Current Events - August 6, 2013

 PK'S NOTE: Because that's a US President's priority, not the economy, Middle East, etc.

Have No Fear: Obama is Monitoring the A-Rod Situation

Have no fear everybody, the know nothing about anything important President is monitoring the A-Rod baseball suspension situation and even has a comment about it. From Fox News White House Correspondent Ed Henry:

Jay Carney says the President believes A-Rod etc have "important responsibilities as role models"

Terrific. In case you're out of the loop, dozens of Major League Baseball players were suspended this week for illegal use of performance enhancing drugs.

 Meanwhile, Obama is still getting his news about the IRS scandal, and every other scandal surrounding his White House, from the newspaper.  

http://townhall.com/tipsheet/katiepavlich/2013/08/06/have-no-fear-obama-is-monitoring-the-arod-situation-n1657623 

Rumor mill: Valerie Jarrett calling the shots during Benghazi attack?

Via Conservative Report:

Confidential sources close to Conservative Report have confirmed that Valerie Jarrett was the key decision-maker for the administration, the night of the Benghazi terrorist attack on 9/11/2012. [...]

After supper, Barack Obama had a telephone conference scheduled with Israeli Prime Minister Benjamin Netanyahu…  As that meeting drew to a close, Ms. Jarrett, who is also the Assistant to the President for Public Engagement and Intergovernmental Affairs, went from the living quarters to the White House Situation Room, where the attack in Benghazi was being monitored by Dempsey, Panetta and other top-ranking officials.

Whether she was instructed by the President to go there, or if she went of her own volition, is only known by the President and herself. [...]

As was reported earlier by Conservative Report, Cross Border Authority was denied… Two revelations are deeply troubling:

First, it is reported that an Army Special Forces team was present with an AC-130U Spooky (also known as a Spectre Gunship) on the tarmac at the airport in Tripoli, Libya…

Add to that, a team of Green Berets on the ground to secure and/or evacuate the Annex, and the outcome would have been two SEALS still alive, and a mess of dead terrorists.

The second, and most troubling aspect of the refusal to issue Cross Border Authority is who issued the refusal. Rather than the President, the Commander In Chief, making critical decisions, granting or denying the authority to initiate offensive-actions in support of our valiant fighting men, the decision not to take action was made by a person, to whom the people did not elect, nor did the Congress have confirmation power over.

The military-order, not to initiate action, saving our men in Benghazi, was issued by the President’s Advisor, Valerie Jarrett.

Now, I’m generally not inclined to highlight reports based on information from unnamed sources, but I thought this post from the Conservative Report blog site was worth noting for two main reasons:

1.) The White House hasn’t exactly been forthcoming with details about the deadly terror attack, to put it midly.  In fact, the administration has gone out of its way to craft blatantly false narratives involving a dumb YouTube video; and

2.) It’s been widely reported that Jarrett’s influence has shaped our management of international crises, specifically her role in convincing President Obama to call off the planned raid on Osama bin Laden’s Pakistani hideout three separate times.

That said, I still take such reports with a grain of salt.  However, the burden of proof is on the White House at this point as it has worked overtime to muddy the water and obfuscate the truth.  Until the Obama administration is forthright and truthful with the American people, the rumor mill will continue churning out reports from unnamed sources.

http://www.theblaze.com/blog/2013/08/06/rumor-mill-valerie-jarrett-calling-the-shots-during-benghazi-attack/#more-636287

Study: U.S. Debt Obligations $70 Trillion

A new study by University of California-San Diego economics professor James Hamilton finds that the United States has over $70 trillion in off-balance sheet liabilities--an amount nearly six times the on-balance-sheet debt figure.

The Treasury debt outstanding is $16.74 trillion. Of that, $4.84 trillion is money the U.S. owes itself. For that reason, explains Matt Phillips of Quartz, “many analysts tend to focus on the $11.91 trillion in debt that is publicly available to be traded.”

Hamilton’s study, however, examined the federal liabilities that are not included in the government’s officially reported numbers. Specifically, he examined the federal government’s “support for housing, other loan guarantees, deposit insurance, actions taken by the Federal Reserve, and government trust funds.” 

Not surprisingly, Hamilton found that Medicare and Social Security represent the bulk of future U.S. debt obligations, coming in at $27.6 trillion and $26.5 trillion respectively.

The study's $70 trillion debt estimate may actually be overly optimistic. Boston University economics professor Laurence J. Kotlikoff, who served on President Ronald Reagan’s Council of Economic Advisers, says the nation’s true debt obligations are three times that figure.

"If you add up all the promises that have been made for spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That's the fiscal gap," Kotlikoff told National Public Radio. "That's our true indebtedness."

Hamilton concedes that other scholars may arrive at different figures.

