Category Archives: View

View 685 Wednesday, July 27, 2011

· Budget Cuts

· Debt Limit History

· Real Cuts

· What Should Boehner Do?

· Whales vs. school lunches

·

There Are No Cuts

Everyone is talking about Draconian cuts to the budget. The President won’t sign the Boehner Plan because of the cuts. Yet there are no cuts in that plan or in any plan proposed.

There are no cuts. None. Zip, Nada, Bupkis, Zero. None.

We need to understand how “budget cuts” are measured. The base line budget projects a $9.5 Trillion Dollar increase in spending over the next ten years. Any reduction in this increase in spending is officially a “cut.” Thus the Republican Deficit Plan mandates an approximate “cut” of $1 Trillion over the next decade in exchange for a rise in the Deficit Limit of $2 Trillion. Note that the $1 T “cut” isn’t assured, since it takes place in the future, and one Congress cannot bind another. (Note that. One Congress cannot bind a future Congress. It might be well to remember this.) But even if the $1 Trillion “cut” is faithfully carried out, the effect is that there will be an $8.5 Trillion increase in spending (and thus in Debt) over the next decade.

Put it this way. If Congress were to freeze spending: we will spend next year precisely what we spent this year on each project, none of them increased and none decreased – if Congress were to do that, the result would officially be a $9.5 Trillion cut. It would be a cut in government pay, in school lunches, in Medicare and Medicaid, to the Army and Navy, to the DOE SWAT team and the Department of Agriculture Pet Bunny Inspectors, a cut to Head Start, a cut the FDA, a cut to – well, you get the idea. Not spending more money every year is a cut, and a freeze on spending is a $9.5 Trillion Cut in Federal Spending. Cuts to school lunches, Medicare, Medicaid – well, we’ve said all that. Not spending more is a cut.

It hasn’t always been this way. Back in the 1960’s a “cut” was actually a cut; if a department’s budget got cut it meant that it got less money. But since the budget acts of the 70’s Federal spending automatically increases year after year and any reduction in that increase is scored as a cut.

So: if we adopt the Boehner Plan, we get what amounts to a $10 Trillion increase in spending over the next decade. And that, we are told, is the best we can hope for, and we ought to wheedle the Democrats and the President graciously to concede to give it to us good and hard.

Let me repeat that because while most of you know it, some don’t, and those who haven’t thought of it will find it hard to believe. A freeze in spending: a mandate that no department of government spend more next year than it spent this year; will be reported as a $9.5 Trillion cut. If Boehner gets all he asks for and then some, say a $1.5 Trillion cut over the next decade, he will have locked in an $8 Trillion increase in government expenditures (and thus the Deficit) over the next ten years. And the Democrats will decry the Draconian cuts in school lunches, education spending, Medicare, etc., etc. And at the moment the “non partisan Congressional Budget Office” believes that Boehner Plan would only “cut” $0.85 Trillion over ten years, meaning $850 Billion, meaning $85 Billion/year. The United States borrows $100 Billion a month.

There are never any actual cuts in spending. No one is proposing any. There are only temporary reductions in spending increases. No Plan by either Party contemplates any actual cut in spending. We are arguing over how much more we will let the deficit rise: $8 Trillion or $10 Trillion. If it only rises by $8 Trillion that will be counted a great victory with a $2 Trillion cut. Be prepared to pay.

Salve, Sclave.

The Limited Debt

A brief history: the debt limit in 2006 was   $8.2 Trillion.

It is now (2011)   $14.3 Trillion.

When this Dance is done the debt limit will be  $16.3 Trillion

In 2021 it will have to be somewhat more than $23.0 Trillion, and will continue to rise.

The Pournelle Plan

The Republican leadership proposes at best a $8.5 Trillion increase in federal spending over the next ten years. That is advertised as a Trillion Dollar Cut.

I propose that we not only freeze Federal spending, but impose a 1% reduction in all payments. That’s all of them. Welfare, Medicare, Medicaid, school lunches, whale watchers, game wardens, and the rest of it. No adjustments. That will be hard on military families, and I know it, but that’s only for a year while the various departments readjust their budgets.

