon emissions. Because we can’t do everything we would like to do, we must prioritize what we do, and controlling carbon emissions does not come close to the top of the priority list once the politics and hysteria are swept away.

I highly recommend this book to anyone interested in the climate change debate.

Bipartisan Reforms Would Strengthen State Education

2009-11-26T04:01:00.000-08:00

This article by Senate Majority Leader Mike Bishop makes sense. Education must be a top priority in our long run economic growth in our state (along with improving the business climate). The challenge is finding sufficient savings in the remainder of the state budget to keep adequately funding education without raising taxes. It can be done.

“Bipartisan reforms would strengthen state education
Sen. Michael D. Bishop

Politics should stop at the classroom door when reforming education.

Michigan must move now to turn around failing schools.

When it comes to improving the education of our children, making sure they have top-quality schools and preparing them for 21st-century jobs, we must put politics aside and work together

Now is the time to make real, meaningful reforms to turn around failing schools and increase statewide student achievement.

Senate Republicans continue to work on several key reforms that fulfill the requirements of President Barack Obama's Race to the Top plan, which makes our state eligible for up to $400 million in additional funding to improve Michigan schools. . . . ”

Senate bills

Bill 965: Creates an "interim teaching certificate" for individuals with a college bachelor's degree who are taking a 12 credit hour alternative "intensive teaching program" that meets state standards.
Bills 925 and 926: Allows "schools of excellence" operated by highly accredited charter or other public schools from outside the state. They don't count against state cap of 150 charter schools. Districts where these schools exist would receive state "transition payments" to ease possible student losses.
Bills 981-983: Failing public schools could run by a "turnaround school chief educational officer" or management firm that could reassign workers, suspend union work rules and control curriculum and discretionary spending.

Click here for more.

10 Republican Principles Proposed by RNC Leaders

2009-11-25T18:17:00.000-08:00

Some members of the Republican National Committee (RNC) signed on to a resolution that will be proposed at the RNC's winter meeting in January, which lists 10 positions Republican candidates should support to demonstrate that they "espouse conservative principles and public policies":

We support smaller government, smaller national debt, lower deficits and lower taxes by opposing bills like Obama's "stimulus" bill;
We support market-based health care reform and oppose Obama-style government run health care;
We support market-based energy reforms by opposing cap and trade legislation;
We support workers' right to secret ballot by opposing card check;
We support legal immigration and assimilation into American society by opposing amnesty for illegal immigrants;
We support victory in Iraq and Afghanistan by supporting military-recommended troop surges;
We support containment of Iran and North Korea, particularly effective action to eliminate their nuclear weapons threat;
We support retention of the Defense of Marriage Act;
We support protecting the lives of vulnerable persons by opposing health care rationing and denial of health care and government funding of abortion; and
We support the right to keep and bear arms by opposing government restrictions on gun ownership.

In the spirit of Ronald Reagan "that someone who agreed with him 8 out of 10 times was his friend, not his opponent.", I agree with the 10 principles.

The only one I may not be in total agreement is No. 1, in that I probably would have voted for "a" stimulus bill, as the economy was close to a meltdown. I would have wanted a bill more aimed with tax cuts, rather than spending on pet projects that furthered the Democrats' agenda and paid off some of their campaign debts to many interest groups.

Lifelong Learning

2009-11-20T11:50:00.000-08:00

Yesterday I finished listening to the 36 lecture CD series, "Economics", by Timothy Taylor, one of the "Great Courses" from The Teaching College. Even after having taken 27 courses in Economics or Econometrics throughout the years, it was a great refresher, with a very balanced discussion of the pros and cons of many policy issues. I highly recommend it.

I have listened to MANY courses in the Great Courses series, making good use of my drive time, and highly recommend them. Many are available from the Saline District Library.

Anyone who says they cannot afford to get an education is making excuses, because if one wants, he/she can get an education free, just maybe not a college degree. A person can improve their marketability and value in the labor market.

I fully believe, in the long run, one is compensated in direct proportion to the service to others one provides. How much service do you wish to provide?

Gas Tax Increase Acceptable Only if Coupled With Change in Allocation Formula

2009-10-21T08:26:00.000-07:00

State’s deteriorating roads could lose almost half of their funding if state can’t find the money to match federal dollars earmarked for Michigan Tom Gantert, reportingmichigan.org, October 18, 2009 reports the following:

According to the Michigan Department of Transportation, the state could lose a combined $1.9 billion in federal dollars in 2011, 2012 and 2013 because the state may not be able to afford the 20-percent matching funds necessary to receive federal support.

“In 2010, the state has $1.2 billion set aside for highway and maintenance programs. Without the federal aid, that annual figure would drop to $477 million in 2011, $524 million in 2012 and $418 million in 2013.

State and federal gas taxes and vehicle registration fees are the primary sources of revenues for the Michigan Transportation Fund. Every consumer pays 19 cents in state taxes and 18.4 cents in federal taxes for every gallon of gas. That 18.4 cents is given back to the states by the federal government with some conditions. The state must provide matching funds to the returned-federal tax. The federal government returns to Michigan all but about eight cents on every dollar.”

Here’s the rub:

“According to the Michigan’s Roads and Bridges 2008 annual report put out by the state’s Michigan Transportation Asset Management Council, more of Michigan’s roads are falling into disrepair every year.

The council says about 17,378 lane miles of federal-aid-eligible roads were classified as in poor condition. Almost 1/3 of the state’s federal-eligible-roads are now in poor condition. That number has jumped from 13.6 percent in 2004 to 31.6 percent in 2008. The council stated that in 2008, only 19.4 percent of the state’s federal-eligible roads were in “good” condition.

Even worse, it’s believed that 43 percent of the state’s non-federal-aid roads (9,223 lane miles) are in “poor” condition.

It would cost $7.2 billion to bring all of the state’s roads up to “good” condition, the council estimated.”

"Doing nothing on this key issue would mean lost jobs, bad roads, sending federal money for Michigan to other states, and a failure to improve public transit — which does not sound like a winning political strategy to me," Michigan Chamber of Commerce CEO Rich Studley has said. The SPECIAL REPORT: Michigan's tax reform playbook, by The Center for Michigan - August 6, 2009.

So how is Michigan to come up with the matching funds?

“Michigan’s flat 19-cents-a-gallon gas tax was last raised in 1997. . . . In a rare show of consensus, Granholm, MDOT officials and the Michigan Chamber all back changing the tax to a percentage of the wholesale price, which means the state would take in more when gas rises and less when it falls. Although the Chamber generally opposes tax increases, Studley said more money for roads is critical for businesses.” The SPECIAL REPORT: Michigan's tax reform playbook, by The Center for Michigan - August 6, 2009.

While I am also not generally in favor of tax increases, a state gas tax increase would be consistent with the basic principle of public finance is that, to the extent possible, users of government services that directly benefit from the provision of such services should pay for the privilege of doing so. That is, user fees are the most defensible form of taxation. And, while gas mileage varies from vehicle to vehicle, the amount of gas consumed is a close approximation of the usage of the roads and highways. Further, if we are not willing to pay for essential government services that we demand and use, what are we willing to pay for?

I would not favor a gas tax increase, however, without a change in the allocation formula for distributing about $2 billion of funds per year from the Michigan Transportation Fund under Public Act 51 of 1951. The current distribution formula is primarily based on the number of miles of roads and highways in the various jurisdictions. The formula does not distinguish between 2-lane and 4-lane roads, nor consider highway utilization factors such as vehicle miles driven or even the physical condition of the roads. Inefficient allocation of scarce resources results, with rural areas with relatively lightly traveled roads getting a disproportionate amount compared with more urban areas. See the Citizens Research Council’s February, 2008 report Improving the Efficiency of Michigan’s Highway Revenue Sharing Formula

To make matters worse from the perspective of the voters of the 55th Legislative District which I expect to represent, Monroe and Washtenaw Counties fare very poorly in the current system. On a per capita basis, Washtenaw County is second to last among the counties, while Monroe County is 4th from last. On a vehicle miles traveled basis, Monroe County is dead last, and Washtenaw County second to last. CRC, pages 8 and 9.

One proposal to raise the gas tax 9 cents per gallon over 3 years and the diesel tax 13 cents over three years would generate an additional $500 million each year for Michigan’s highway system after being fully phased in. If the allocation formula is not changed, some of the additional money would go to counties where the roads are in much better shape than in other counties. The formula must be changed to put more emphasis on highway condition, capacity and utilization, before any increase in the gas tax would be acceptable.

Comments?

Can the Federal government require anyone to buy anything, or is there some Constitutional limit?

2009-10-21T06:05:00.000-07:00

In my October 2, 2009 blog entry Constitutional Limits Tested by Health Care Reform? in which I discussed Health-Care Reform and the Constitution: Why hasn't the Commerce Clause been read to allow interstate insurance sales? September 15, 2009 article in the Wall Street Journal by Andrew P. Napolitano, the question was raised, “Can the Federal government require anyone to buy anything, or is there some Constitutional limit?”

The following two well written articles amplify my concerns:

Freedom's Destruction By Constitutional De-Construction, by Timothy Baldwin, 10/19/09
Can Obama and Congress Order You to Buy Broccoli? by Terry Jeffrey , 10/21/09

With a Constitution written with a multitude of checks and balances, where have the limits gone? We have slipped down the slippery slope inch by inch to the point that most Americans believe we live in a democracy rather than a limited government.

The constitutional limit in question is the Tenth Amendment, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” In other words, the principle was that the Federal Government is one of enumerated and limited powers.

The first slippage was the Supreme Court ruling in 1819 in the McColluch v. Maryland case that the federal government had powers to do things that were implied by a more general grant of power to do things. This was an interpretation of the “Necessary and Proper Clause”, i.e., Article One of the United States Constitution, section 8, clause 18: “The Congress shall have Power - To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.”

Then came the “supremacy clause” in which the federal government supersedes any state action that is in conflict with the federal law in the same subject area. In the New Deal era, a major erosion occurred with the extension of the commerce clause to most anything that might somehow cross state lines or otherwise affect interstate commerce. Then, the protection of the “substantive due process” requirement before property could be taken by the government was gutted. The Court ruled that the means to an end that the government could mandate need only have some rational connection to a legitimate government goal or end. Further, the Congress need not actually have made that rational connection at the time of enacting the law but the Court could do so later if in the use of its imagination it could make that connection.

All this begs the question raised in Jeffrey’s article, “If the federal government can mandate the purchase of health insurance, what stops it from requiring people to buy broccoli, or anything else, for that matter?

Why is this important? Without limits, any government that has supreme authority to do anything or take anything from someone is by definition tyranny – whether it be a monarchy, oligarchy, fascist, or a pure, unlimited democracy. As I pointed out in my October 7, 2009 blog entry Robbing Peter to Pay Paul?

“The hazard is that with a reported 47% of Americans not paying income tax, we have reached the point that the receivers (including the public service employees who also benefit from government transfers, and their liberal sympathizers, such as private union members) are a majority that are being supported by a minority of wealth producers. "The government who robs Peter to pay Paul can always depend on the support of Paul," said George Bernard Shaw.” Without limits, the "have-nots" have to power to take anything they want from the "haves".

We must somehow restore some limits to our Constitutional government, or we face a continued bit by bit loss of our freedoms which we enjoy and take for granted in our free society.

A resource that explains this in much greater detail can be found on Wikipedia’s Tenth Amendment to the United States Constitution with its references to The Tenth Amendment Center, which works to preserve and protect Tenth Amendment freedoms through information and education. The center serves as a forum for the study and exploration of states’ rights issues, focusing primarily on the decentralization of federal government power.

Cornell University Law School Legal Information Institute’s CRS Annotated Constitution Tenth Amendment also contains an excellent detailed legal discussion of the court cases.

Comments?

Controlling Public School Employee Benefit Costs

2009-10-20T14:51:00.000-07:00

The Detroit News is highlighting ideas from various groups to promote discussion on reform, restructuring government and the economy.

Idea 20 : Cap school employee health benefits and/or enroll them in health savings accounts.

Idea 14: Consolidate health care coverage for all public employees in Michigan in a single insurance pool.

Idea 19: Transition newly hired Michigan teachers to a defined contribution retirement system or 401(k).

All three of these ideas attempt to control costs of benefits, yet in ways that do not infringe on the results of years of collective bargaining between the teachers’ unions and the local school districts.

The typical employee share of the health insurance cost is 5 to 10 percent, compared with an average of 25% in the private sector. With statewide school health insurance expenses of $1.93 billion in 2008, increasing the percentage to that of the private sector would save more than $290 million a year. Moving all school employees to high-deductible Health Savings Account plans would save even more -- as much as $450 million in the first year and $26 billion through 2021, according to a Mackinac Center for Public Policy analysis.

An alternative approach to controlling rising health care costs would be to create a health insurance pool for all public employees which is believed would cut administrative costs and provide a larger number of customers to negotiate lower rates. This was a Republican idea which was going nowhere until House Speaker Andy Dillon (D) came out publicly this summer in favor of such an approach. See the Hays Group 2005 Report on the Feasibility and Cost-Effectiveness of a Consolidated State-wide Health Benefits System for Michigan Public School Employees.

Dillon’s white paper estimated that pooling health insurance would save up to $900 million a year, versus an estimate by the American Federation of Teachers and International Union of Operating Engineers in 2005 of only $156 million to $223 million a year for teachers (or a 7 percent savings). Applying the 7 percent savings across all government and school employees amounts to more than $500 million a year. Whichever estimate is correct, and it is impossible to say ahead of time which will be more correct, as the savings will depend on the details of the proposals enacted, the savings appear worthwhile to achieve.

A second expensive benefit is the teachers’ retirement plan.