“Some may argue that the current off-balance-sheet liabilities of the U.S. federal government are smaller than those tabulated here; others could arrive at larger numbers," writes Hamilton. "But one thing seems undeniable—they are huge.”

http://www.breitbart.com/Big-Government/2013/08/04/Study-U-S-Debt-Obligations-70-Trillion

The fight Priebus should have chosen: the debates themselves

Reince Priebus issued ultimatums to CNN and NBC to withdraw programs focusing on the political life of Hillary Clinton they plan to air, arguing that the move demonstrates bias toward the presumed Democratic frontrunner.  Both broadcasters rejected the demand, and the RNC chair will presumably push for a binding resolution from the GOP to refuse to sanction any debates in the 2016 presidential primary cycle on those channels.  We’ll see if the RNC plays along for now, but National Journal’s Brian Resnick wonders whether Preibus’ assumption that the movies will hurt Republicans is all that solid.  In fact, he picks up on Allahpundit’s suggestion that the movies give Priebus a free pass to keep state parties from acting independently to add debates to the schedule:

In the 2012 election cycle, there were 20 GOP primary debates, and many—including the RNC—thought thatwas a bit of overkill. According to a GOP post-mortem, the number of debates should be reduced “to a still robust number of approximately 10 to 12, with the first occurring no earlier than September 1, 2015, and the last ending just after the first several primaries.”

But doing so is kind of tricky, since many of the local arms of the Republican parties gain money from the debates, explains Zeke Miller at Time:

But the effort to cut back on the number of debates has run into headwinds from Republican state parties in early states, who in many instances see revenue from co-hosting the debates and associated events. The autopsy recommends changing the RNC rules to include penalties for Republican state parties or candidates if they participate in debates unsanctioned by the RNC.

To date that provision has not caught on.

It’s just a theory, of course, but maybe one way to reduce the number of debates without ruffling any Republican feathers is to blame it on the Clinton miniseries. An anonymous RNC insider relays to Miller that the letter is designed to make limiting the number of debates a bit easier.

I’d say it also helps in shaping a particular battleground in advance of the next cycle — the media battleground.  With conservative activists irate at the lack of pushback against the broadcasters in the debates who manipulated agendas and engaged in debating themselves, Priebus’ offensive against CNN and NBC will score political points and help bring Tea Party supporters closer to the GOP.  Airing hagiographies of Clinton — if they are indeed such, which is unknown at the moment — makes that an even easier case to make.  Think of it as drawing a line in the sand early, and putting broadcasters on notice that the RNC will get a lot more aggressive about defending it this time around.  That kind of effort is an easy sell to the base, and indeed what it has long demanded of the Republican Party leadership.

Still, this is an opportunity missed to fix what’s truly broken about the primaries, which is the format itself.  In my column today for The Week, I outline the real problems with the traditional zinger-producing format, and wonder why the revolution in broadband technology hasn’t inspired either or both parties to take the entire effort in-house:

But let’s focus on the real problem in all of these cases: The format of the primary debates. Voters need to know how candidates think on complicated issues and policies. Instead of giving them time to flesh out answers and discuss any nuances of approach, the format locks candidates into absurdly short responses and rebuttals. Too often, the result is a rushed recitation of campaign talking points, with little or no original thought.

Worse yet, the media coverage of these debates end up focusing less on the substance of the answers than the rehearsed one-liners candidates use to needle each other. Analysts have little to judge from these debates other than superficialities such as posture, facial expressions, and the relative skill of the candidates’ tailors, which is why they latch onto the zingers as if the entire process is designed to produce the best master of ceremonies for the White House Correspondents Dinner. Parties with open primaries end up with a stage full of damaged candidates before the first ballots in primaries and caucuses get cast.

Furthermore, it’s not just Priebus who should be concerned about the ridiculous spectacle of these debates. The potential risk in the 2016 cycle extends to both parties, unlike 2012 when Democrats had an unchallenged incumbent. Hillary Clinton blew her cool in a December 2007 primary debate when challenged on states’ issuance of drivers licenses to illegal immigrants, changing her position in the course of her answer, on a subject that had little relation to the presidency. While the Republican primary will be up for grabs, Clinton starts off as the presumed frontrunner in the 2016 cycle, just as she did in 2008, which makes her the big target for everyone else. Clinton could end up as damaged as Mitt Romney after the 2012 primary debates.

If Priebus wants to take serious steps toward reform, he should rethink the entire debate structure. Instead of beat-the-buzzer formats with as many as a dozen candidates on stage at once, the RNC chair should look into formats that have only two or three candidates discussing issues at a time, with a moderator chosen for either neutrality or statesmanship within the party rather than to promote a media outlet’s own reporters. The candidates could rotate through the discussions over a series of events, and the RNC could invite broadcasters to air the debates themselves or have reporters attend them. Given the reach of broadband access, the RNC could live-stream those debates themselves and bypass media outlets altogether. That would put candidates in the best possible position to connect with voters and challenge each other on substance based on their own agendas rather than those of the media outlets.

Mediator bias is a real problem, but it’s the reliance on media outlets for broadcasting the debates that introduces the opportunity for bias in the first place.  (If that’s the problem that Priebus wants to correct, read the column to see why I think a bigger issue is ABC’s George Stephanopoulos.)  The conventional wisdom is that debates need the broadcasters to reach viewers and the trade-off is the imposition of political reporters as moderators, but I’d challenge that assumption.  Even airing on broadcast networks, primary debates aren’t going to pull in casual viewers, and motivated viewers would have little trouble finding the debates on a GOP internet channel instead.  The political media will still report on the debates, but they would no longer dictate the agendas and the questions — a role which really belongs to press conferences and interviews anyway.  And candidates are hardly likely to stop doing either, especially those in need of bigger media exposure to challenge front-runners.