The following year each department other than the military is subject to a 2% budget cut, to be allocated as they see fit: reducing payments, laying off people, reducing pension obligations, whatever has to be done. At that time we reset the conditions for getting Welfare and Social Security: raise the automatic age by one month per month until it is 68, not 65. Adjust the non-retirement payments – disabilities, dependents, everything that people get who have not paid into Social Security to get it – by some small amount per year as we raise the qualification requirements for getting into those programs.

And we search through all the government programs to find those which we simply cannot afford so long as we have to borrow money to do them. This includes not only the obviously silly ones like Pet Bunny Inspectors, but much more importantly, the various regulations: is the economy strong enough to afford this kind of regulation? The assumption is that it is not: that we cannot afford it. As for example the FDA testing of “effectiveness” of drugs. Safety is fine. Testing for safety is fine. Accumulating data is fine. Certifying “effectiveness” is controversial to begin with, and interferes with people’s right to be damn fools. Freedom is the freedom to do things without your permission. Drugs will carry, in large readable letters, the warning that the effectiveness of this product has not been tested by the FDA. The FDA can enforce truth: if this says it contains snake oil it does in fact contain oil squeezed out of a snake – but makes no commitment about its effectiveness for any purpose. Take at your own risk. That’s freedom.

That sort of thing. Find things the government is doing that may or may not be a good idea, but which we can’t afford when we have to borrow money to do it. We can borrow money for investment, but most of that infrastructure investment is better made by the states anyway. We have already built the Federal Highways and the Interstate Highway. There are other essentials, but they need to be done in priority with the understanding that we have to borrow the money to do them.

Those can and should include genuine investments in technology development including space technology. Now that Shuttle is no longer eating NASA alive to feed the standing army it might be possible to have some genuine manned space development that isn’t built to pay 22,000 development scientists and technicians. We had that chance after the Challenger disaster, when the Citizens Advisory Council – Chairman J. E. Pournelle. PH.D. – urged that we not rebuild Challenger, but build a genuinely reusable manned ship, no tiles, no wings, lifting body, Shuttle Main Engine to run at 95% of maximum thrust instead of 103% thus meaning it is refillable not rebuildable, etc. This was endorsed by the whole Council which included the top space scientists and developers in the country; but instead they rebuilt the old bird, because the mission of Shuttle was to employ the standing army.

I am rambling. I haven’t the authority to propose anything. I may even be off my head, but I continue to insist that it is time to have a genuine prioritization of federal expenditures. Get rid of the stuff we can’t afford. And shared sacrifices must include the recipients of entitlements and government employees.

What Should Boehner Do?

We have to get through this. We will probably do it with some variant of the Boehner Plan. I hate that, but the one thing Boehner must not do is pretend he has made cuts. He should be honest. “I have got an agreement to raise the deficit $9 Trillion instead of $10 Trillion over the next decade, assuming that the Democrats actually agree. We have cut nothing. We will raise the Debt Ceiling because the President gives us no choice.” Say that, not that you have “compromised” and made budget cuts.

Be honest with us, Mr. Boehner. I understand that forcing the President to shut down the government would be a very dangerous thing, and most Americans do not want to see that happen. Just be honest with them: make it clear that this is no cut, that spending continues, that borrowing continues, and we have not got rid of any of the things we can’t afford. Tell us the blinking truth.

Whale Watch

Today’s LA Times tells us of a Federal program involving research ships and research aircraft: it studies whales and how they are being killed by ships colliding with them in the Santa Barbara Channel. In the past decade about 6 whales/year have been killed (that we know of. The number may be as high as 100, although that is unlikely).

It doesn’t give the cost of the program, but I’d guess about $10 million a year. It’s certainly worthwhile. It’s something I’d like to see done. And we can’t afford it. Or can we? If you have to choose, free school lunches or research on accidental deaths of whales in the Santa Barbara Channel, which would you choose?

It is that sort of choice that needs to be made when you have to borrow the money for these programs. And it is that sort of choice that no one is making.

View 685 Tuesday, July 26, 2011

The Deficit Dance

I hate to keep writing on this subject.