The Michigan Public School Employees' Retirement System (MPSERS) provides pension and other post-employment benefits to more than 160,000 retirees and beneficiaries. There are 715 participating employers, including K-12 districts, public school academies, district libraries, tax supported community colleges, and seven universities. Under the current “defined benefit” plan, each of which is required to contribute the full actuarial funding contribution amount to fund pension benefits for its employees. (1.5% times the years of service times the highest three year average compensation, plus qualified retirees get health insurance coverage.) As the investment yield rises and falls, and estimates of retirees’ health care costs fluctuate, the actuaries calculate the contribution necessary to fully fund the plan, with a current rate of almost 17% of each employee’s wages (and projected to rise even higher).

The recommendation is to switch to a “defined contribution” plan, where the employer would contribute a set amount each year, and the ultimate benefit the employee would receive would depend on how well the investment of the contributions do. In short, the risk of market variation is shifted to the employee. The contribution rate might also be somewhat less than current and forecasted contribution rates.

The Citizens Research Council of Michigan in July, 2009 said in Michigan State and Local Government Retirement Systems, page 51:

“Transitioning newly hired Michigan teachers to a defined contribution retirement system would provide a much-needed structural reform to the state budget and prevent long-term legacy costs that are unsustainable for the Michigan education system and state budget. . . .

However, the transition from closing a defined benefit plan to new entrants, and placing all new hires in a defined contribution plan, normally requires ongoing contributions to both plans that may entail an increase in overall pension contributions for a number of years, so careful actuarial and budget analysis is critical to informed decision-making.”

The problem with high and rising MPSERS contribution rates is nothing new, with the Citizens Research Council forecasting significant funding difficulties in its 2004 report Financing Michigan Retired Teacher Pension and Health Care Benefits, A step in the right direction since then has been switching to a more actuarially sound “graded premium” plan for the retirees' health benefits. Under this change, retirees are required to contribute to the health insurance cost on a sliding scale based on the number of years of service, as compared with needing to contribute only 10% once vested after 10 years of service regardless of whether the years of service accrued were 10 or 35.

Nonetheless, the burden of the current plan is far above what private industry carries; in other words, the benefits are far richer than private sector employees enjoy.

The Michigan Education Association, the state's largest teachers and school employee union, already runs its own health insurance pool through the Michigan Education Special Services Association, which covers more than half of public school and community college employees. The MEA opposes any increase in the teachers’ share of the cost, the pooling of the health care plans, and transition to a contributory retirements system.

As much as we all like individual teachers, we must push for every efficiency in government that we can, in light of the scarce dollars we have to spend. Increasing the school funding by raising taxes in the face of an economic downturn to continue unsustainable benefit programs for teachers is not only politically unpalatable, but also counterproductive in encouraging job growth in Michigan.

Comments?

Repeal PA 312 to Eliminate Binding Arbitration for Police and Firefighters?

2009-10-20T07:09:00.000-07:00

The Detroit News is highlighting ideas from various groups to promote discussion on reform, restructuring government and the economy.

Idea 2: Eliminate binding arbitration for municipal police and fire workers.

“Why: Public Act [312] is four decades old and prevents police and firefighters from going on strike by mandating that labor disputes be settled by third party, binding arbitration. Arbitrators do not take into consideration the financial status of local governmental units or their ability to pay the awards mandated by the arbitrators. Public safety costs amount to as much as half of an average city budget. Current law prevents money-saving consolidation of police and fire departments and can drive pension benefits to the point where, in some cases, retirement incomes are greater than wages when officers are still on the job.

Benefit: Economic studies estimate that removing binding arbitration could result in a 3 percent to 5 percent reduction in local government expenditures. Local governments in Michigan spent $2 billion on public safety in 2006. A 4 percent reduction would amount to annual savings of $80 million statewide. Not only would repealing Public Act 312 directly reduce costs to municipalities and help them manage their budgets, it would also provide flexibility to achieve efficient and cost-effective consolidation and collaboration among Michigan's 1,800 units of local government.

How: The state Legislature would have to repeal Public Act 312.

Obstacle: Public safety unions (such as the Michigan Association of Police, Michigan Professional Fire Fighters Union and Police Officers Association of Michigan) argue PA 312 does exactly what it was intended to do and this is prevent strikes. They also contend repealing PA 312 is an attempt to solve a problem affecting a small amount of municipalities with a statewide solution.

Sources: Business Leaders for Michigan and Center for Michigan. “

My Comments: We must all be thankful for our police and firefighters who risk their lives in serving us – in protecting our lives and properties. However, that does not mean we need to approve every demand that their unions make. While proper wage and benefits must be paid our public employees, PA 312 has resulted in unsustainable levels of compensation set by arbitrators without regard to the municipalities ability to pay, sometimes simply on the bald assertion that the municipality could always raise taxes.

The Michigan Municipal League has worked for months trying to get a compromise falling far short of complete repeal of the act and yet get greater consideration for the taxpayers' perspective. That faces as much opposition and political backlash as complete repeal, so I simply favor repeal.

There should be checks and balances in every governmental action. PA 312 takes away the taxpayers’ perspective. We must push for every cost control in government that we can, in light of the scarce dollars we have to spend. Increasing taxes to pay for exorbitant wages and benefits for even our most valued public employees in the face of an economic downturn is not only politically unpalatable, but also counterproductive in encouraging job growth in Michigan.

Comments?

Consolidate School Services? Districts?

2009-10-20T06:32:00.000-07:00

The Detroit News is highlighting ideas from various groups to promote discussion on reform, restructuring government and the economy.

Idea 11: Intensify school district consolidation. Intensify school district consolidation and service sharing.

Idea 22: Slash school district bureaucracy. Save tax dollars and drive more money into the classroom for students and teachers by reducing excessive administrative overhead in K-12 education.

A law was passed a couple of years ago requiring each Intermediate School District (ISD, or RESA – regional educational service agency, as in the case of Wayne RESA) to prepare a report about potential service sharing opportunities that might save money. The idea was that consolidation of services, without actual consolidation of districts, might create possibilities of economies of scale, and therefore reduce the number of people required to perform many of the support services. Some of this has now occurred, most notable in districts consolidating payroll services and some districts sharing Business Managers. Big savings has not occurred, but every bit of greater efficiency helps.

Resistance to service sharing often comes legitimately because personnel in smaller districts perform multiple tasks. If one of the tasks is contracted out to the ISD, the other tasks still remain to be done. Sometimes, the position can be downgraded to a part-time position, other times it can’t. Until you eliminate the full or partial FTE’s (full time equivalents) of personnel at the local levels, no savings occur. Less defensible, but understandable, resistance comes from the fact that unless you can reduce staff by attrition, layoffs of good people who have become friends must occur, something no one wants to do.

Bottom line: voluntary service sharing will result in very small savings.

Consolidating districts into larger units is another idea promoted by the Detroit News. They mention two ways this might be done:

(1) Pass legislation (patterned after the federal military base closing commission) to establish a School District Streamlining Commission that would conduct public hearings and recommend to the Legislature a 50 percent reduction in the number of school districts from 552 to 276. The recommendation could not be amended and would automatically take effect unless rejected by both houses of the Legislature.

(2) Pass legislation (based on a concept by state Superintendent of Public Instruction Mike Flanagan) that would limit the role of the 552 school districts solely to academic purposes and require the immediate transfer and consolidation of all non-instructional responsibilities to the 57 intermediate school districts.

Either proposed legislation would need to incorporate changes to the Urban Cooperation Act (PA 7 of 1967) which acts as a disincentive to consolidate government entities. It practically requires any intergovernmental service sharing between entities to go to the highest wage and benefit level among the entities, as the act prohibits any employee from being harmed. In other words, all savings is wiped out and often costs would actually increase. That is why the push was to consolidate services via intergovernmental contract, rather than consolidation of entities. Amending the Urban Cooperation Act is promoted by the non-partisan Center for Michigan. See How to save Michigan's local communities.

I have mixed feelings about the consolidation proposals, but come out in favor of such proposals.

Voluntary methods are unlikely to work.
Local school district boards and superintendents cannot withstand the pressures from the unions to grant wage and benefits that the districts can’t afford. A more centralized board might.
The model is used in some other states where the school district is the entire county. In other words, opponents can’t attack this as “It will never work.”
Consolidating every district into the county may or may not make sense. After awhile in increasing size of an entity, you begin to have "dis-economies of scale", where instead of efficiencies, you get layer after layer of bureaucracy. Thus the Streamlining Commission approach has some merit, as the Commission could look at consolidation on a case-by-case basis and recommend consolidation only where it would appear to make sense.
On the other hand, a split between instructional and non-instructional services proposed in the Flanagan approach is tough to make. For example, increasing class sizes is one way to save money, but at the expense of educational goals. Similarly, instructional support personnel, such as parapros, can be a great help in the instructional program, but cost money.

My theory while I worked as a school business manager was to look at the instructional goals, and the accompanying instructional strategies and tactics to achieve those goals, and budget around those, rather than try to fit whatever instruction can fit within a given amount of money. That derived from my bottom-line focus from private business management, and my realization that student achievement was the objective in schools.

In short, the instructional objectives are so tied up in the financial decisions, that separating one from the other is almost impossible. Given this difficulty, I would lean in favor of complete consolidation, if the Urban Cooperation Act effects of actually raising costs can be avoided. In some cases, it might make sense to go all the way towards consolidation, and in other cases it might make sense to consolidate the support services of Business Office, Personnel, transportation, custodial, food service and technology support.
Local resistance will be tough, as the concept or “ideal” of local control runs deep in school government. Parents want to feel they have a say in the education of their children. Further, old loyalties die hard. “My granddaddy was an Eagle, my daddy was an Eagle, I was an Eagle, and by God, my kids will be Eagles!” can be heard more times than you care to hear.
Few elected officials will voluntarily give up their positions of power as school board members. For many, this is the most important thing they have ever done in their lives, and the "power" they feel they have is not easily relinquished.

We must push for every efficiency in government that we can, in light of the scarce dollars we have to spend. Increasing the school funding by raising taxes in the face of an economic downturn is not only politically unpalatable, but also counterproductive in encouraging job growth in Michigan.

Comments?

The Actual Number of "Uninsured" in the US

2009-10-18T17:01:00.000-07:00

The President and his minions often cite the figure of 46 million Americans being uninsured, which is given as the "crisis" necessitating "Health Care Reform". Here is a breakdown of that figure, as taken from Liberal Media and Liberal Congress Create Health Care ‘Crisis’ Where There Is None.

"According to the Census Bureau, the number of uninsured is 45,657,000 people — that’s 343,000 people less than is usually reported. BUT the Census Bureau also documents that 9.7 million of the 45.7 million uninsured are “not a citizen.”

. . .

Among those uninsured are 17 million who make at least $50,000 a year (the median household income is $50,233) . . . Economists at the National Bureau of Economic Research estimate that 25 to 75 percent of people who do not buy health insurance “could afford to do so.”

Further, the Congressional Budget Office says that 45 percent of the uninsured will be insured within four months.

Finally, the liberal Kaiser Family Foundation has estimated that the number of Americans who lack health insurance because they cannot afford it and/or do not qualify for government programs is between 8.2 million and 13.9 million — or an average of 11 million people.

. . .

Take the 11 million uninsured figure — the accurate one — and know that if all 11 million fell down and broke their arm, they could walk into any hospital or clinic in the country and be treated. It’s the law that they must be treated.

If you’ve ever been to an emergency room, you know this is true. . . "

Knowing these figures makes transforming 1/6 of our economy for uncertain results at tremendous cost seem a lot less necessary, doesn't it?

Comments?

Washtenaw County ISD Millage - There are Better Options

2009-10-18T06:08:00.000-07:00

As a former school business manager, I can tell you from an "insiders" perspective that there are still ways to cut the spending of school districts that the districts are electing not to choose. Instead, they fear monger with the parents about cutting services to kids, cutting teachers, increasing class sizes, etc.

Contracting out additional support services has been recommended in the booklet "Six Habits of Fiscally Responsible Public School Districts" for over 10 years, but little adopted by school districts. At Adrian in 2006, we could have saved $800,000 per year if we had contracted out our custodial work. Only later did they partially contract out, and just recently contracted out the transportation department as well. This is not easy, and good people are adversely affected. Nonetheless, if given the choice of protecting adult jobs or better educating the students, what would be your choice? What if you were on the school board and the mission was to educate students?

Another option would be to decrease the actual total cost structure of the wages and benefits, instead of decreasing staff numbers. Education is a people intensive business, and about 85% of a district's budget is devoted to people costs. State law permits school distrists to impose a contract on the employees if agreement in collective bargaining is impossible. I am aware of only one district in the state with over 500 school districts which has had the guts to do this. The key target must be the teachers' unions, as they are the big driver of the compensation levels among all school employee groups.

I am not against teachers, as most I have had the pleasure of knowing are wonderful, dedicated educators. Nor am I against education, as education was the key for my 5 brothers and sisters and me getting out of poverty after my dad died leaving my mom with us 6 kids. But, I am not for raising taxes in the current economic downturn with struggling homeowners and businesses when there is a better way to adequately fund the education of our kids.

Also, backing a tax increase thinking it will "improve the economy" is a smoke screen we should all be able to see through.

I recommend a "No" vote on the proposed millage.

Consumer Confidence, the Paradox of Thrift. Is it all a Hoax?

2009-10-17T03:42:00.000-07:00

A friend of mine and I had a running commentary on whether consumer confidence made any difference. Her contention followed the Mises Institute view that the “paradox of thrift” was a hoax and that only savings stimulated the economy. This was in response to my blog posting of The Dow Reaching 10,000 is a BIG Deal.

The earlier comments were that consumer confidence did not matter, that it was a hoax.

The problem with disregarding "unreal" things like consumer confidence is that perceptions are real things which significantly affect things, and in unforeseen and major ways. Otherwise, forecasts would be easy.

One of the things you learn when you are in business marketing a product or service is that perceptions are real, even if a perception is not true. For example, in 1974 the media made a big deal about apple growers using a chemical called Alar on apples, claiming it might have an adverse health effect. People got scared and bought far fewer apples, despite the fact that there was in truth no health concern about the product. Perceptions have real market effects. The apple growers lost money.