That’s the direction of real reform, which would actually improve the standing of the party’s candidates rather than turn them into Match Game panelists.  It’s at least worth trying — if for no other reason than to send a stronger message to broadcasters that they are not indispensable to this process, and to state parties that the RNC will remain in control of debates.

http://hotair.com/archives/2013/08/06/the-fight-priebus-should-have-chosen-the-debates-themselves/

Obama's False History of Public Investment

Entrepreneurs built our roads, rails and canals far better than government did.

For almost five years now, President Obama has been making the argument that government "investments" in infrastructure are crucial to economic recovery. "Now we used to have the best infrastructure in the world here in America," the president lamented in 2011. "So how can we now sit back and let China build the best railroads? And let Europe build the best highways? And have Singapore build a nicer airport?"

In his recent economic speeches in Illinois, Missouri, Florida and Tennessee, the president again made a pitch for government spending for transportation and "putting people back to work rebuilding America's infrastructure." Create the infrastructure, in other words, and the jobs will come.

History says it doesn't work like that. Henry Ford and dozens of other auto makers put a car in almost every garage decades before the National Interstate and Defense Highways Act in 1956. The success of the car created a demand for roads. The government didn't build highways, and then Ford decided to create the Model T. Instead, the highways came as a byproduct of the entrepreneurial genius of Ford and others.

Moreover, the makers of autos, tires and headlights began building roads privately long before any state or the federal government got involved. The Lincoln Highway, the first transcontinental highway for cars, pieced together from new and existing roads in 1913, was conceived and partly built by entrepreneurs—Henry Joy of Packard Motor Car Co., Frank Seiberling of Goodyear and Carl Fisher, a maker of headlights and founder of the Indy 500.

Railroads are another example of the infrastructure-follows-entrepreneurship rule. Before the 1860s, almost all railroads were privately financed and built. One exception was in Michigan, where the state tried to build two railroads but lost money doing so, and thus happily sold both to private owners in 1846. When the federal government decided to do infrastructure in the 1860s, and build the transcontinental railroads (or "intercontinental railroad," as Mr. Obama called it in 2011), the laying of track followed the huge and successful private investments in railroads.

In fact, when the government built the transcontinentals, they were politically corrupt and often—especially in the case of the Union Pacific and the Northern Pacific—went broke. One cause of the failure: Track was laid ahead of settlements. Mr. Obama wants to do something similar with high-speed rail. The Great Northern Railroad, privately built by Canadian immigrant James J. Hill, was the only transcontinental to be consistently profitable. It was also the only transcontinental to receive no federal aid. In railroads, then, infrastructure not only followed the major capital investment, it was done better privately than by government.

Airplanes became a major industry and started carrying passengers by the early 1920s. Juan Trippe, the head of Pan American World Airways, began flying passengers overseas by the mid-1930s. During that period, nearly all airports were privately funded, beginning with the Huffman Prairie Flying Field, created by the Wright Brothers in Dayton, Ohio, in 1910. St. Louis and Tucson had privately built airports by 1919. Public airports did not appear in large numbers until military airfields were converted after World War II.

No matter where you look, similar stories come up. America's 19th-century canal-building mania is now largely forgotten, but it is the granddaddy of misguided infrastructure-spending tales. Steamboats, first perfected by Robert Fulton in 1807, chugged along on all major rivers before states began using funds to build canals and harbors. Congress tried to get the federal government involved by passing a massive canal and road-building bill in 1817, but President James Madison vetoed it. New York responded by building the Erie Canal—a relatively rare success story. Most state-supported canals lost money, and Pennsylvania in 1857 and Ohio in 1861 finally sold their canal systems to private owners.

In Ohio, when the canals were privatized, one newspaper editor wrote: "Everyone who observes must have learned that private enterprise will execute a work with profit, when a government would sink dollars by the thousand."

In all of these examples, building infrastructure was never the engine of growth, but rather a lagging indicator of growth that had already occurred in the private sector. And when the infrastructure was built, it was often best done privately, at least until the market grew so large as to demand a wider public role, as with the need for an interstate-highway system in the mid 1950s.

There is a lesson here for President Obama: Government "investment" in infrastructure is often wasteful and tends to support decaying or stagnant technologies. Let the entrepreneurs decide what infrastructure the country needs, and most of the time they will build it themselves.

http://online.wsj.com/article/SB10001424127887324635904578644233086643450.html?mod=WSJ_Opinion_LEADTop 

Ensuring Choice and Universal Coverage

The Left and the Right have a duty to articulate the values each wants to see in health-care reform.