Budget Cuts: we will increase spending, but we will reduce the rate of increase. We just spent $9 Trillion we didn’t have, but we will make a $1.1 Trillion cut – over ten years. Which is to say we will cut $100 Billion a year, having spent $9 Trillion. The deficit will continue to grow. So the only choice is to raise taxes or the nation is finished, the elderly will not get their Social Security checks, the Veterans will not get their benefits. Inspectors in the Department of Agriculture will continue to get “cost of living” raises and step increases in their civil service ratings. Department of Education SWAT teams will get their raises including full health and pensions. The deficit will grow, and there will be another financial crisis. The EPA will continue to impose regulations, the courts will continue to accept lawsuits to harass anyone who intends to open a mine, drill an oil well, or create a business.

The only remedy will be to raise taxes. We must have shared sacrifices so that the Washington elites can go about business as usual. Washington public schools will continue to deteriorate but none of the elites will send their children to those public schools so that won’t be a problem.

In other words, the Dance goes on, and we are being played. Nothing much has changed. What’s called a cut is in fact merely a small decrease in the rate of increase, so that “cut” means spending more money. There will be a $1.1 Trillion cut spread over ten years, with a Commission of 12, 6 Republicans and 6 Democrats, to propose more cuts. If 7 of them can agree on a “cut” – which may be an actual cut but is more likely to be a reduction in the rate of increase – then both Houses of Congress have to approve the “cut”. This may amount to $2 Trillion spread over ten years, or $200 billion a year.

The government will continue to borrow $100 Billion a month. That amount will go up as the deficit rises. We will then be told that gollies, we did everything we could, but it’s not working, we have to have more revenue or we are in default, give us more money. When we point out that they promised cuts and didn’t deliver, we will be told that, well, yeah, but look at that guy with the private jet over there! Tax him, tax him! Look, that company made obscene profits last year! Tax them, tax them!

There is a way out. It starts with cuts in Entitlements. Begin this way: from this moment, you are entitled to only 99% of what you were previously entitled to. That includes Social Security, Welfare, your pension, Medicare. Meanwhile all government salaries and benefits are reduced by 1%. Once again, these are real cuts.

Set up the 12-person joint Congressional Commission, but its purpose is to identify programs that we can no longer afford to fund. Those will simply be eliminated or deferred until we have budget surpluses. They include a great number of regulatory agencies and enforcements. We set up a second Commission whose job it is to determine which regulations we can afford to put off until there is a budget surplus. In other words, determine what we can afford and must have even if we have to borrow money to do it. Everything else stops until we can afford it at which time we can debate the desirability of inspections of stage magicians to be certain they have a permit to use their rabbits in their acts. We can determine whether we have to reduce ozone emissions so drastically when we can afford to do that: but we don’t need to borrow money from the Chinese in order to cripple our ability to compete with the Chinese who don’t pay any attention to our environmental regulations.

We could try liberty. Leave the money to those who make it and get out of the way.

Or we can continue to Dance. Spend and spend, pretend to cut, spend and spend, pretend to cut, and when the next crisis comes, raise taxes.

Birth of Fire, a science fiction action adventure novel by Jerry Pournelle, is available on Amazon now, and will presently be available for the Nook.

Birth of Fire by Jerry Pournelle is now available for Nook as well as Amazon.

View 685 Monday, July 25, 2011

Niven is coming over to discuss fiction so this will be brief.

The Deficit Dance grows more frantic. Obama wants to scare everyone until they pressure the Republicans into giving Obama what he wants, which is to get past the Deficit Limit Kabuki and postpone the next crisis until 2013. And of course he insists on “revenue increases” as part of deficit reduction. The formula is new revenue now – either by “Closing loopholes” like deductions for state taxes and mortgage interest, or outright raises in taxes – while the budget “cuts” will be referred to committees or commissions or some other entity: there won’t be any cuts. The Bunny Inspectors and the NEA SWAT Team and the NASA SWAT Teams will continue. We won’t cut spending levels back to , say, 1998 or 2000 levels (where they were already far too high). We won’t eliminate programs and actions that may or may not be desirable for government to do in times of prosperity but are almost certainly not worth borrowing money to do. In fact, not much will happen except that there will be new Commissions which will require staffs of New Government Employees.

And if we don’t do that, then the Social Security checks won’t go out, and a lot of people will be ruined because they can’t make their mortgage payments. Obama is making it clear that he prefers Bunny Inspectors to paying the Army.