The same is true for consumer confidence. When people get concerned about their financial security because of real or imaginary events publicized in the media, they are a bit more cautious with their money. They spend less and save more. Individually, that is likely a good and prudent thing. Collectively, however, the reduced consumer spending has the effect of causing the economy to slow down, kind of a self-fulfilling prophecy.

The markets are clearly affected by psychological factors, swinging from greed in a bubble to fear in a downturn. This is nothing new, and nothing concocted by the media in either the Bush or Obama presidencies. We clearly were in a bubble stage at 14,000 Dow. Only time will tell whether 10,000 is a good number.

I, however, am optimistic that nationally we have hit bottom and we will begin a slow recovery. Are there hazards? Yes. Are there things that could throw the economy backwards? Surely, there always might be. But, I am betting my money on the resilient American economy. In other words, I am putting my money where my mouth is.

Her response was to cite the following articles which contain the free market view: http://mises.org/story/851, http://mises.org/story/1156, http://www.cato.org/pubs/journal/cj16n1-7.html and http://mises.org/story/3194

I believe there is a way to reconcile the two views.

The paradox of thrift has a short run effect, without subsequent reallocation of resources and readjustment of prices. In the short run, no matter how much additional production occurs due to the additional savings and investment, the economy is not helped much. Just ask the (former) Big Three automakers with their swollen inventories in the past two years despite generous rebate programs.
On the other hand, in the long run, with time for resources to be reallocated and prices to adjust, additional savings will drive interest rates down, which will not only discourage additional savings but also drive down the costs of business, allowing either higher business earnings or lower prices of the business’s products. With anemic demand, the most likely result is a reduction in prices to ultimately increase purchases to reduce those inventories. Over time, the free market system will bring things back into equilibrium, at least until the next disruptive event.

A problem in this long run scenario is the downward “stickiness” of some factors of production, most notably the wages of union workers. To the extent that these wages are not adjusted to “market clearing” levels, the equilibrium is hard to obtain. There are many other factors that drag on these adjustments as well, in our “mixed economy”.

So, I am aligned with your thinking that in theory, the economy would readjust itself and get back into equilibrium without any government intervention. What concerns many economists, however, is that despite low interest rates and a collapse of spending and mass underutilization of labor and other resources and falling commodity and other prices, the economy did not pick up for years and years in the Great Depression. (What we were taught was called “the liquidity trap”.) The danger of that experience being repeated is what brings many to support government intervention to shorten the downturn.

Of course, there is no free lunch, and the deficit spending must ultimately be paid for with increased taxes, which ultimately are a drag on the economy. When I took freshman economics, the textbook taught that there was always a net positive impact of government spending. They never mentioned the downside of the taxation, which in the long run counterbalances the stimulus. Alternatively, in the short run, instead of raising taxes, a deficit may occur which is financed by government borrowing, which has the impact of increasing the interest rates, another drag on recovery. If the Fed then tries to counteract that with increasing the money supply to hold interest rates down, then the danger of inflation rears its head. Hmm, sounds like fix after fix requires further fixes, huh?

Comments? Way too technical? Sorry, the world is a complicated place.

The Dow Reaching 10,000 is a BIG Deal

2009-10-15T06:02:00.000-07:00

My comment on Facebook, 10/14/09: “Woohoo! The Dow is over 10,000. I am glad I did not panic and abandon stocks like many others did when they did not like how their 200.5(k)'s tanked! (For the non-mathematically inclined, a 200.5(k) is your old 401(k) that was only worth half as much as it did before.)”

My primary election opponent’s comment: “WHOOP DE DO! 10K is just another number. So the market is up more than 60% from the March low. It is STILL about 30% below where it was a year and a half ago. I am more concerned with the policies at the national level, the monetarizing of the national debt, and the consequent inevitable inflation reducing the significance of any benchmark.

My follow-up: “The performance of the stock market as indexed by the Dow is much more than WHOOP DE DO!

First of all, although 10,000 may be looked at as “just another number”, it is also perceived as an important psychological barrier. Consumer perception, as translated into consumer confidence, is critical. Despite the fanciest econometric forecasting models economists create, varying levels of consumer confidence and other market psychological impacts create uncertainties that are often totally unpredictable. However, improved consumer confidence is expected to be a necessary component of a recovering economy. Personal consumption (which includes consumer spending AND government health care spending), at 70 percent, was the largest component of GDP in 2006. (The gross domestic product (GDP) is the generally accepted measure of the size of the national economy. It is the sum of investment, personal consumption, government spending, and net exports. Other components of GDP include Investment at 17%, Government spending at 19% and Net exports at minus 6%.)

“One year after a U.S. economy said to be overly dependent upon consumer spending toppled into crisis, consumption now makes up an even larger share of national output.

Personal spending on cars, clothes, food and other items accounts for 71% of gross domestic product, according to the latest Bureau of Economic Analysis data. That's slightly above the level one year ago and well above the long-term average around 65%. . . .

Now, with credit tight, wages flat-lining and unemployment steadily ticking higher, consumers are strapped. Personal spending in the second quarter was $195 billion below the figure for the same period last year. That 1.9% drop is significant — over the 20 years that ended in 2006, consumer spending reliably increased at an annual 3.3% rate.

But other parts of the economy, such as construction and businesses' spending on new equipment, shrank even faster since mid-2008. "Other components of GDP just got crushed," . . . .” http://www.usatoday.com/money/economy/2009-10-11-consumer-spending_N.htm

The bottom line is that until consumer confidence returns and consumer spending picks up, the economy cannot be expected to pick up significantly as businesses are not likely to increase production and increase their inventories until consumers resume their buying. Now, we cannot expect consumer spending to return to the recent heyday when people regarded their homes as their personal ATM machines to support unsustainable spending, Nonetheless, reasonable consumer spending is certainly much greater than the current hunkering down most people are doing, even those with plenty of money to spend.

The Dow hitting 10,000 also has another, very important effect – the wealth effect. As people perceive they are wealthier, they spend more. While 10,000 is well off the Dow high of 14,164.53 on October 9, 2007, it surely is a lot better than the recent low of 6,547 on March 9, 2009. This increase in perceived wealth from just 7 months ago will have an impact on consumer spending, if the Dow level can be maintained long enough to restore confidence.

You are right to be concerned with potential inflation caused by the massive monetization of the Federal budget deficits and other expansionary efforts of the Federal Reserve Board. So far, we have not seen the inflationary effects of the increased money supply because the “velocity” of money has dropped precipitously. (Nominal gross domestic product = money supply x velocity.) Velocity is the turnover rate, or speed that people holding money spend or invest it. As consumer and investor confidence returns, the velocity will pick up, increasing inflation pressures. As long as there is ample underutilized capacity in the economy (unemployed labor, closed or underutilized factories), little inflation is likely, as the result in the short run will be increased production.

Ultimately, however, the Fed will need to reel in the massive increase in the money supply to avoid inflation through unwinding its opening of the auction windows and its open market operations. Whether it will do so at the right time, is questionable. The Fed will be walking the fine line of wanting to bring the money supply into line to prevent inflation while not doing so too soon and squelching the economic recovery. Political pressures will be to delay until clear signs of recovery are seen, and with the lag in the effect on the economy of Fed actions, that will likely result in at least some inflation.

So, the Dow at 10,000 is a big deal, not only for the economy as a whole, but also, I like the way my portfolio looks today a lot better than I did on March 9, 2009.

Comments?

Activists' Dilemma: My Party's Candidate and I Don't Agree!

2009-10-14T12:38:00.000-07:00

A very conservative person (or perhaps a person who feels strongly about a particular issue ) often faces a dilemma. What are they to do when their party’s elected official or candidate is running for office but who advocates positions which are not consistent with the conservative citizen’s views? Vote for the Democrat? Or sit on their hands in protest and allow the Democrat candidate to win due to their inaction? I believe neither strategy is the best solution.

The choices legislators face are not always the ones they would like to face. In the State budget standoff currently, for example, we have a Democrat Governor and a Democrat majority in the House of Representatives. The choices basically are spending cuts, tax increases, a combination of spending cuts and tax increases, or in the event of no agreement, a government shutdown. If the Republican Senate insists on no tax increases as the solution and the Democrat House says no more spending cuts, a “game of chicken” occurs. Who is going to give? If neither, an extended government shutdown (or an extended period of “continuation budgets”) occurs. This reflects negatively nationally and globally as a place to locate or start a business.

Pressure mounts on the legislators to “do their job” and reach agreement. The legislators are expected to be “statesmen”, to give primacy to “the public good”, and to give up their individual preferences.

Choices between evils must be made by someone. Ultimately, more likely, some compromise is reached where all must accept something they regard as evil. Tactically, those who are forced to make these hard choices (i.e., to take the hard votes) are allocated by the respective Republican and Democrat caucuses in each chamber to those legislators who either are not going to run for office again or those legislators who are in “safe” seats. This scenario angers many of the voting public who feel strongly that their legislator has “sold out”, and many more are disgusted on how the process has played out due to the “political games”.

It is also helpful to better understand the mindset of an elected official, so that unrealistic expectations of elected officials are not created. Elected officials are faced with multiple, complex issues. Further, as much as single issue advocates would like to believe, there are few simple, controversial issues faced by a legislator, where a stand for principle must be made. Many such votes are not close, so a vote is easy as the vote really does not affect the outcome of the vote. If the vote is close, again, the “hard votes” are allocated by the party caucus to those who either are not going to run for office again or those legislators who are in “safe” seats.

Legislators seldom make the hard choices to take the hard votes until there is either a deadline or a crisis. That is why little was done to adopt a state budget until September 30 arrived. No one wants to give in. No one wants to take a hard vote against their constituents or vocal advocacy groups.

Do we like this situation? No, but that is reality. The saying that, “There are two things you don’t want anything to do with once you have seen how they are made – legislation and sausage” is all too true. However, we must deal with what is, while working to make things better.

Another factor to consider is that our elected officials make decisions in an atmosphere with much more information about an issue than most citizens have access to. What appears like a simple, black and white decision to some may be some shade of gray to the better informed. For example, on the climate change issue, I see that the weight of the evidence is that global warming is occurring and the man’s activities are causing the warming. But, I have been presented with disconfirming data and arguments that appear to refute that “consensus” opinion. What am I to believe? As an average citizen, I don’t have easy access to trusted experts to evaluate the credibility of the new information. Elected officials do. Now, whether the elected officials seek out that additional expertise or whether they have the intellectual capacity to digest the additional information is another question. Obviously some do and some don’t.

An activist with access to a candidate can attempt to persuade the candidate to change his or her position based on logic or new information the candidate may not have heard before. Or, promises of support (or veiled threats of withholding support) may be tried. Obviously, the ability to persuade will depend tremendously on the relationship you have previously built with the candidate, your credibility and the network of people you can deliver for or against a candidate. In the end, you must usually somehow appeal to “What’s in it for me?” from the candidate’s perspective to effectively persuade. Do they want to be right on an issue? Or do they simply want votes regardless of the correctness of their position?

For hints on how to bridge the chasm between the public and elected officials, see the Citizens or Experts: Who Should We Listen To? page on my Coming Together: Reaching Common Understanding website.

Want to see how your elected official is voting? You can track your US Senators' and Representative's votes by e-mail by signing up for the service at Congress.org. The Mackinaw Center for Public Policy publishes the “Michigan Capitol Confidential” that publishes voting records for state legislators. You can also search your state legislator’s voting record at http://www.michiganvotes.org/

Comments? Suggestions?

Can We Defend Ourselves? The Heritage Foundation says, "No."

2009-10-11T05:59:00.000-07:00

"The Southeast Michigan Committee recently screened 33 Minutes: Protecting America in the New Missile Age. This is a thrilling, one-hour documentary that tells the story of the very real threat foreign enemies pose to every one of us. The truth is brutal - no matter where on Earth a missile is launched from, it would take 33 minutes or less to hit the U.S. target it was programmed to destroy. Despite this present and growing danger, our government has failed to build the missile defense systems capable of defending us against such attacks." Watch the trailer on the Heritage Foundation site.

President Reagan proposed a anti-missle defense system in the '80's that was visionary (labeled derisively at the time as "Star Wars" by the opponents). During the "Mutually Assured Destruction Doctrine" (MADD) era, an anti-missle defense system was considered destablizing, as that would permit the perception that we could launch a preemptive strike and then be able to defend against the retaliatory strike from the USSR. That lessened support for the defense.

Now that deterring a nuclear attack from a major super power is less of a concern than during the Cold War, that concern about "destabilizing" no longer is relevant. What is of concern is the fact that weapons of mass destruction are now or soon will be in the hands of unstable regimes or regimes which support terrorists that within 10 years could have the capability of striking the US via intercontinental ballistic missile. For example, North Korea has been testing its missles and has continued to defy international pressure to stop its nuclear program. Will we be ready to defy its demands once it has the capability to hold us hostage with a threat of attack?

Funding the construction of an anti-ballistic missile defense system now when the economy is weakened, when the American people are tired of funding the wars in Iraq and Afghanistan, and when the US budget deficit is already enormous will face tough opposition. But, defending our country is the number one priority stated in the US Constitution, and a priority it would be folly to ignore.

Comments? Arguments?

The Fight Over a Health Care Reform Bill is not Done

2009-10-10T05:27:00.000-07:00

Vocal opposition to the “Health Care Reform” efforts in Washington, D.C. is cooling. In part, this is because most citizens who become politically active only do so for a short period of time, before returning to their immediate needs in their daily lives. Others have been fooled by the Baucus Senate Finance Committee “health care reform” bill which the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation have calculated will not raise the deficit.

Beware!