Conservatives and libertarians have criticized the IPAB “death panel” that Obamacare endows with the authority to make top-down decisions about Americans’ health care. They’ve discussed how mandates for religious employers, businesses, and individuals run counter to the Constitution and the principle of personal choice. They’ve issued calls for Republican governors to resist Medicaid expansion in their respective states in order to impede the law’s implementation.

But now a number of conservative groups have issued a blanket Obamacare ultimatum: “If you fund it, you’re for it.”

Conservatives of all stripes are united in their opposition to Obamacare. But we are not united in what we might want in its place. If not Obamacare, what kind of health reform do we want? How should our values be reflected in policy, and why?

We have failed to engage those questions at a deep level, and we have struggled to articulate and defend our answers in a way that resonates with most Americans. Obamacare is now law, and our agenda for health reform is rooted in opposition — not in making the case for how conservative principles can serve as the foundation for something better.

Today AEI is launching a big-think proposal for comprehensive health reform that aims to fill that gap and spark substantive discussion. Titled “Best of Both Worlds” and authored by eight renowned economists from Harvard, Stanford, the University of Chicago, and the University of Southern California, the plan puts forward a market-based post-Obamacare replacement that guarantees both universal coverage and individual choice. It was formulated to answer a basic question: “If we could design the health-care-financing system from scratch, what would we build, and why?”

The plan itself begins with staples of center-right replacement thinking, such as eliminating the income-tax exemption for employer-based health insurance and providing all Americans with a sliding-scale subsidy to purchase private insurance on their own. It then joins these proposals to a new concept only implied in current center-right thinking: full, individualized, market-based pricing.

Every American would be given enough support to purchase a privately sold and administered catastrophic health-care plan, while private insurers would be freed to (a) use an individual’s health information to price the policy and (b) design whatever other policies it believes consumers would want and pay for. That puts the poor and the rich on more equal footing by replacing Medicaid (widely recognized as a second-tier system) with private coverage. It guarantees universal coverage without mandates by providing a basic plan at no cost to all Americans, with more generous coverage for the poorest and sickest. It introduces greater competition among insurers by fostering competition across state lines. And its substitution for Obamacare saves more than $60 billion over ten years.

By offering a proposal that marries a progressive emphasis on equity and protection with a conservative vision of market competition and choice, “Best of Both Worlds” neatly forces everyone debating Obamacare and health-care policy to confront the basic values at play and therefore to think through their policy implications.

The plan raises tough questions for conservatives and libertarians. Do we find distasteful any flavor of federal financing used to help low- and working-class-income Americans purchase health care? If so, or if not, why?
More broadly, is health insurance simply another commodity that some individuals are able to purchase and others are not? How does that interact with the uniquely conservative emphasis on the dignity of the individual? This plan suggests that health care is not just a service and that Americans’ altruistic impulse favors devoting some funding to a well-designed program that ensures care for society’s most vulnerable.

It confronts progressives with serious questions, too. Though Obamacare will greatly reduce the number of uninsured Americans, it will still leave 20 million uncovered a decade from now. And it is likely to make insurance less affordable for many who are already covered. Are progressives willing to consider an alternative policy that better realizes their overarching goals? Or are they politically yoked to a plan many privately agree is poorly designed and needs substantive overhaul? Are they willing to free up private insurers if it improves coverage and affordability for the poor and the sick? If so, by how much? And if not, why?

Progressives, conservatives, and libertarians all have a duty to articulate and defend the values they want to see reflected in health reform. Progressives must confront the dissonance between the policy objectives they sought in Obamacare and the reality of what the law will likely provide. Conservatives must offer a forward-looking policy agenda that proposes substantive solutions along with their criticism of the current agenda. 
And they must recognize that any politically successful repeal program must include a replacement component that resonates with Americans’ broader beliefs and personal experiences

Ultimately, this plan is just one option out of many. But it seeks to foster a discussion that is long overdue.

http://www.nationalreview.com/article/355181/ensuring-choice-and-universal-coverage-henry-olsen-brad-wassink 

Reminder: Under Obamacare the IRS Taxes Drug Companies For Selling Life Saving Medication

 In June 2012, Obamacare was officially declared a big, fat tax and now, the IRS is moving forward with plans to tax pretty much everything it can. I've already written extensively about the job and innovation killing medical device tax, but according to a GAO report, the IRS has the authority to tax drug companies for the number of life saving medications it sells. As a result, drug prices go up and costs are passed onto patients who need those medications.

Established annual fee on manufacturers and importers of branded prescription drugs.

The report notes this tax was established in 2011, which explains recent increases in the cost of medication. 

A new analysis from HealthPocket of early health insurance rate filings finds that consumers who choose the lower cost Bronze Plans and Silver Plans under the Affordable Care Act (aka "Obamacare") will likely be paying more for prescription drugs than they do now. Compared to comparable existing individual and family plan copays and coinsurance costs, consumers with prescription drug coverage can expect to pay an average of 34 percent more out of pocket for these medications if trends continue.

"About 70 percent of Americans use prescription drugs, and they are going to need to pay very, very close attention to what plans offer to minimize out-of-pocket increases for medications," said Kev Coleman, head of Research & Data at HealthPocket and author of the study. "When it comes to drug costs and changes in our newly reformed health care system, the fine print really matters."