Actually the Social Security Trust Fund holds well over a trillion dollars in US Treasury bonds. The Social Security trustees are legally obligated to cash in those bonds to make Social Security payments. The Trust Fund has plenty of money, more than enough to make Social Security payments for years. The money is in the form of Treasury Bonds, but those are as good as cash. If Social Security needs to send checks, they cash in their bonds. When a bond is cashed in, the Debt is diminished by the amount of the bond: meaning that they can then sell another bond and not go over the debt limit. Social Security payments have no effect on the National Debt. You don’t have to raise the Debt Limit to pay Social Security.

And of course if the government were really worried about running out of money, it could stop spending so much. Every Bunny Inspector laid off is another Social Security check that can be written. And of course Obama is telling us that if we don’t keep borrowing and spending we won’t be able to “invest in education.” I presume that paying the Department of Education SWAT Team is a really good investment in education.

I really don’t like to ascribe malice to people, but when everyone in Washington acts as if they are ignorant of basic facts that they absolutely have to know, it becomes harder to understand.

The way to reduce deficits is to stop borrowing money to do things you don’t have to do. Every beginning writer and family understands the concept of “eating money.” You’d think at least a few of those in Congress would. Obama has probably never met anyone who had to pay his own bills. Even so, one can be pretty sure that they are aware of these things both on Capitol Hill and in the White House. We don’t hear them acting as if they did.

It sounds as if the best the Republicans hope for now is to raise the debt limit so that spending can continue until April. A Commission will go find some cuts to make, and it will get around to doing that Real Soon Now, after which both the House and Senate will have to agree with the cuts recommended: in other words, there will be rejoicing among the political consultants and lobbyists who will become rich, and many people in Congress will receive campaign donations, and some symbolic “cuts” will be made – the NASA SWAT Team to guard Canaveral might well be one of them since not much will be going on there now – and the spending will go on. We will continue to “invest” in bunny inspectors, enforcers of the Americans with Disabilities Act, regulators who harass business until they leave the country. The beat goes on.

View 684 Sunday, July 24, 2011

Amazon has quietly launched Birth of Fire by Jerry Pournelle. That’s not strictly correct. Of course I uploaded it – thanks to Eric Pobirs and Rick Hellewell who got it into proper Kindle formatting so it looks good, a task that is tougher than most eBook publishers seem to realize – but Amazon still officially lists the book as under consideration in its reports to me. But Amazon also tells me that a dozen or so copies have already been sold, and when I went looking for it I found it listed for sale despite their not telling me that it has been published. Apparently all the departments at Amazon aren’t quite in synch.

Life at Chaos Manor has been chaotic over the weekend and we continue to be an interrupt driven system. I hope to recover from that and get some real work done shortly, but I didn’t get much done today. Alas.

The Saturday Wall Street Journal has an important article/interview with Bill Gates on education. Gates has spent a lot of money trying to improve American public education. The article, “Was the $5 Billion Worth It?” asks a significant question: could Gates have spent that $5 Billion on improving education in some better way? The answer is a bit more complex than it seems. My own theory is that $5 Billion distributed as prizes with specific goals could change the way education is done in this country; but it would have to be very carefully done. The stakes are enormous. And Gates did learn a lot for his $5 Billion.

I intend to write a lot more on this subject, and to reference this article again; but if you missed it, it’s worth looking up and reading. There is a sense in which there is no more important question facing this country. The public school system consumes an enormous part of government budget, and is responsible for the lion’s share of public deficits in many states. It’s the biggest item in the California budget. All that money is spent now with the primary goal of satisfying unions, which is to say, keeping every teacher employed regardless of competence, even minimum competence, down to the point of insanity. In the Los Angeles School District some 7 teachers have been dismissed for incompetence in a dozen years. Another hundred or so have been isolated from all contact with students, but are still paid full salary. Make it 200 in 10 years and it’s still a tiny number for a system that employs tens of thousands of teachers. Of course some of them are incompetent. Some started incompetent, some achieved incompetence, and some may have had incompetence thrust on them by an accident or just plain burnout. However they became incompetent, they are: and one of the things Gates’ research has shown – although he doesn’t like to say it flat out because he is trying to maintain some level of civility with the teacher unions – is that you can improve most schools by a factor of two by firing the 10% least competent teachers. This shouldn’t be surprising: it’s the case with most organizations. Weeding out the worst is always an effective means of increasing the efficiency of an organization. Gates has also shown conclusively something that honest education theorists have know for fifty years: class sizes don’t matter much, and spending more money seldom improves schools.