There is no “Baucus bill” as it is only a conceptual framework without actual legislative language. See Jubilation over the “Health Care Reform” Bill that Isn’t a Bill and Isn’t Going To Be the Bill and Max's Adventures in Wonderland.
The calculations include increased revenues and “savings” over ten years but the cost of benefits over only 8 years.
The increased revenues are obtained by tax increases.
The “savings” are achieved by benefit reductions, primarily to seniors, and vaporous “cutting fraud and waste”.
The bill is estimated to still leave 25 million Americans uninsured.
The Democrats are likely to ram a bill through the Senate using either

a. 60 votes to invoke the cloture rule to close debate (either by having all Democrats vote for cloture or bring along one or two Republican Senators, such as Snow) or

b. Using Congress’s budget reconciliation process which requires only a simple majority vote, which is outside the normal Senate procedure, which requires 60 votes to end debate on a bill; thus taking away the filibuster, letting some Democrat Senators off the hook to vote for a controversial bill and passing the bill without the need for any Republican votes.

c. And, carving out a bill such as use H.R. 1586—a bill passed by the House in March to impose a 90-percent tax on bonuses paid to employees of certain bailed-out financial institutions—as a ‘shell’ for enacting the final version of the Senate’s health care bill (to evade the Constitutional requirement that such a bill originate in the House of Representatives) The House Democrats are very reluctant to take “unnecessary” hard votes on a bill which may not have the votes in the Senate, due to the first term Democrat Representatives being very nervous about their ability to get re-elected next year.

d. And, passing the bill with little time for the public to read and react to “the final agreed upon” bill, despite cries for the proposed minimal 3 day period that a bill be posted prior to passage. Oops, it appears House and Senate Democrats recently blocked amendments that would have required health care bills to be posted online for 72 hours before a committee vote. Hmm, I guess citizens really wouldn’t be interested anyway, you think?

In short, a bill may be passed using a very unusual closed door procedure to craft the bill with no input from the American people. Such a bill will NOT be bi-partisan, and it will not achieve the dual objectives of containing costs and universal coverage that were the original reasons for many Americans initially supporting the concept of health care reform. This is NOT the change we need!

Comments? Arguments?

How to Influence Public Policy

2009-10-09T15:16:00.000-07:00

The purpose of political activism is to influence public policy. Sometimes this gets confused with being in politics to win elections, but winning elections is simply a means to an end – that being to influence public policy. This article explores the multiple ways that may be done.

Write a letter to your elected official. For hints on how to write an effective letter, click here.
Write a letter to the editor or other publication. Letter to Editor Guide.
Comment on articles on the internet.
Join an online social networking page (e.g., Facebook, MySpace, etc.), invite friends and share articles consistent with your beliefs.
Create a blog about political issues. Its free at https://www.blogger.com/start
Contribute to a campaign, political action committee or political party. Yes, money is still the mother’s milk of politics.
Volunteer on a campaign to help elect an official with whom you agree by putting up a yard sign, telephoning, endorsing the candidate, doorbelling, hosting a coffee hour, stuffing envelopes, etc.
Volunteer on a campaign to help elect an official with whom you wish to gain access to better express your viewpoint, with the hopes of actually influencing his/her votes on issues.
Attend a rally to show support and/or opposition to policies.
Join a political activist group, such as Americans for Prosperity, Campaign for Liberty, Tea Party Express, Tax Day Tea Party, Michigan FairTax Association, Michigan Taxpayers Alliance, RightMichigan.com, Heritage Foundation of Southeast Michigan, etc.
Get active in a political party. (of course, we are hoping that is the Republican Party)
Attend political events, such as political party picnics, Lincoln Day Dinners, parades, fair booths, etc. to get acquainted with politicians and elected officials.
Attend forums, town hall meetings, coffees, etc. hosted by politicians and elected officials to stay informed and contact officials directly.
Go to Washington/Lansing/Township Board/County Commission/School Board meetings and testify on an issue.
Run for office in a hard to win race to enable you to have your voice being heard in debates, etc.
Run for an office to get elected.

Of course, you will be able to best influence public policy if you remain informed and be and sound credible. In addition to the organizations above that disseminate information, here are additional sources of Michigan issues you may wish to tap into: Sources of Balanced Discussion of Issues At the federal level, two of my non-partisan favorites are The Hill and the Committee for a Responsible Federal Budget.

Humans have a natural tendency to collect additional data (and be receptive to sources which provide such data) that confirms their already formed opinions and beliefs. In effect, we put on blinders, so we don't see disconfirming information.

No one knows everything. Everyone's perception of "reality" is filtered by our prior experiences. In short, no one has the monopoly on "the truth". Thus we must stay open to hearing facts and opinions that do not agree with our own. To counteract our natural tendencies, we must seek out contrary sources. If it turns out that our beliefs and opinions are not supported by facts, then we must be willing to rethink our positions and form a new belief. Such constant re-evaluation of one's beliefs is not "waffling", but rather simply an application of the scientific method applied to theories in action.

Comments? Addition suggestions?

Robbing Peter to Pay Paul?

2009-10-07T07:26:00.000-07:00

The government levying taxes to redistribute wealth to others has been referred to as “robbing Peter to pay Paul”, i.e., “robbing” some people of their money to give to others.

The hazard is that with a reported 47% of Americans not paying income tax, we have reached the point that the receivers (including the public service employees who also benefit from government transfers, and their liberal sympathizers, such as private union members) are a majority that are being supported by a minority of wealth producers. "The government who robs Peter to pay Paul can always depend on the support of Paul," said George Bernard Shaw.

Without Constitutional limits being effective to stop these wealth transfers, and the mistaken idea that America is a “democracy”, this is a very real danger. Our entire Constitutional concept of being a “republic” with a limited government is in danger.

But what of the “safety net” which most Americans support? I myself was raised on welfare for the first 17 years of my life after my father died when I was 2 months old and my mom raised us 6 kids. Without that “aid to dependent children”, I am not sure how we would have made it. My mom preached, “Get an education and work hard”. We have, with all six of us getting at least a Bachelor’s degree and four getting a Master’s or more of education. We saw the safety net as temporary.

A problem with many families on welfare is that it has become a cultural fixture, a generation after generation pattern. Many receivers come to think that they are “entitled” to these benefits, and thereby avoid taking any personal responsiblity for improving their situation without continuing public assistance. Currently there is little incentive to get a job at minimum wage when you compare the benefits of the welfare payments, food stamps, Medicaid and Section 8 housing assistance that you would lose if you became employed. Our incentive system is backwards.

Are there solutions to this problem? Should Michigan go back to “workfare”? Or are some “safety net” programs on such a slippery slope that once you agree to the concept, there is no bright line test to know when you have gone too far that you should not start at all? I don’t believe that our society is ready to roll back the safety net that far. Where is the middle ground?

Comments? Your ideas?

Michigan Laws that Impede Greater Efficiency through Collaboration

2009-10-05T13:06:00.000-07:00

Running our governments more efficiently is a laudable goal of many public servants and politicians.

The Citizens Research Council examined Michigan laws and the city charters to investigate potential legal impediments that would limit the ability of communities to expand collaboration. Here are some excerpts from their report Streamlining Functions and Services of Kent County and Metropolitan Grand Rapids Cities, October, 2009.

“Difficult economic conditions are forcing local government officials to reconsider the standard methods of performing functions and providing services. Officials have three options to deal with the fiscal and operational pressures on local governments: 1) increase taxes to yield more revenues; 2) cut spending to meet available revenues; or 3) find alternative methods of providing services at current levels for less money. The first two options can negatively affect the attractiveness of any single municipality relative to its neighbors. They would either increase the cost of residing and operating a business in the municipality or diminish the menu and/or level of services provided. Intergovernmental collaboration provides local governments with alternative methods of performing functions and providing services.” Page i.

“The 2007 CRC Report, Authorization for Interlocal Agreements and Intergovernmental cooperation in Michigan, found 77 specific laws, or provisions of laws, that authorize intergovernmental collaboration. Some laws broadly authorize collaboration for any services that local governments are authorized to provide independently, other laws authorize collaboration for the provision of specific functions or services.

Laws that Impede Collaboration

Those laws were implemented to authorize collaboration among local governments, but provisions in some of these laws severely limit the ability of local governments to come together for joint service provision.

Employee Protection Provisions

Employee protection provisions contained in six separate laws prohibit local governments from using intergovernmental collaboration to displace employees currently engaged in providing the functions or services that are proposed for joint provision. The provisions state that employees affected by transfer because of collaboration should not be put in any worse position relative to worker’s compensation, pension, seniority, wages, sick leave, vacation, health and welfare insurance, or any other benefits that were provided as an employee of one of the merging government service providers. The result of these provisions is that intergovernmental collaboration cannot be used effectively to reduce the size of municipal staffs. In fact, because of these provisions, consolidated service provision may cause the cost of that service to increase rather than decline.

The Urban Cooperation Act, for instance, provides:

“No employee who is transferred to a position with the political subdivision shall by reason of such transfer be placed in any worse position with respect to workmen’s compensation, pension, seniority, wages, sick leave, vacation, health and welfare insurance or any other benefits that he enjoyed as an employee of such acquired system.”

Government tends to be a labor intensive enterprise for many services. It is especially labor intensive for the public safety services – police and fire protection – that consume the majority of the budgets for full service local governments. Laws that hinder the ability to achieve savings through collaboration put public officials in the difficult position of needing to reduce the service levels or eliminate those services completely to achieve savings.

Laws that Make Collaboration More Difficult

Certain other laws do not directly create impediments to collaboration, but either through their construction or their omission makes collaboration more difficult for the local policymakers that must make difficult decisions when initiating collaborative services.

Public Act 336 of 1947, the Public Employment Relations Act (PERA) requires employers and representatives of employees to “…confer in good faith with respect to wages, hours, and other terms and conditions of employment…” [emphasis added]

This wording has been interpreted to mean that the duty to bargain extends to the public employers diversion of work to non-unionized employees or to outside contractors. Thus local governments currently engaged in the provision of a service must submit to collective bargaining potential actions to provide that service collaboratively with another governmental unit or through non-governmental contractors.

Further, Public Act 312 of 1969 submits interest or contract formation disputes between public employers and public safety employees to binding arbitration, as well as issues arising during collective bargaining negotiation over the terms to be included in a new contract. Thus, local governments considering collaboration for the provision of police or fire protection must consider the possibility of those changes to the conditions of employment being subjected Act 312 binding arbitration.
Public Act 116 of 1954, the Election Law, permits intergovernmental collaboration agreements to be used as a cause for recall efforts against elected officials.
Under Public Act 279 of 1909, the Home Rule Cities Act, several cities have amended their charters to create minimum staffing requirements for their police and/or fire departments. Such provisions preclude collaboration as a viable tool for seeking efficiencies in government operations.
Finally, Public Act 206 of 1893, the General Property Tax Act could be amended to facilitate greater tax base sharing. As long as local government officials are driven by the need to expand the tax base, the goal of new development will outweigh the benefit of collaboration.

Reform of these laws would better enable local government officials to make structural changes to the methods of providing government services and create an atmosphere in which leaders think beyond the boundaries that define their local governments.” Pages 7 and 8.

These laws must be examined for either repeal or modification to allow our tax dollars to be more effectively and efficiently spent.

Comments?

National Value Added Tax Considered - Tax Increases Ahead

2009-10-02T13:33:00.001-07:00

We're broke ... time for a new tax: Given the country's fiscal hole, former Fed chair Paul Volcker and many tax experts say there may be a need for a value-added tax. CNN Money.com article.

Look out, here come higher taxes. And, if the value added tax is the means to raise additional revenue, it is a hidden tax.

Almost everyone agrees that we must get our fiscal house in order at the national level, and that means eliminating the huge deficits which are causing the national debt to skyrocket. Where there is little agreement is how to do it. Many think expenditures must be reined in. “Progressives” cited in the article think tax increases are in order.

What is likely is at least some tax increases (whether we like it or not), and to avoid increasing taxes on the poor (defined as anyone making less than $250,000 apparently by Obama’s rhetoric) and to avoid excessively high marginal rates on the “rich”, some experts are looking for an alternative. And that alternative is available from European experience – the value added tax.

“A VAT is tax on consumption similar to a national sales tax. But it's not just paid at the cash register. It's levied at every stage of production. So all businesses involved in making a product or performing a service would pay a VAT. And then the end-user -- such as the retail customer -- ponies up as well.”

A major problem with the value added tax is that it further burdens business, and discourages job creation. It also compounds in multi-stage production systems. Further, it is a hidden tax, as few average citizens will pay the tax directly, and not notice when future increases occur. Need another giveaway program? No problem, just raise the value added tax, as average voters won’t care.

If additional revenues are needed, it would be far better to enact a national Fair Tax, which also is a consumption tax, but does not discourage businesses creating jobs, investing, saving and earning – and is much simpler.

Comments?

Detroit News Editorial Hits a Home Run on What Needs to be Done

2009-10-02T11:40:00.000-07:00

Howes: What's it gonna take for Michigan to change? This Detroit News.com editorial is great.

However, many people talk about the need to reform our tax structure, to have a tax system that better reflects our evolution to a service society, to reform the Michigan Business Tax and its hated 22% surtax, to make the state more business friendly, and to improve the business climate to create jobs.

An out of the box solution that few have yet given great thought about that does all of those things is the proposed Michigan Fair Tax. For details go to http://mifairtax.org/, but, in short, it eliminates the current sales tax, personal income tax, Michigan Business Tax, Personal Property Tax, 6 mill State Education Tax on business and sales tax on all business purchases and replace them all with a simple retail sales tax, which at 9.75% is estimated to be revenue neutral.

I don’t know that the current proposal is perfect, but it sure warrants discussion and evaluation. My bet is, if that were done, people would see that this is far better than what we have, and much more likely to spur job growth in the state.

Now this is not the only thing that needs to be done, as the suggestions in the article regarding the public service unions are also needed. We need to get beyond the entitlement mentality that is crippling Michigan and encourage entrepreneurship, innovation, deferred gratification and hard work.

Comments?

Kids short changed in considering number of days of instruction

2009-10-02T11:09:00.000-07:00

In School Daze Update: Budget fight shrinks school year reforms, John Bebow with the Center for Michigan decries the feeble response by the Legislature to the outcry about the shrinking number of days of school our K-12 students attend school. I commented as follows:

While a school business manager, I argued for more school days rather than fewer, longer days to meet the clock hour requirements. I felt little more was learned with a few more minutes each day, as compared with more days. The bias for fewer days came through negotiations with the teachers’ unions, as they preferred a shorter work year, which means more days off during the year or a longer summer. Sometimes we considered the savings created by fewer school days because of fewer days you needed to run the busses, but the teacher negotiations were the primary driving factor.