And of course, this tax hurts the sickest people and the elderly the most. This tax is just another reminder of the true costs of Obamacare as more people than ever want the legislation repealed. 

http://townhall.com/tipsheet/katiepavlich/2013/08/06/under-obamacare-the-irs-taxes-drug-companies-for-selling-life-saving-medication-n1657531

Amnesty Driven by Voodoo Economics

Voices calling for amnesty do not really understand economics or free enterprise. They offer garbled misconceptions -- with graphs. But they would be kicked out of the economics courses I took in business school. The pro-amnesty camp argues from "voodoo economics."
Amnesty will grow the economy, they argue. Well, if there are more people, technically the economy will be bigger. But each person may be poorer. A growing economy is only 'better' if the economy grows faster than the population increases. Otherwise, each individual is worse off among a larger crowd.

Gross Domestic Product (GDP) measures total activity -- not household income for each individual family. Amnesty will create a worse economy for everyone, even if total GDP is larger. (Actually, amnesty just transfers workers from Mexico to the U.S.A., so there isn't really any growth in GDP, just a transfer.)

An estimated 30 to 40 million low-skilled workers will be added. The borders won't be secure. Millions more trespassers will invade. 'Blue card' holders can bring in their husbands, wives, children, parents, etc. to join them. Many who have already been deported can return.
Amnesty promoters insist that trespassers won't get a green card until the borders are secure. But, who cares? RPI status does everything a green card does except it just isn't green. 'Registered Provisional Immigrant' status will be granted 6 months after Obama signs a bill. Some are calling RPI status the new 'blue card' -- blue for States that vote Democrat.

Of course, amnesty will elect more Democrats. Democrats will enact government policies that destroy the utopian economic pipe dreams of the libertarians and business lobbyists pushing for amnesty. Utopian libertarians and naïve business interests are pushing for their own extinction. Political activist John Kwapisz, who taught me much, put it all together for me:

Regulations hostile to free enterprise, business, and libertarian pipe dreams will multiply because of 11 million new Democrat voters. Anti-business regulations are often passed at the state, county, or city level. A few cities already allow illegal aliens to vote in city elections. Immediately after amnesty, many more county, city, and state elections will allow amnesty recipients to vote.

But businesses need more high-skilled, high-tech immigrants, we are told. Employers need more Science, Technology, Engineering, and Mathematics (STEM) workers.

Wrong. In fact, American colleges and universities are graduating twice as many STEM graduates as there are STEM jobs in the USA. This is the report of Steve Camarota of the Center for Immigration Studies. We have U.S. high-tech graduates who can't find work.

The solution to getting high-skilled workers is to reform our schools and universities. It is education that needs reform, not immigration. But data -- rather than anecdotes -- show that we already have too many unemployed high-skilled workers. (Perhaps we need to import better human resources directors to recruit more effectively and fill vacancies.)

The naked truth is that businesses want to drive down salaries. Flooding the economy with millions of unneeded, surplus workers will lower the market rate for labor. But who will buy their products and services when family budgets shrink? Employers may pay cheaper wages, but will sell fewer products and services. (We have to consider other errors also to determine that outcome.)

"Specialization" or "comparative advantage" is the last desperate attempt of amnesty supporters to patch together an argument with bubble gum and twist-ties. "Comparative advantage" is a truth, but it simply does not apply to the hair-brained scheme of amnesty. This is the biggest error.

For example, society is richer overall if a heart surgeon devotes her time to doing heart surgery and pays a less-skilled person to mow her lawn. It would be a net loss for a heart surgeon to mow the lawn (except perhaps as mind-renewing relaxation). Economics teaches that workers should be allocated to their most productive capabilities.

In free market theory, a higher salary allocates workers to their most productive job. The heart surgeon earns more money performing operations than mowing lawns. These "price signals" are the information that makes a free market work. The higher salary encourages surgeons to perform more operations and mow fewer lawns.

But amnesty promoters don't want to pay the going rate for workers. They want to use government policy to drive down wages and salaries. That disrupts comparative advantage price signals, causing market distortions and misallocation of economic resources. (In technical terms, a few companies earn surplus "rents" (profits) by lobbying the government to distort the economy on their behalf. A few benefit at the expense of everyone else.)

Since we already have too many unemployed, low-skilled workers, adding more cannot grow the economy. Supplying what is missing can unleash a stalled economy. Making an existing surplus bigger won't help. In fact, it will drain the public Treasury, reducing available investment capital in society. Comparative advantage theory merely allocates the existing population among various jobs.

The biggest error is that high-value jobs are relatively scarce. An unlimited supply of high-value jobs is the false assumption of utopian amnesty defenders. Therefore, they fantasize, if we flood the country with high-school dropouts with poor language comprehension and few job skills, this will free up native-born American citizens to move into higher-value job positions. This will unleash a utopian renaissance, they dream.

But there simply aren't that many higher-value jobs in any society. A scarcity of high-value jobs is the limiting factor, not a shortage of high-school dropouts available to facilitate specialization. The U.S.A. is perfectly able to generate plenty of our own, home-grown high-school dropouts, thanks to the National Education Association. Adding to a glut of poorly-educated workers will not crypto-magically grow the economy.