The single most effective thing you can do to improve a school is to fire the worst teachers and distribute their students among the remaining teachers. The increased class size won’t matter much: the school will improve quickly and visibly.

With many schools it can be quite dramatic. Most teachers know it. Most teachers know who the incompetent teachers are. Yet incompetent teachers are seldom if ever removed. Any attempt to get rid of the worst – and the worst can be really really bad, obviously bad, hilariously bad, and everyone knows it – and any attempt to get rid of them is met with implacable opposition and fanatic resistance by the teacher unions who are willing to sue school districts into bankruptcy if that’s what it takes to protect the incompetent. That’s hardly surprising, nor is it astonishing that the unions will at the same time claim that all they want is to protect the best interests of the kids; but it is a bit surprising that parents never catch on, and the best teachers, who are thoroughly aware of all this, almost never speak out. Of course they don’t dare. Teachers unions may claim to be professional associations, but many of them are more than willing to employ tactics that might shock even a mob-controlled garbage collector union. Bring a good teacher is hard enough: it’s a bit much to ask good teachers also to be crusaders against the system at the same time.

And so, like the Deficit Dance that results in delayed Social Security checks while the Bunny Inspectors continue with their inflated salaries, generous benefits, and high benefit pensions, the beat goes on. Better to protect the incompetent than help the kids learn something. Just as it is better to hold up a Veteran’s check than to eliminate the Department of Education SWAT team. (And now I am informed that NASA has a SWAT team. One wonders how long that will go on.)

The purpose of government is to hire and pay federal employees. It does that first, before paying debts, before paying out Social Security benefits that the recipients paid into for years, before – well, before anything. We’ll default before we begin serious cuts that eliminate needless departments and agencies of government even though we can live without what those agencies do and we have to borrow the money to let them go on doing it. But that’s a familiar rant, and it’s late.

Bill Gates seriously wants to change the world for the better, and he has the largest single Foundation in the land, larger than the next three combined. He has shown his willingness to spend money to get results. And mostly he has found that the politics are just too tough, even given his fortune. “It’s hard to improve public education—that’s clear. As Warren Buffet would say, if you’re picking stocks, you wouldn’t pick this one.” Give money to alleviate AIDS in Africa and everyone will say you’re a fine fellow. Try to induce real educational reform and you will soon find you are denounced as a villain.

One of Gates’ problems is egalitarianism. Gates has said often that every American child deserves a world class university prep education. That goal is unattainable even in Lake Wobegon where all the children are above average, because not even all those who are above average can or should go to university, and a world class university prep education doesn’t necessarily equip them to do much in the real world. I understand that there can be real value in a university prep education coupled with some practical instruction, and if all the children were really above average this might be a goal worth striving for; but everywhere except in Lake Wobegon half the children are below average, and condemning all the children to a world class university prep education dooms about half of them to a school life of hell followed by being thrust out into the School of Hard Knocks unprepared to do anything anyone would pay you money to have done. OK – I exaggerate. But not by all that much.

But that leads toward the essay I need to write, and this is not the time to write it.

I do commend the article/interview to your attention.

The same issue of the Wall Street Journal has Peggy Noonan saying “Out of the Way, Please, Mr. President”. She seems to believe that Obama is sincere but misguided. I hope she is right. The Deficit Dance continues and moves ever closer to the edge; once the US actually defaults on its debt – which it does not have to do, since the government takes in more than enough money each month to service the debt and pay the military, and pay enough people to write the checks – once default actually happens, interest rates will soar. At that point we won’t be able to borrow enough to roll over the debt.

At this point it begins to look as if the best we can hope for is a short interim “solution” in which we kick the debt can down the road a bit further. We won’t default, but the bunny inspectors need not fear for their jobs. Nor need needless employees of the Department of Education, cosmetic inspectors, those who enforce the Disabilities Act, and all the others who do things that we just might be able to live without borrowing money to pay for. When it’s over they’ll be safe. The President wants to get past the 2012 election. So do the public employee unions. And we sow the wind.