Few school boards are willing to stick to their guns in negotiations with the teachers. I described the tools (laws) available to use in negotiations in my presentation to the Michigan School Business Officials annual meeting in 2006 entitled “Taking Back the Ship”, but I am aware of only one district that has been able to extract a favorable result. Heck, in Detroit, even when the teachers struck in violation of the law, NO ONE sought to enforce the law.

Tom Watkins puts it even more bluntly when he commented, “While education should be about teaching, learning and children– far too often, in Michigan and across the US– it is more about: POWER, CONTROL, POLITICS and ADULTS.”

It is time we focus on what is best for the students' learning, and less about providing employment with rich salaries and benefits for adults.

Comments?

Constitutional Limits Tested by Health Care Reform?

2009-10-02T06:24:00.000-07:00

Health-Care Reform and the Constitution: Why hasn't the Commerce Clause been read to allow interstate insurance sales? September 15, 2009 article in the Wall Street Journal by Andrew P. Napolitano

Judge Napolitano discusses an issue being overlooked in the Health Care Reform effort. Does the federal government even have the constitutional power to regulate health services, particularly by requiring people to buy insurance, i.e., the "individual mandate”? The federal government has only specific enumerated powers in the Constitution, while the Ninth and Tenth Amendments reserve the remaining powers to the states and the people. The fact that states can require people to buy car insurance does not extend that power to the federal government. So, the federal government being able to require people to buy health insurance would be precedent setting. If the federal government can do this, are there any limits in the Constitution that remain?

Until I read this article, I did not understand the purpose of Michigan HCR004 and SCR004/SR17 (Michigan Sovereignty Under the 10th Amendment). Although not binding, they would send the message that we still take the Constitutional limits seriously – that we are a Republic, a limited government and not a democracy which allows tyranny by the majority. With recent statistics of 47% of Americans not paying any income tax, millions taking government handouts, and the strength of the public service unions, the power and the incentive to redistribute wealth from the producers in society will become overwhelming if there are no Constitutional limits.

Of course, this could be looked at as an exercise of the "taxing power", i.e., that this is nothing more than a tax imposed on individuals, which tax can then be avoided by purchasing the insurance. However, if this rationale holds, then anything can be required by the federal government, and this is certainly NOT what the founding fathers envisioned.

Comments?

Capitol Hill Switchboard Used For Partisan Purposes

2009-09-29T08:25:00.000-07:00

Did you know that if you call the switchboard for Congress, the number you'd call to be put through to your Congressman or Senator's office, you get a short message selling Obama's healthcare policies before being transferred to the switchboard operator.

The number to call Congress is 1-800-828-0498. The message is:

"Thank you for calling your Representative and your Senators. Please urge them to vote yes on health insurance reform. Because the American people can no longer wait for more choices, lower costs, and coverage we can count on."

This does NOT sound proper to me. What do you think?

Comparing Health Care Plans - Focus on Costs Still Needed

2009-09-29T07:33:00.000-07:00

Yesterday, US Budget Watch released "Comparing Health Care Plans: A Guide to Health Care Reform Proposals in the 111th Congress." The paper offers detailed summaries of the three major health care reform bills being considered in Congress, and their fiscal implications. http://usbudgetwatch.org/document/comparing-health-care-plans-guide-reform-proposals

They have maintained their insistence on cost control:

"Expanding health insurance will be extremely expensive, notably, at a time when the federal budget is already facing huge fiscal imbalances. Merely offsetting the new costs of a bill will not be sufficient to make a reform plan fiscally responsible since those offsets could otherwise be used to help close the longterm fiscal gap. Instead, a fiscally responsible plan must include aggressive measures that would help slow the growth of overall health care spending and reduce health care costs for the federal government. As debate and negotiation continues, we urge a strong focus on cost; not just over the next ten years, but over the long-term."

Five Step Program to Kick the Tax and Spend Addiction and Grow Jobs

2009-09-29T07:21:00.000-07:00

Business Leaders want Michigan to be a Top 10 state for job and economic growth. Read their report, which has many ideas on what can be done, both short term and long-term. Their five step turn around plan includes:

STEP 1: Changing the Way We Manage Our Finances
STEP 2: Right-sizing & Enacting Structural Budget Reforms
STEP 3: Getting Michigan Competitive To Attract & Retain Jobs
STEP 4: Making Investments That Create A Great Job Environment
STEP 5: Accelerating Job Growth Through Innovation & Entrepreneurship

Download the full plan from the Business Leaders for Michigan website for the specific actions under each step, along with the rationale. This is a good place to start, even if we might not agree with all of the specifics.

How to Fix Michigan - Business and Political Leaders Weigh In

2009-09-29T05:20:00.000-07:00

Tom Gantert in his Reporting Michigan news article Some of the biggest names in Michigan business and politics say how they would fix Michigan lists six suggestions made by the leaders speaking at the Republican Leadership Conference on Mackinac Island September 25-27:

* Make the regulatory system friendlier to businesses
* Adopt right-to-work legislation
* Fix Detroit
* Regionalize and consolidate local municipalities
* Get rid of the Michigan Education Association, the teacher’s union
* Get rid of term limits on politicians

Other posts in my blog will deal with most of these points, to get to more specifics on each of these. Stay tuned! Meanwhile, check out Tom’s report.

Democrats Confused About Business Taxes. Or are They?

2009-09-29T04:04:00.000-07:00

Tom Gantert in his Reporting Michigan blog GOP state representatives are against a health care tax on physicians’ gross receipts reports:

“The Republican state representatives criticized a Democrat plan to tax health care in order to help balance the state budget, according to a GOP press release.
House Bill 5386, which is currently in the tax policy committee, levies a 4 percent tax on physicians’ gross receipts.

“It is astounding to me that right now when we are in the middle of a national discussion about lowering the high cost of health care, Michigan Democrats are actually pushing for a new tax on doctors that will make medical treatment more expensive,” said House Republican Leader Kevin Elsenheimer, of Kewadin, in a press release. “Doctors are going to have to pass these costs onto their patients, making the cost of health care go up.”

The GOP estimates that, if approved, the tax would raise health care costs in Michigan by nearly half a billion dollars annually.”

This attempt by the House Democrats reveals a fundamental misunderstanding many Democrats have about taxes levied on businesses or professionals. Anyone who understands economic theory knows that in general, businesses don’t pay taxes – individuals do. In the long run, any taxes levied on businesses get factored into the prices for the products the businesses produce or the services the business provides. An exception to this rule may be in the case of a small business in which the “profits” are actually the wages the sole proprietor or small business owners take home as a residual of what left after paying the business’s expenses. And, even in this case, in the long run there is less of this product or service provided which raises prices to consumers of those products or services.

Another possibility is that the Democrats are simply confused about business. Many Democrats equate a “business” which makes profits as “evil”, and therefore should be punished by extracting taxes to be redistributed to those they perceive as more worthy. The quest for profits is what makes the capitalist system work, and the capitalist system has been proven to provide abundance. Would anyone care to try the Soviet experiment in the United States? Profits are the wages for the small business owner. Big corporation profits go to the shareholders, who are you and me, owners of many corporations indirectly through our ownership of shares in our mutual funds, 401(k)’s and other investments.

The bottom line is that the Republicans in the Michigan State Legislature are justified in resisting further taxes on businesses, even those the Democrats perceive as “filthy rich, greedy physicians”. We must resist such class warfare.

Comments? Arguments?

The Michigan Fair Tax Looks Fairly Good

2009-09-18T13:45:00.000-07:00

It is time we begin to rethink our Michigan tax structure if we wish to create a better business climate to attract and grow jobs in the State. My listening tour with the Michigan Chamber of Commerce, National Federation of Independent Business, Michigan Farm Bureau, and the organizations representing the realtors, bankers, home builders, restaurant owners and the associated builders and contractors all echoed the same message - we need a more business friendly tax structure.

More specifically, we need to fix the Michigan Business Tax (and the accompanying 22% surcharge). They also mentioned we need to reduce or streamline the regulation of businesses in the state – with the initial focus on the permitting processes performed by the Department of Environmental Quality - but that is another subject which deserves its own posting.

Rather than tinker around the edges, making minor changes that don't really address the problems, we need to take a hard look at the "Fair Tax" proposed by the http://www.mifairtax.org

Their proposal would:

"Replace Michigan’s current complex and unfair tax system with a simple retail sales tax.
Eliminate current sales tax, personal income tax, Michigan Business Tax, Personal Property Tax, 6 mill State Education Tax on business and sales tax on all business purchases and replace them all with a simple retail sales tax.
Save MI taxpayers billions of dollars now being wasted in complying with the current tax code.
Significantly lower the cost of goods & services produced in Michigan by removing the cost of
business taxes and tax compliance costs that are hidden in today’s prices.
Make Michigan products more competitive with foreign products and return jobs to Michigan.
Provide a more stable revenue source and raise the same amount of money for Michigan government with the imposition of a fair/no loophole retail sales tax on all new goods and services with an effective tax rate of 0 - 9.75%.
Return to MI families 100% of the sales tax up to the poverty level by monthly “prebate” payments to all Michigan citizens’ households. No MI citizen will pay taxes on the necessities of life.
Constitutionally guarantees revenue sharing."

http://www.mifairtax.org/resrcs/Brochure-MI.pdf

I have long favored a consumption tax because it does not discourage earning, saving and investing. The Fair Tax also has the virtue of being visible, a virtue the value added tax does not possess.

At a federal level, to reduce deficits, I fear significant tax increases will be imposed. In an attempt to avoid discouraging earning and investing, there will be a strong push for a value added tax as an alternative. A Fair Tax would be a much better alternative, due to its visibility. Otherwise, a value added tax would be too easy to creep up and up, similar to the 1% income tax initially imposed.

I am an announced candidate for State Representative for the 55th Legislative District, which stretches from Pittsfield Township south through Whiteford, Bedford and Erie Townships on the Ohio border. I would expect significant opposition from the retail business community to a Fair Tax imposed in Michigan in the absence of a similar tax in Ohio, fearing loss of retail sales in Michigan to nearby Toledo, the city many in those township already are more oriented to than Michigan. This would especially be true on high cost items, such as automobiles, furniture, etc.

I have asked the Michigan Fair Tax Organization the following: What are the considerations here? Countervailing arguments? I can see that the retail businesses would avoid the MBT and its hated surcharge, and personally avoid the current Michigan income tax, but would the net effect be negative for these border retail businesses?

If I can get satisfactory answers to these questions, it would appear that the Fair Tax is something highly desirable. (Of course, if a Fair Tax were imposed on a national level, this concern would be moot.)

Dr. Gary Wolfram, from Hillsdale College (you might remember him if you attended one of the Health Care Reform forums he spoke at) and Dr. Bruce Ikawa have prepared a report entitled "An Analysis of Fiscal Effects from the MI Fair Tax", and believe that the revenue stream from the Fair Tax is about the same as the current level from the various sources. Thus, it appears feasible. And, the indirect effects of a more favorable business tax climate could have enormous long-term favorable impacts. It certainly merits discussion and study. It may be a radical change, but we need to "think outside the box", to use a cliche'.

Comments? Concerns? Am I missing something?

The "Public Option" in the Health Care Reform House Bill

2009-08-23T08:52:00.000-07:00

I did not realize the full impact of the "public option" being proposed in the House Bill 3200 until I heard Ben Taylor with the US Chamber of Commerce speak at last week's Town Hall Meeting held in Saline. It is being proposed as "just another option" to compete with the private insurance companies to force them to drive down costs.

Here is the truth to the situation. The Bill also will set requirements of what all health insurance plans must cover, so there can be no variation of contracts to meet specific situations - one size fits all. Consumer driven health care plans such as Health Reimbursement Arrangements or Health Savings Accounts (high deductible plans with employers paying into the employees' HSA's) will not be allowed. The insurance companies will need to compete with a subsidized plan with a "company" that has no costs of capital and which does not need to generate any profit. Further, like Medicare, the public option is expected to place limits on payments for specific procedures or services, thus shifting some of the cost of those procedures and services to others. Thus the government plan will be able to offer lower premiums (on its face a "good thing"). As a result, employers are expected to gravitate quickly to the government plan.

Currently, insurers are picking up the tab for "cost shifts" (and transfering the cost of the cost shifts to the insured). 2009 Vermont Health Care Cost Shift Analysis, February 2009 defined "cost shift" as,

“In its simplest form, one can think of the cost shift as a subsidy. The Cost Shift Task Force report stated that, from the perspective of a payer of health care costs, the cost shift is defined as: “The payment of higher prices (above cost) paid by one or more payer groups to offset lower prices (below cost) paid by other payers.” In layman’s terms, this is often referred to as “charging Peter to pay for Paul”. From the perspective of a hospital, it is a pricing mechanism used to achieve revenues to support services provided to all patients when payments from some payers do not cover the costs incurred by those patients.”

Hospitals shift costs of costs of services not paid by Medicare or Medicaid, "charity care" and "charge-offs" to those patients who can pay, primarily the insurance companies. In turn, the insurance companies increase their premiums to the buyers of insurance to cover those extra costs.

The problem with the "public option" is that as the numbers of people covered under the "public option" grows, the amount of the cost shift to private insurers will dramatically increase. At the same time, the numbers of people insured by private insurers will decrease. With fewer people picking up an ever growing volume of cost shifts, the premiums charged by the insurance companies will need to rise dramatically, making them even less competitive, driving away even more employers to opt for the "public option". In a very short time, the "public option" is likely to be the "only option".

In short, with a "public option", very quickly, the health "insurance" industry will be a single payor system run by the government. Maybe the House Bill 3200 does not immediately set up a "government takeover" of the health insurance industry, but that is likely to be the ultimate result.