Why are their home countries poor if 11 million illegal aliens will benefit the U.S. economy? If high-school dropouts are a burden back at home, how will they spark an economic boom here? Shouldn't they stay there and create prosperity back home?

Will amnesty recipients fit in as good employees? They won't know English (not for years at least) and won't understand our economy, our country, our culture, or our laws. I once had a client as a lawyer whose house was damaged by a sloppy paint job in a wealthy suburb of Washington, D.C. After the "respectable" painting company got the contract, the actual painters arrived who couldn't speak English and ignored the agreed plans. The family had to spend thousands of dollars getting paint out of the hardwood floor. And the paint job was done wrong.

Should a company pushing for amnesty trust someone to handle money, work with coworkers, or drive a company vehicle who has already proven they don't care about following our laws? Employers often run background checks on job candidates. Increasingly, businesses won't hire an applicant with bad credit. Employers won't trust workers to handle money or with company assets if they have a shady background or bad credit rating.

Yet the lemmings are stampeding. Cartoonish economic myths motivate Republican insiders to rush toward the cliff of amnesty for illegal aliens. GOP leaders feel the instinctive, genetic itch to leap irresistibly into the abyss, to their own political destruction. When the business lobbyists' arguments just don't ring true and violate common sense... they are probably snake oil.

http://www.americanthinker.com/2013/08/amnesty_driven_by_voodoo_economics.html#ixzz2bD8qW0E3

Krauthammer’s Take: Embassy Closings ‘Fruits’ of ‘Nothing Happening to the Bad Guys’ in Benghazi

On Special Report, Charles Krauthammer explained “a perennial problem that a superpower has is you want to be loved and respected,” and that the recent threat against American embassies in the Middle East indicates the Obama administration has opted for the latter.

“This is the fruits of being in Benghazi, having our ambassador attacked, and nothing happening to the bad guys,” he remarked. “There is no sense of anywhere in the world if you kill a U.S. ambassador, if you attack an embassy, you go against America’s interest, you ignore it, and you stick a finger in its eye that anything will happen to you.”

He detailed that this sort of conduct extends beyond the Benghazi attacks to include the administration’s relations with Russia throughout the Edward Snowden affair and its handling of Iran and Syria.

“This is the idea that America somehow by being nice will be treated well,” he said.

http://www.nationalreview.com/corner/355180/krauthammers-take-embassy-closings-fruits-nothing-happening-bad-guys-benghazi-nro

PK'S NOTE: Well, we've already been in it for a long time. I believe that is what Benghazi was about. Guns to Syria and for quite a while. 

Stay Out Of Syria To Avoid Turning War Into Another Federally Funded Entitlement

Obama administration policy toward Syria is a slow train wreck.  Unremitting pressure from war-minded elites is pushing President Barack Obama closer to military intervention in the bloody civil war.  Yet getting involved would be a fool’s errand.

Nevertheless, America’s putative allies appear to believe that they are entitled to U.S. support.  The president should disabuse them of this dangerous notion.

War should be a matter of necessity, not choice.  Of course, the Sirens’ call of intervention usually promises quick and humane results.  Alas, Americans seem to be constantly rediscovering that military operations rarely go as planned and the costs of conflict usually are far higher than expected.

When the much maligned “Vietnam Syndrome” ended in the 1980s, U.S. presidents again began marching off to war.  But Ronald Reagan’s meddling in Lebanon’s civil war, Bill Clinton’s misadventures in Somalia and the Balkans, and George W. Bush’s invasion of Iraq and occupation of Afghanistan offer bloody reminders that war is not just another policy option.

There is no reason to believe that Syria would be any different.  Indeed, that nation is distinctly unpromising for nation-building:  a messy civil war with a weakened family dictatorship attempting to retain control of an artificial nation increasingly fractured along ethnic and sectarian lines.  Even direct action to oust President Bashar al-Assad likely would not stop the killing.  As in Iraq, the end of formal hostilities would only trigger the next round.

Yet Syrian insurgents and their supporters not only hope for Western aid.  They expect it and are angry when Washington fails to act.  Last August, reported the Washington Post, America “increasingly is being viewed with suspicion and resentment for its failure to offer little more than verbal encouragement to the revolutionaries.”  One rebel spokesman said:  “America will pay a price for this.  America is going to lose the friendship of Syrians, and no one will trust them anymore.  Already we don’t trust them at all.”

Individual rebels complained that the U.S. could have aided their cause and prevented battlefield victories by the government.  Analysts warned that Washington was losing its opportunity to promote the emergence of a democratic and secular Syria.

Only limited humanitarian assistance followed, to the great frustration of the insurgents.  In February the administration promised additional non-military aid.  Secretary of State John Kerry called this “a significant steeping-up of the policy.”  The insurgents did not agree.

Opposition leader Adib Shishakly complained to the Post that “We expected more, but hopefully this is a positive start.”  He emphasized that the rebels were “absolutely disappointed” at the lack of military assistance.  Indeed, he added, Washington should “at least give us the tools to protect ourselves.”  An insurgent spokesman told the Post “we do not need food at the moment.  We would rather have weapons to defend ourselves and our children.”

Washington recently promised to provide weapons to the rebels.  That decision came in response to charges that Damascus used small amounts of chemical weapons.  Yet doubts about that claim persist, since the government has little incentive to deploy chemical weapons except in large quantities as a last resort.  Some analysts suspect that insurgents used captured stores in an attempt to induce Western intervention.

Even after deciding the administration was slow in acting.  When Secretary Kerry visited Syrian refugees in mid-July, they berated him for the delay.  He promised to “take your voices and concerns back with me to Washington.”

Refugees understandably wanted the globe’s sole superpower to overthrow their tormentor.  Yet they acted as if Washington was supposed to represent them rather than Americans.

One insistent refugee was quoted by the Wall Street Journal:  “We are not satisfied with the Americans’ actions.  We are only hearing words.  We need active steps!”  The Journal cited another one asking “What are you waiting for?  At least impose a no-fly zone or an embargo.”   Another refugee said:  “The U.S., as a superpower, can change the equation in Syria in 30 minutes after you return to Washington.”

Rebels reacted similarly.  Complained Gen. Salim Idriss, commander of the Supreme Military Council: “we don’t understand why our friends delay and delay and delay and hesitate to support us.”  Moreover, “At the end of the day we are not getting any kind of military support.  We told them repeatedly what we need.  But it is just hopeless.”  Mosab Abu Qutada, a rebel spokesman, said:  “We have honestly lost hope.  We were promised a lot before, and they never kept their promises.”

Samir Nashar, a businessman and member of the Syrian Coalition of Opposition and Revolutionary Forces, complained:  “as always, the West’s promises are bigger than its actions.”  A rebel fighter was quoted by Reuters as deriding U.S. excuses:  “what is important is that they are not helping us.”  Nashar complained: “I think it’s a policy aimed to manage the crisis, not to help the Free Syrian Army on the ground.”  Another combatant suspected that Washington simply wanted to keep both sides busy fighting.

The insurgent want list is long.  When the administration announced more humanitarian assistance, Gen. Idris opined:  “We don’t want food and drink and we don’t want bandages.  When we are wounded, we want to die.  The only thing we want is weapons.  We need anti-tank and anti-aircraft missiles.”

Louay Meqdad, a spokesman for the Free Syrian Army, said:  “We need short-range ground-to-air missiles, [shoulder-fired] MANPADS, anti-tank missiles, mortars, and ammunition.  We also need communications equipment, bullet-proof vests and gas masks.”  Moreover, “It is necessary to establish secure areas and impose no-fly zones in the south or north.”  Finally, the rebels required “a safe haven” to stop the regime from using “Scud missiles with unconventional warheads to shell liberated areas.”  In another statement he declared:  “If they send small arms, how can small arms make a difference?  They should help us with real weapons, antitank and antiaircraft, and with armored vehicles, training and a no-fly zone.”

One is tempted to ask, anything else?  Maybe a few B-52s plus an aircraft carrier and a couple of ICBMs?

Some Syrians seem inclined to blame the U.S. for their difficulties, even though Syria is one of the few Middle Eastern nations which never has been an American client state.  Last fall some Syrian protestors made their theme:  “America, has your spite not been sated by our blood?”   More recently, Washington Postcolumnist David Ignatius reported that “almost every Syrian I talked to thinks [the fighting over Aleppo] is America’s fault.”

In February the Syrian National Congress announced that it would boycott U.S.-organized peace talks to protest inadequate assistance.  After government missile attacks on Aleppo, the Syrian National Coalition announced:  “In protest of this shameful international stand [meaning the West’s failure to act], the coalition has decided to suspend its participation in the Rome conference for the Friends of Syria and decline the invitations to visit Russia and the United States.”

In June Gen. Idris proclaimed “If we don’t receive ammunition and weapons to change the position on the ground, to change the balance on the round, very frankly I can say we will not go to Geneva” for an international meeting intended to bring together the opposition, Assad government, and interested nations.  The insurgents changed their mind after a phone call from Secretary Kerry and, explained Mouaz al-Khatib, head of the Syrian Opposition Coalition, promises of “qualitative aid” from America and Britain.

The strangest reaction—if one believes Sen. John McCain, who has campaigned relentlessly for American intervention—is a threat to attack the U.S. if it does not give in to rebel demands. No doubt some Syrians will remember who their friends are, though that reaction presumably runs both ways.

But what of those who want America to intervene?  According to the Associated Press, a refugee complained to Kerry:  “You and the U.S. government look to Israel with respect.  Cannot you do the same with the children of Syria?”  Another warned “We will return to Syria and we will remember everything.”  TheNew York Times interviewed Syrians who threatened to “turn their backs in return,” pointing to U.S. support for Libyan insurgents and invasion of Iraq, suggesting that oil was the motivation for America’s different response.