Is that what we want?

Comments?

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Republicans Support Health Care Reform - Just not the President and the Democrat Congress's Proposals

2009-08-13T13:59:00.000-07:00

Lest the Republicans be labeled the "Party of NO", let it be known throughout the land that Republicans do have a plan for health care reform that does address the problems of cost control, more access to health care and promoting healthy living and quality care for all Americans. See House GOP Solutions Group Outlines Health Care Plan to Increase Affordability, Accessibility, Availability

What is clear, however, is that the Republican proposal maintains a much higher level of individual choice, including protecting Americans from being forced into a new government-run health care plan "that would: a) eliminate the health care coverage that more than 100 million Americans currently receive through their job; b) limit your choice of doctors and medical treatment options; and c) result in the federal government taking control of your health care."

Although this is not yet a detailed plan (i.e., it does not run over 1000 pages, just 4), you may wish to take a look, to see if this is not more in line with what would be acceptable to you.

Comments?

Another View on Controlling Health Care Costs

2009-08-13T13:31:00.000-07:00

The American Thinker article How to 'bend the curve down' in healthcare costs, August 11, 2009, is another interesting look at the causes of the increases in health care costs.

The first point made is that the July 26 letter from the Congressional Budget Office which says,

"The net effect of the coverage specifications, which affect both spending and revenues would add an estimated $1,042 billion to cumulative deficits (over the 2010-2019 period).... The net cost of the coverage provisions would be growing at a rate of more than 8 percent per year in nominal terms between 2017 and 2019; we would anticipate a similar trend in the subsequent decade."

effectively sets aside the administration's claim -- "that we can simply increase the number of individuals covered by government insurance and decrease the growth rate of healthcare spending over time".

Simply put, providing complete medical care coverage to more people than currently have access to such care raises costs. Duh! I wish I could have figured that out on my own. Right!

They say, "Douglas Elmendorf, the director of the CBO has stated:

"Spending on health care has generally grown much faster than the economy as a whole, and that trend has continued for decades. In part, that growth reflects the improving capabilities of medical care -- which can confer tremendous benefits by extending and improving lives. Studies attribute the bulk of cost growth to the development of new treatments and other medical technologies."

This tracks the results of a comprehensive study cited in the article.

They also say, "Countries that utilize forms of socialized healthcare spend less than the United States because they ration care, to some degree or another, by restricting what services patients can have access to through a variety of mechanisms."

They also document that the U.S. leads the world in "disease specific outcomes" as a result of our access to advanced technology, despite the claims that we lag behind other countries in health services.

They support, "Expanding access for individual's to purchase health insurance outside their state would lead to a significant decrease in the number of uninsured individuals and increase quality and transparency in the medical marketplace. While not all individuals would be able to purchase plans that provide the same level of benefits, the goal should be for all individuals to have plans that cover major and unavoidable medical expenses. "

"The last piece of the equation to decrease healthcare inflation in a meaningful way is to pursue aggressive tort reform to decrease defensive medicine practices. Democratic lawmakers will avoid this issue at all costs because they are indebted to the trial lawyers who are among their largest contributors. . . . .

Defensive medicine is medical practice based on fear of legal liability rather than on patients' best interests. It has been driven to absurd levels in America by the threat of frivolous lawsuits which cost physicians and hospitals so much to contend that they end up settling in many cases where they have not acted negligibly just to save money. This has resulted in ballooning medical expenditures.

The Massachusetts Medical Society found that 83% of physicians surveyed reported practicing defensive medicine. One quarter of all CT scans, MRIs, Ultrasounds and specialty referrals were ordered for defensive reasons. This number is astounding, and if we extrapolate it to total healthcare spending we're looking at close to $ 500 billion annually! A more conservative estimate from The Pacific Research Institute puts the costs of defensive medicine at more than $ 200 billion annually.

Tort reform should focus on caps on damages and abolition of punitive or exemplary damages as well as restrictions on contingent and conditional fees. Although historically prohibited by common law, the USA now allows lawyers' fees to depend on the outcomes of their cases. Empirical research suggests that restrictions on contingent fees generally lead to the elimination of the weakest claims."

From this article, it appears that access to insurance policies from across state lines might be a good idea, as well as limiting medical malpractice suits.

Comments?

Looking at France's Universal Care Program

2009-08-13T13:16:00.000-07:00

The Wall Street Journal article France Fights Universal Care's High Cost, August 9, 2009, is worth reading, as it compares and contrasts France's system with the U.S., both as is and as proposed. Although the "fight" to control costs in France is ongoing, what is worth noting is they spend 11% of their GDP on health care services while the U.S. spends 16%. A notable difference is the level of compensation doctors get there, much lower than in the U.S.

A telling comment in the article summarizes the current debate in the U.S., "The French system's fragile solvency shows how tough it is to provide universal coverage while controlling costs, the professed twin goals of President Barack Obama's proposed overhaul."

Comment?

Controlling Health Care Costs

2009-08-13T13:07:00.000-07:00

When looking to solve a problem, it is recommended that you first identify the causes of the problem. PricewaterhouseCoopers did a study of the "waste" in our current health care systems, with the radical idea that if you could first identify the waste, perhaps you could then laser focus on those causes to reduce or eliminate the waste that is causing higher health care costs.

Now, the following list is not totally comprehensive, i.e., not exclusive, as there are other ways that costs can be controlled, but this is a good start, from an objective source.

Health care's big money wasters: More than $1.2 trillion spent on health care each year is a waste of money. Members of the medical community identify the leading causes., August 10, 2009. CNN publishes PricewaterhouseCoopers estimates of annual “waste”:

Risky behavior such as smoking, obesity and alcohol abuse - $493 billion
Too many tests - $210 billion
Those annoying claim forms - $210 billion
Going back to the hospital - $25 billion
Staffing turnover - $21 billion
Medical “oops” - $17 billion
Using the ER as a clinic - $14 billion
Prescriptions written on paper - $4 billion
You forgot to wash your hands - $3 billion
Over-prescribing of antibiotics - $1 billion

Comments?

More from the White House on Health Care Reform

2009-08-13T12:19:00.000-07:00

David Axelrod, Senior Adviser to the President, The White House [info@messages.whitehouse.gov] in his e-mail today also said,

"8 common myths about health insurance reform:

Reform will stop "rationing" - not increase it: It’s a myth that reform will mean a "government takeover" of health care or lead to "rationing." To the contrary, reform will forbid many forms of rationing that are currently being used by insurance companies.
We can’t afford reform: It's the status quo we can't afford. It’s a myth that reform will bust the budget. To the contrary, the President has identified ways to pay for the vast majority of the up-front costs by cutting waste, fraud, and abuse within existing government health programs; ending big subsidies to insurance companies; and increasing efficiency with such steps as coordinating care and streamlining paperwork. In the long term, reform can help bring down costs that will otherwise lead to a fiscal crisis.
Reform would encourage "euthanasia": It does not. It’s a malicious myth that reform would encourage or even require euthanasia for seniors. For seniors who want to consult with their family and physicians about end-of life decisions, reform will help to cover these voluntary, private consultations for those who want help with these personal and difficult family decisions.
Vets' health care is safe and sound: It’s a myth that health insurance reform will affect veterans' access to the care they get now. To the contrary, the President's budget significantly expands coverage under the VA, extending care to 500,000 more veterans who were previously excluded. The VA Healthcare system will continue to be available for all eligible veterans.
Reform will benefit small business - not burden it: It’s a myth that health insurance reform will hurt small businesses. To the contrary, reform will ease the burdens on small businesses, provide tax credits to help them pay for employee coverage and help level the playing field with big firms who pay much less to cover their employees on average.
Your Medicare is safe, and stronger with reform: It’s myth that Health Insurance Reform would be financed by cutting Medicare benefits. To the contrary, reform will improve the long-term financial health of Medicare, ensure better coordination, eliminate waste and unnecessary subsidies to insurance companies, and help to close the Medicare "doughnut" hole to make prescription drugs more affordable for seniors.
You can keep your own insurance: It’s myth that reform will force you out of your current insurance plan or force you to change doctors. To the contrary, reform will expand your choices, not eliminate them.
No, government will not do anything with your bank account: It is an absurd myth that government will be in charge of your bank accounts. Health insurance reform will simplify administration, making it easier and more convenient for you to pay bills in a method that you choose. Just like paying a phone bill or a utility bill, you can pay by traditional check, or by a direct electronic payment. And forms will be standardized so they will be easier to understand. The choice is up to you – and the same rules of privacy will apply as they do for all other electronic payments that people make. "

You may wish to compare these statements to some of the provisions ofthe bill itself. To see a list of some of the provisions of the actual bill, see Who Can You Believe? Part 2. Some of the fears voiced by the opposition are probably overblown, but when you compare the statements above with the provisions of the bill, which do you choose to believe?

Comments?

2009-08-13T12:05:00.000-07:00

I received an e-mail today from David Axelrod, Senior Adviser to the President, The White House [info@messages.whitehouse.gov] which says,

"P.S. We launched www.WhiteHouse.gov/realitycheck this week to knock down the rumors and lies that are floating around the internet. . . .

8 ways reform provides security and stability to those with or without coverage:

Ends Discrimination for Pre-Existing Conditions: Insurance companies will be prohibited from refusing you coverage because of your medical history.
Ends Exorbitant Out-of-Pocket Expenses, Deductibles or Co-Pays: Insurance companies will have to abide by yearly caps on how much they can charge for out-of-pocket expenses.
Ends Cost-Sharing for Preventive Care: Insurance companies must fully cover, without charge, regular checkups and tests that help you prevent illness, such as mammograms or eye and foot exams for diabetics.
Ends Dropping of Coverage for Seriously Ill: Insurance companies will be prohibited from dropping or watering down insurance coverage for those who become seriously ill.
Ends Gender Discrimination: Insurance companies will be prohibited from charging you more because of your gender.
Ends Annual or Lifetime Caps on Coverage: Insurance companies will be prevented from placing annual or lifetime caps on the coverage you receive.
Extends Coverage for Young Adults: Children would continue to be eligible for family coverage through the age of 26.
Guarantees Insurance Renewal: Insurance companies will be required to renew any policy as long as the policyholder pays their premium in full. Insurance companies won't be allowed to refuse renewal because someone became sick. "

Now, I don't see a single provision listed which is in any way aimed at controlling health care costs. They all extend coverage to someone, attempting to pander to someone's self interest.

But note, the administration is trying to change the discussion from "health care reform" to "health insurance reform", thinking that people may be more agreeable to "sticking it to the insurance companies".

Now, I am not saying that some of the changes mentioned might not be a good thing. All I am saying is that it is disingenuous to make this the thrust of health care reform to "keep from busting the budget" or to "revitalize small business" as the administration claims.

Comments?

Who Can You Believe? Part 2

2009-08-13T11:36:00.000-07:00

I am copying and pasting something I received in an e-mail. I have not checked the bill itself to verify the accuracy of the statements, so I can't vouch for it. However, it points out a problem.

We hear many statements from the administration saying that something the opposition to the health care reform bill says in the bill just is not there. The oppositon is being called mobsters and "un-American". Yet, when we look at the provisions of the bill itself, there they are.

Many of the provisions being objected to are pointed out in the document below. Perhaps you would want to look up the specific provisions so that you can be the judge of who is speaking the truth.

- - - - - - Start of document - - - - - -

"Highlights from the Obama Health Care Bill:

Aug. 1, 2009

The complete text of H.R. 3200 can be found on the internet. You will not read all 1017 pages. Neither has your Congressman. Neither have your Senators. Neither has the President.

This is why, on July 31, when the bill finally was voted out of committee, House Democrats were handed a card with the “good” highlights, so that they could memorize them. The Democrats who opposed the final bill were Reps. John Barrow of Georgia, Rick Boucher of Virginia, Jim Matheson of Utah, Charlie Melancon of Louisiana and Bart Stupak of Michigan.

Then they were asked by Nancy Pelosi to go back to their districts and persuade voters to support the bill. She told them: “The president of the United States will be out front as the drum major. We will be the drumbeat across America.”

Here are some of the bad highlights. After you read them, you will begin to see what you will be facing if this bill passes.

As you read each of them, ask yourself two questions: (1) What will be the effect on the supply of future physicians? (2) What will be the effect on the demand for medical services?
* * * * * * * * * * * * *
Pg 22 of the HC Bill mandates the Government will audit books of all employers that self insure.
Pg 30 Sec 123 of HC bill—a Government committee (good luck with that!) will decide what treatments/benefits a person may receive.
Pg 29 lines 4-16 in the HC bill—YOUR HEALTHCARE WILL BE RATIONED!
Pg 42 of HC Bill—The Health Choices Commissioner will choose your HC Benefits for you.
PG 50 Section 152 in HC bill—HC will be provided to ALL non US citizens, illegal or otherwise.
Pg 58 HC Bill—Government will have real-time access to individual’s finances and a National ID Healthcard will be issued!
Pg 59 HC Bill lines 21-24 -- Government will have direct access to your bank accts for election funds transfer.
PG 65 Sec 164 is a payoff subsidized plan for retirees and their families in Unions & community organizations (read: ACORN).
Pg 72 Lines 8-14 Government will create an HC Exchange to bring private HC plans under Government control.
PG 91 Lines 4-7 HC Bill—Government mandates linguistic appropriate services. Example—Translation for illegal aliens.
Pg 95 HC Bill Lines 8-18 -- The Government will use groups, i.e. ACORN & Americorps, to sign up individuals for Government HC plan.
PG 85 Line 7 HC Bill—Specifics of Benefit Levels for Plans. AARP members—your Health care WILL be rationed.
PG 102 Lines 12-18 HC Bill—Medicaid Eligible Individuals will be automatically enrolled in Medicaid. No choice.
pg 124 lines 24-25 HC—No company can sue Government on price fixing. No “judicial review” against Government Monopoly.
pg 127 Lines 1-16 HC Bill—Doctors/ AMA—The Government will tell YOU what you can earn.
Pg 145 Line 15-17 -- An Employer MUST auto enroll employees into public option plan. NO CHOICE.
Pg 126 Lines 22-25 -- Employers MUST pay for HC for part time employees AND their families.
Pg 170 Lines 1-3 HC Bill—Any NONRESIDENT Alien is exempt from individual taxes. (Americans will pay.)
Pg 195 HC Bill—officers & employees of HC Admin (the GOVERNMENT) will have access to ALL Americans’ finances and personal records.
PG 203 Line 14-15 HC—“The tax imposed under this section shall not be treated as tax” Yes, it says that.< /div>
Pg 239 Line 14-24 HC Bill—Government will reduce physician services for Medicaid. Seniors, low income, poor affected.
Pg 241 Line 6-8 HC Bill—Doctors (doesn’t matter what specialty) will all be paid the same.
PG 253 Line 10-18 -- Government sets value of Doctor’s time, professional judgment, etc. Literally, value of humans.
PG 265 Sec 1131 -- Government mandates & controls productivity for private HC industries.
Pg 317 L 13-20 -- PROHIBITION on ownership/investment. Government tells Doctors what/how much they can own.
Pg 317-318 lines 21-25,1-3 -- PROHIBITION on expansion—Government will mandate hospitals cannot expand.
Pg 354 Sec 1177 -- Government will RESTRICT enrollment of Special needs people!
PG 425 Lines 4-12 -- Government mandates Advance Care Planning Consultations. Think Senior Citizens end of life prodding.
PG 425 Lines 22-25, 426 Lines 1-3 -- Government provides approved list of end of life resources, guiding you in how to die.
PG 427 Lines 15-24 -- Government mandates program for orders for end of life. The Government has a say in how your life ends.
PG 429 Lines 10-12 -- “advanced care consultation” may include an ORDER for end of life plans. AN ORDER from the Government to end a life!
Page 472 Lines 14-17 -- PAYMENT TO COMMUNITY-BASED ORGANIZATION. 1 monthly payment to a community-based organization. (Like ACORN?)"

- - - - - - End of document - - - - - -

Comments? What do you see?

Who Can You Believe?

2009-08-10T12:36:00.001-07:00

Today I got two posts, which contradict each other. This debate is getting nasty, and some are using ummmm, well, saying things that just aren't true to try to convince the masses that their side is right.

First, from the Obama camp (David Axelrod, The White House [info@messages.whitehouse.gov]:

"Anyone that's watched the news in the past few days knows that health insurance reform is a hot topic — and that rumors and scare tactics have only increased as more people engage with the issue. Given a lot of the outrageous claims floating around, it’s time to make sure everyone knows the facts about the security and stability you get with health insurance reform. That’s why we’ve launched a new online resource — WhiteHouse.gov/RealityCheck — to help you separate fact from fiction and share the truth about health insurance reform. Here's a few of the reality check videos you can find on the site:

CEA Chair Christina Romer details how health insurance reform will impact small businesses.
Domestic Policy Council Director Melody Barnes tackles a nasty rumor about euthanasia and clearly describes how reform helps families.
Matt Flavin, the White House's Director of Veterans and Wounded Warrior Policy, clears the air about Veteran's benefits.
Kavita Patel, M.D., a doctor serving in the White House's Office of Public Engagement, explains that health care rationing is happening right now and how reform gives control back to patients and doctors.
Bob Kocher, M.D., a doctor serving on the National Economic Council, debunks the myth that health insurance reform will be financed by cutting Medicare benefits. "

However, U.S. Congressman and House Republican Leader John Boehner says it just ain't so:

"WHITE HOUSE “REALITY CHECK” WEBSITE ON HEALTH CARE FULL OF ERRORS, MISSTATEMENTS, FALSEHOODSNEW WEBSITE RECYCLES DEMOCRATS’ DEBUNKED CLAIMS ON HEALTH CARE, DISMISSES AMERICANS’ CONCERNS ABOUT HEALTH CARE AS ‘LAUGHABLE’

August 10, 2009 House Republican Leader John Boehner (R-OH) Permalink

Facing mounting criticism from the American people over President Obama’s proposed trillion-dollar government takeover of health care, the White House has responded this morning by launching a “reality check” website, featuring videos and preloaded messages that purportedly debunk “health care myths.” In reality, the website simply recycles the same false claims that the Administration and its allies in Congress have been pedaling for weeks.

After no fewer than five polls released at the end of July showed increasing, if not outright, opposition to government-run health care, and with Members of Congress taking heat from constituents during the August district work period, it’s understandable that the White House is getting nervous about the prospects for its health care experiment.

The following are some of the discredited claims the Administration’s new website repeats:

CLAIM: If You Like It, You Can Keep Your Health Care Plan. Kavita Patel, who works with Senior Adviser Valerie Jarrett, said “if you like your insurance, if you like the kind of health care you have right now and the plan you have, you can keep it.” She also stated that “the notion that the government will interfere with what you have…really is laughable.” Linda Douglass of the White House Office of Health Reform also played a clip of President Obama’s June 23, 2009 press conference where he stated that: “If you like your plan and you like your doctor, you won't have to do a thing. You keep your plan. You keep your doctor. If your employer is providing you good health insurance, terrific, we're not going to mess with it.”

FACT: That’s simply not true. Both the Associated Press and ABC News have already debunked this pledge, noting that White House officials have acknowledged the president’s rhetoric shouldn’t be taken “literally.” An independent study conducted by the Lewin Group predicted that 114 million Americans may be forced out of their current health care coverage, including more than 106 million Americans who currently have employer-provided health care. The point is, this White House cannot guarantee that Americans will be able to keep their plan – because they don’t know how many employers are going to drop their coverage altogether if their plan goes into effect.

Lastly, the Wall Street Journal noted in a July 20, 2009 editorial:“The House bill says that after a five-year grace period all Erisa [Employee Retirement Income Security Act] insurance offerings will have to win government approval—both by the Department of Labor and a new ‘health choices commissioner’ who will set federal standards for what is an acceptable health plan. This commissar—er, commissioner—can fine employers that don’t comply and even has ‘suspension of enrollment’ powers for plans that he or she has vetoed, until ‘satisfied that the basis for such determination has been corrected and is not likely to recur.’ In other words, the insurance coverage of 132 million people—the product of enormously complex business and health-care decisions—will now be subject to bureaucratic nanomanagement.”

CLAIM: Reform Will Benefit Small Business – Not Burden It. Christina Romer, Chair of the Council of Economic Advisers stated that, “The facts are very clear. The system doesn’t work for small businesses now, and reform is very much aimed at easing the burdens, making it easier for this crucial sector of our economy.”

FACT: A broad coalition of job-creating groups – representing small businesses to homebuilders and manufacturers – has come together to oppose the Democrats’ government takeover of health. In a letter to Congress, this coalition wrote: “We are specifically concerned with a proposal to mandate that employers either provide health insurance or pay a new eight percent payroll tax. The House ‘pay or play’ proposal is even more troublesome because employers are also mandated to pay the majority of employee premiums. Exempting some micro-businesses will not prevent this provision from killing many jobs.”

And the National Federation of Independent Business (NFIB), representing small businesses across the country, also weighed in, saying it would destroy jobs and reduce access to affordable health care: “NFIB opposes the [Democrats’ bill] because it threatens the viability of our nation’s job creators, fails to increase access and choice to all small businesses, destroys choice and competition for private insurance and fails to address the core challenge facing small businesses – cost.”

CLAIM: Medicare Will Not Face Cuts Under Democrats’ Plan. Robert Kocher of the National Economic Council repeated president Obama’s claim that “nobody is talking about reducing Medicare benefits.”

FACT: Today’s New York Times rebuts this claim: “To help finance coverage for the uninsured, Congress would squeeze huge savings out of Medicare, the program for older Americans and the disabled. These savings would pay nearly 40 percent of the bills’ cost. The legislation would trim Medicare payments for most services, as an incentive for hospitals and other health care providers to become more efficient. The providers make a plausible case that the cutbacks could inadvertently reduce beneficiaries’ access to some types of care.” An independent analysis of the House Democrats’ government-run plan shows the legislation slashes Medicare to the tune of $361.9 billion. That means fewer choices and lower health care quality for our nation’s seniors – exactly what then-Senator Obama blasted last fall, during the presidential campaign.

Republicans agree that Congress should pursue meaningful health care reform, but none of the legislation that Democratic leaders are pursuing at this time actually meet this description. Instead, their proposals will increase costs, lower quality, and cause millions of Americans to lose their current health coverage.

Americans want health care reform, but the Democrats’ go-it-alone, government takeover of health care isn’t the way to improve the best health care system in the world. House Republicans have a plan that will reduce costs, expand access and increase the quality of care in a way we can afford – without raising taxes on small businesses or middle class. To read more about the House Republicans’ plan, click HERE."

Wow! Now there are two widely different opinions. From what I have seen, I tend to trust Boehner more than the claims for the adminstration's proposal, especially when proponets begin to call the opposition "mobsters", "unAmerican", and other such character assassinations. These inappropriate tactics have no place in serious discussions about such an important topic, so critical to so many patriotic Americans.

Comments?

Funding for Public Employee Retirement Plans and Post-Retirement Benefits Under Pressure

2009-08-09T07:25:00.000-07:00

Negative investment returns after September, 2007 have increased the challenges to proper funding of public employee retirement plans in Michigan, as well as the rest of the U.S. For a full analysis, see Michigan State and Local Government Retirement Systems, July 2009, Report 356 by the Citizens Research Council of Michigan

The report says:

“Michigan is one of nine states in which the constitution states that participants in a public retirement system have a guaranteed right to a benefit that has been promised, and that accrued financial benefits cannot be eliminated or diminished. . . .

In Michigan, state and local government pension plan benefits are protected by Article IX, Section 24 of the 1963 State Constitution, which provides that "The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby. Financial benefits arising on account of service rendered in each fiscal year shall be funded during that year and such funding shall not be used for financing unfunded accrued liabilities." Benefits that have been earned by covered employees for work performed are a contractual obligation of that unit of government. . . . Michigan public employers are required to set aside funds to pay pensions as those pensions are earned. Future pension benefits may be changed, both for new hires and for the future service of current employees, as long as benefits accrued are not impaired or diminished.”

However, an issue arises concerning the post-retirement benefits of health, dental and vision insurance.

“Health benefits are promised, but various courts have ruled that they are not obligations in the same sense as pension benefits. (That could change, though, as this spring the House of Representatives adopted legislation that would give state employees, including school employees, a contractual right to retiree health care.)

The health plan is a “pay-as-you-go” system. Instead of setting aside money in advance, it uses each year’s school contributions to pay each year’s bills. At this point, according to the MPSERS report, the state has promised the equivalent of about $25 billion in health care to current and future school retirees.” Retirement fund losses will cost schools, but how much?, April 20, 2009, from the Mackinac Center for Public Policy

The legislation mentioned is House Bill 4073, which would create a contractual right of state employees to post-retirement health benefits and which passed by the House with all Democrats voting for it against unanimous Republicans opposition on March 4, 2009 and sent to the Senate, where it has not moved due to the Republican majority in that chamber.

The Constitution rightly protects vested contractual rights in retirement plans. The bill would create additional vested rights. When state and local governments are pressed financially, this is no time to decrease the flexibility of the state to balance its budgets by guaranteeing post-retirement health benefits to state employees.

Comments?

P.S. Michigan State and Local Government Retirement Systems, July 2009, Report 356 by the Citizens Research Council of Michigan is an excellent source of information on the various state and local public employee retirement plans. It contains options for cost control, but does not make any recommendations.

The Mackinac Center Weighs in on the Idea of a Statewide Health Insurance Plan for Public Employees

2009-08-08T14:49:00.000-07:00

On Balance, School Health Insurance Proposal an Improvement, By Mr. Jack P. McHugh, August 4, 2009

This article from the Mackinaw Center for Public Policy states that the idea is a good idea because creating a statewide health care plan for public employees would better match the bargaining power of the employees and the state than the current MEA/MESSA vs. local school district board faceoff. A con is that the political muscle of numerous MEA members in each legislative district might create extreme pressure on the state legislators to grant excessively generous benefits. On balance, the pros outweigh the cons. A well written piece.

Comments?

Michigan House of Representatives Republican Caucus Plan

2009-08-08T06:16:00.000-07:00

For a full version of the Michigan House of Representatives Republican Caucus Plan for balancing the state budget and not raising taxes, go to http://www.gophouse.com/publications/The%202009%20Republican%20Budget%20Plan.pdf.

Even if you might not agree with all of the specifics, at least here are some details for how we might avoid any tax increase.

Comments?

The Michigan Legislature’s Balancing Act – or Not

2009-08-07T05:15:00.000-07:00

"Job No. 1 is balancing the state budget," said Michigan Chamber of Commerce CEO Rich Studley. "Job No. 2 is balancing the state budget and Job No. 3 is balancing the state budget. We think it's important to get the right steps in the right order." http://www.thecenterformichigan.net/blog/special-report-michigans-tax-reform-playbook-2/

Studley was talking about efforts to pass the State of Michigan’s fiscal year 2010 budget starting October 1, with recent estimates putting the projected deficit as high as $2.7 billion. The longer run issue is to create a tax climate in Michigan that's fair and attractive to businesses while finally returning state government to stable financial footing – and ending the structural tax and spending problem that has bedeviled legislators for years.

House Republicans, in the minority (Democrats hold a 67-43 edge over Republicans in the 110-member House), unveiled a proposal last Wednesday to significantly cut state spending for the budget year, freeing up more federal stimulus money for road construction and job creation programs.

The proposal would freeze state hiring and employee pay, trim spending in several departments, privatize some prison services and make dozens of other changes to either cut or save nearly $1.4 billion. That would allow the state to take about $700 million from the federal Recovery Act, now expected to help fill general budget deficits, and spend it in other places. House Republican Leader Kevin Elsenheimer of Kewadin said the plan would balance Michigan's budget without tax or fee increases.
http://www.lansingstatejournal.com/article/20090723/NEWS04/907230343/1005/NEWS04/House-GOP-plan-calls-for-big-cuts--bumps-road-funds

Meanwhile, Republicans who control the state Senate have voted for spending cuts of more than $1 billion, including the elimination of the $140 million scholarship program and a $110 per student funding reduction for Michigan's K-12 schools. But many of the Democrats who run the state House don't want to cut nearly that much.

Governor Granholm Democratic governor has proposed cuts to tax revenue sharing payments that help local governments pay for police, fire departments and other services. But she won't support even deeper cuts passed by the Republican-led Senate. She also has supported scaling back some tax incentives or closing what she calls "loopholes" for "special interests" as revenue enhancers. She has not, however, released her list of just which of the estimated $36 billion “tax expenditures”, also known as “silent spending”, she would eliminate or scale back.

Also, much of the upcoming budget hole could be filled with money from the federal stimulus package. But cuts still would have to be made in the next fiscal year, so avoiding the pain this year will again involve “kicking the can down the road” another year.
http://www.lansingstatejournal.com/article/20090718/NEWS04/907180322/1005/NEWS04/Gov.-disputes--dangerous-cuts-

What is clear is that no one wants to touch tax increases or to address the long term structural budget deficit the state faces. Unless addressed this year, this will likely need to wait until 2011 with a new Governor and a new legislature, as few legislators will have the stomach for the fight in the 2010 election year. A good primer on the subject, however, can be found at SPECIAL REPORT: Michigan's tax reform playbook by The Center for Michigan, August 6, 2009.

Comments?

A Statewide Health Insurance Plan for Michigan's Public Employees?

2009-08-06T06:10:00.000-07:00

Peter Luke’s article “Employee health costs a linchpin for broader Michigan change”, July 19, 2009 http://blog.mlive.com/peterluke/2009/07/the_marker_that_speaker_andy.html, focuses on Michigan House of Representatives Speaker Andy

“Dillon's proposal to pull all government employees in Michigan under one health insurance benefit program, and to couple it with a tax overhaul, poses a direct challenge to risk-averse Democrats and Republicans who find it politically safer to defend the respective interests of the status quo.

A single health insurance standard for some 400,000 teachers, emergency responders, caseworkers and engineers save significant sums over time because it assumes employees would shoulder a greater share of their health benefits cost. A 15-percent assessment on a $12,000 policy for a government worker with dependents works out to $1,800 annually.”

Dillon’s announcement picks up the thrust of numerous previous Republican efforts to bring Michigan public employee health benefit costs under control. Coming from a Democrat, especially the Democrat Speaker of the House, controlled by a majority of Democrats, this gives the idea a better chance of being enacted than before. That’s a good thing. The bad thing is that this is still just an idea, with the details to be worked out.

The details will not be simple. Take the situation with public schools. Many public school districts are facing not only single year budget deficits, but chronic multi-year deficits resulting in negative “general fund balances”. Even those districts without budget deficits feel pressed by the current funding situation in Michigan. But the pressures amongst districts are not being felt equally.

Many districts under financial pressures for years have already taken significant steps towards controlling their employees’ health care costs. Some districts have gone from the earlier MESSA SuperCare 1 (a truly Cadillac plan) to MESSA Choices, then Choices 2 (comparable to BCBSM Flexible Blue). Drug co-pays have gone from $2/$2 to $10/$20 (co-pays for generic drugs/brand name drugs). Some districts have negotiated insurance premium “caps” paid by employers, shifting the cost of the premiums in excess of the maximums paid by the employer to the employees. Some districts have adopted high Deductible Plans and Health Savings Accounts, attempting to induce more informed consumerism into health care service purchases to reduce the long-term costs of health care. Other districts have gone to self-insured plans, purchasing a major medical plan to cover the big losses and self-insuring for the deductibles under those high deductible plans – usually for the employees not represented by the Michigan Education Association, the owner of MESSA.

Thus, any savings generated by a new statewide plan will affect different school districts differently. If the state were to simply impose upon school districts a new, lower cost plan, some districts might actually see a cost increase, rather than a cost decrease, while other districts that have not previously negotiated cost savings measure may save money. It would probably turn out that districts which have been most pressed financially in the past are those who have already made these changes and not realize the savings. Hmm, that does not seem to solve their problem.

Nonetheless, to the extent that savings throughout the system may be achieved, Michigan needs to consider new ways of doing business. Michigan is highly likely to lag the nation in economic recovery, so it may be awhile before we are singing, “Happy days are here again…” We must seize upon opportunities to be more frugal, despite the entrenched special interest groups that will oppose changes.

Comments?

Will Health Care Reform Result in Rationing of Services? Of course…..

2009-08-06T05:29:00.000-07:00

One of the concerns we hear is that the Health Care Reform proposals will result in a “rationing” of health care services. While out walking one day, I realized that we already have rationing in our health care system. What’s that you say? Well, here comes the result of some of the 27 courses in economics and/or econometrics:

All scarce resources are rationed. Mostly in our economy, this is done through pricing, through the dynamics of supply and demand. Everyone does not get all of what they want.

With access to health care for the elderly primarily paid by Medicare, services are rationed according to the rules of Medicare and the Medicare Supplement Insurance the elderly have. For youth covered by SCHIP, services are rationed according to that program’s rules. For the rest of U.S. residents, health care services are rationed according to the rules of the marketplace – i.e., supply and demand. People with health insurance with complete coverage are somewhat restricted in the services they can access paid by insurance by the insurance policy coverage provisions. Beyond that, health care services are rationed by people’s ability to pay, related to their varying levels of wealth.

It is readily understood that not all available medical services make sense in every circumstance. Let’s explore an end-of-life scenario to illustrate. Assume Mary is an 82 year old widow with no children. no grandchildren and no other close family. She is suffering from cancer and has been told she has 6 months to live.

Her hip causes here extreme pain when she walks, and is told that that could be relieved if she were to get a hip replacement, followed by a four month physical therapy program. Should she? Most would question whether that would make sense in this case.
She discovers she has some rare liver disease which causes her to slowly lose weight and is slowly wasting away. Surgery that costs $30,000 which would take a three week recovery period would solve the problem. Should she have this surgery?
She falls and breaks her leg. This requires that she have her leg in a cast, and be in traction for two weeks to allow the leg bone to heal properly. Should she be provided this service?
She suffers from high blood pressure. She is told that if she would take pills costing $400 per month her blood pressure would be controlled. Should she be provided the pills?

Some of the above health care services some would agree should be provided while others may say they should not be. This exercise shows that it probably does not make sense for all possible health care services to be provided in all cases.

The questions arise, “Where do you draw the line? What are the criteria for the decision?” For example, in the case of Mary described above, does it matter whether Mary has a huge loving family rather than being without? Would it matter if she also suffered from dementia? Would it matter if she were a popular, former state Governor? A famous singer? A Moslem? A black? A man? Should the decision be based on cost, such that the pills for the high blood pressure are OK, but invasive surgery is not? Does recovery period affect the decision? Does the accidental nature of the leg break affect the decision versus a chronic problem such as the high blood pressure?

Another question is, “Who decides?” Currently, those covered by insurance or who have sufficient wealth to have reasonably full access to services feel they have the choice, and are loath to give up that choice. This to some extent explains why polls show that about 80% of people are satisfied with the coverage they have. (Another reason is that they are not paying the costs of the insurance but receive the benefits – a “deal” that is perceived as much more advantageous than if they had to pay for the coverage.)

Under a government plan, the decisions of “who gets what services” are determined by the provisions of the plan, such as is currently done through Medicare and SCHIP. To the extent that savings in the system seek to be achieved by restricting access, then there must be a mechanism for doing so, either through a hard and fast written rule of some sort or some decision-making mechanism. Even a “hard and fast written rule” would require someone to administer the rule, thus still requiring some decision-making person or body. Leaving the decision up to the doctor-patient would not likely be perceived as any restriction at all, so that means that the decision would need to be shifted to some independent their party or “board”.

Arguments against that are that (1) the decision would then be made by someone not as familiar with the specific circumstances of each individual case (and therefore introduce the possibility of poor decisions made) and (2) the loss of choice by the individual.

People will line up for and against any Health Care Reform largely along lines based on their self-interest. If they are happy with their current situation, with health care services rationed in a manner which currently favors them, they will be more likely to oppose changes. If currently rationed out of access to health care services (such as people from the age of 19 – 65 and who are not covered by employer paid insurance), they will likely favor their increased access to health care services, even with restrictions on how much or what kind of service they can get. Anything would be better than nothing.

The position for the status quo was stated as follows:

"To me it seems that the industry is saying they will cut health care costs by rationing care," said Greg Scandlen, founder of Consumers for Health Care Choices. "That could mean they will pay only for services that have proven to be effective. . . . I think people can ration their own care and not spend on procedures that aren't worthwhile," Scandlen said. "Consumers don't need a government committee or insurers to make that decision for them."
How they'll save $2 trillion on health care, June 9, 2009, http://money.cnn.com/2009/05/11/news/economy/healthcare_reformproposals/index.htm

It appears clear that increased access to health care services by those currently denied (or limited) access will increase total costs to the health care system. I can’t see how it cannot. Unless significant increases in the supply of these services simultaneously occurs, some shortages of supply (or capacity) is bound to occur. This alone will result in the necessity of some mechanism for deciding who has priority of access. If the mechanism is not price and current access to insurance, what mechanism would be acceptable to ration those services?

More Concerns about Health Care Reform

2009-08-06T04:51:00.000-07:00

A July 24, 2009 Money.cnn.com report entitled "5 freedoms you'd lose in health care reform: If you read the fine print in the Congressional plans, you'll find that a lot of cherished aspects of the current system would disappear." http://money.cnn.com/2009/07/24/news/economy/health_care_reform_obama.fortune/index.htm
highlights a few key concerns of many in the U.S. today.

The entire article is worth reading, but here are the main points of what we would lose:

Freedom to choose what's in your plan
Freedom to be rewarded for healthy living, or pay your real costs
Freedom to choose high-deductible coverage
Freedom to keep your existing plan
Freedom to choose your doctors

These are freedoms few of us wish to lose. Small wonder there is a growing outcry about the proposals included in the bills pushed by the Democrats in the majority in both houses of Congress. Despite the historic victory by President Obama in November, was this what the majority of the people in the country want? An electoral victory is not a mandate to do whatever one wishes once in office, even if you have the power through a majority of the votes in Congress.

Health Care Reform Forum Materials

2009-08-06T04:01:00.000-07:00

The following was shared at the Health Care Reform Forum I moderated on Thursday, July 30 at the Ann Arbor District Library:

Health Care Issues/Problems Perceived

The nation’s 2009 annual health care bill: $2.5 trillion—$18 out of every $100 produced by the domestic economy (gross domestic product or GDP) - and is projected to go to one-third of GDP by 2030.
Projected health expenditures in 2018: $4.4 trillion—$1 out of every $5 produced domestically.
Health care cost for each man, woman and child: $8,050 in 2009; $12,104 in 2018 (adjusted for inflation).
Health‐related spending in the federal budget: $870 billion in 2009—21 percent of total spending—more than amounts projected for Social Security ($680 billion) or national defense ($645 billion, excluding defense health care costs).
The federal budget’s share of the national health care bill: 35 percent in 2009.
Health care’s rank within overall consumption: #1—Americans spend more for health care than for any other type of good or service including housing, food, or transportation. The health care industry is the third largest private employer after manufacturing and retail operations.
Compared with other industrialized nations, the United States spends the most per person but ranks at the bottom of health indicators including infant mortality rates and life expectancy at age 60.
46 million people living in the United States did not have health insurance in 2007. Another 17 million may be underinsured. Those statistics point to inequities in access to and the affordability of health care. [Many of the uninsured use the emergency rooms which cannot turn them away and then don’t pay for the services, which results in the costs being shifted to those who can pay, or by the insurance companies which then tacks those costs onto the insurance premiums.]
The high rate of growth in annual health care spending strains public and private budgets. The excessive growth in costs also raises serious concerns about the efficiency and equity of the nation’s health care system. [The cost of health care to businesses creates a competitive disadvantage for domestic companies competing in the world market against companies in other countries where the such health care is unheard of or the government pays for it. The auto bailout relieves some of that disadvantage due to legacy costs from GM and Chrysler.]
According to opinion polls, more than four out of 10 Americans rate national health care quality as only “fair” or “poor,” and about twice as many— eight out of 10—are dissatisfied with the total cost of healthcare. Yet when it comes to their own health care experience, people are generally positive about its quality, and most report that they are satisfied with the amount they pay. [A major disconnect, due to the ones who pay for the services are not the ones who use the services, and it is a lot easier to spend someone else’s money than your own.]

Source: Health Care and the Federal Budget. This is a July 21, 2009 release from the Committee for a Responsible Federal Budget that is very informative (and sobering!). http://www.crfb.org/documents/HealthCareandtheBudget.pdf The content included in [ ]'s I added to the original work by the CRFB.

Conclusion: Most agree “something” must be done. The question is “what?”

Concerns About Proposed “Solutions”:

The plan enacted will not contain health care costs.
The costs of health care will increase, further increasing the federal budget deficit and national debt beyond what lenders (including foreign lenders) will be willing to finance, and if willing, only at interest rates that will stifle economic growth.
Taxes will have to increase.
I may not be able to see the doctor of my choice.
I will lose my current excellent insurance coverage.
A medical treatment needed to save the life of me, my loved ones or a friend may be denied through a rationing system.
People will be counseled near end of life to stop living.
Any public “option” will end up being the only option, limiting competition and innovation.
Access to personal medical records will be easier to access and be abused.
Illegal aliens will be covered.
Etc.

The forum was conducted using the National Issues Forum "deliberative dialogue" method. For more information, see http://comingtogether.us.com/

Facebook link

2009-07-26T16:15:00.000-07:00

You may link to me on my Facebook page at facebook.com/olson48176.

I look forward to hearing your ideas. Rick