Sen. McCain went much further, however, arguing that “the Syrian people are angry and bitter at the United States” for failing to intervene.  Indeed, he added:  “We are sowing the wind in Syria and we are going to reap the whirlwind.”  Why?  A teacher allegedly told him:  “This next generation of children will take revenge on those that did not help them.”

It’s a ludicrous claim coming from someone who has worked to raise insurgents’ unrealistic expectations of armed intervention and, more important, doesn’t recognize the significant and frequent blowback from intervention.  That is, when U.S. forces kill, bomb, invade, and occupy, they inevitably create enemies.  And the latter, like Osama bin Laden, often seek revenge.  Nothing justifies their attacks on civilians, but there is an obvious logic:  if they perceive America as being at war with them, they try to strike back.  The examples and victims are many, ranging from the Russian and Austro-Hungarian Empires to Sri Lanka, Israel, and Iraq and on to America.

When, however, have combatants lashed out violently against those who failed to help them?  The world is filled with conflicts in which Washington did not—thankfully!—intervene.  Yet there is no known act of, say, Tamil terrorism over America’s failure to support independence from the Sinhalese majority in Sri Lanka.

Moreover, presumed gratitude toward America for intervening has not protected Americans from attack in Afghanistan, Iraq, Libya, and elsewhere.  In the case of Syria, most of the world’s 200 nations have not assisted the insurgents.  America is bigger and more capable, but not the only state able to arm/aid rebel forces.  In fact, angry Syrians interviewed by the New York Times vented against Europe as well as America, but none threatened violent retaliation.

Moreover, insurgents ultimately will have more on their minds than attacking the U.S.  If they win, they will have a country to rebuild and rule (and, unfortunately, local opponents to jail, try, and execute).  If the opposition loses, its members will have to evade and survive a vengeful Assad regime.  They would more likely look for ways to escape to America than to launch attacks on America.

If terrorism is on their minds, then perhaps Washington should target rather than assist the rebels. However sympathetic the opposition and its grievances, there is no justification for terrorism.  If the insurgents really would attack the U.S. for not helping, then the Obama administration should consider acting preemptively.  Thankfully, of course, Sen. McCain’s purported threat almost certainly doesn’t exist.

In any case, providing rebels with light weapons is a foolish half-step which would further entangle Washington without ending the conflict.  An interventionist Greek Chorus then would insist that U.S. credibility was on the line and demand further steps, including direct military action such as a no fly zone.  Since even that measure likely would not be enough to oust Assad, the war would continue, along with proposals for further escalation.

Instead, the U.S. should follow a policy of peace.  On very rare occasions war is necessary.  However, none of America’s recent interventions—other than the initial ouster of the Taliban in Afghanistan—involved any degree of necessity.  Most were frivolous, foolish, or both.  The conflict in Syria is a human tragedy, but there is no security interest at stake for Americans who would do the paying and especially the dying from intervening.

The expectations of Syria’s opposition are another reason to stay out.  People around the world increasingly appear to view U.S. military intervention as some kind of entitlement.  In Syria, it seems, they feel free to threaten Americans if Washington chooses not to risk its own citizens in combat.

Washington should reeducate the rest of the world about the purpose of the U.S. military.  It is to protect Americans, not remake the globe.  As John Quincy Adams declared nearly two centuries ago, the U.S. should be “the well-wisher to freedom and independence of all.”  But America “is the champion and vindicator only of her own.”  Americans should not go “abroad in search of monsters to destroy.”

Especially today, Washington should stop making new enemies who then want to attack the U.S.  The Obama administration should not turn Syria’s tragedy into America’s tragedy.

 http://www.forbes.com/sites/dougbandow/2013/08/05/stay-out-of-syria-to-avoid-turning-war-into-another-federally-funded-entitlement/

‘The Proxy War Is About to Be Discovered’: Beck Explains Why He Fears We Might See World War III

Glenn Beck reflected on the latest news across the Middle East and within the United States on radio Monday, saying he continues to fear the path we are on leads to World War III.

“My theory is this whole thing is coming apart at the seams, that this thing is at its end,” he said, proceeding to reflect on how many years passed between the election of former president Franklin Delano Roosevelt and the beginning of World War II.

“Just like with FDR, I think things are falling apart,” Beck explained.  He specifically pointed out that a wildly disproportionate amount of U.S. jobs added in July were part-time, low-paying, or both, and that many are blaming the burdensome costs the president’s health care plan places on employers.

Couple economic instability with a “proxy war” in the Middle East, Beck said, and trouble is on the horizon.

“You’re at the point now where the proxy war is about to be discovered,” Beck asserted. “Russia has picked Iran; we have picked the Muslim Brotherhood and Libya and Egypt…”

“It’s been a cold war, it’s been a proxy war, it’s been one where nobody really understands it yet, but I think you’re about to,” he continued.  “I think this whole thing in the Middle East is the beginning of the end of the proxy war and a covert war.  You are now going to see an openly hot war, I fear, and the beginning of World War III.”

http://www.theblaze.com/stories/2013/08/05/the-proxy-war-is-about-to-be-discovered-beck-explains-why-he-fears-we-might-see-world-war-iii/

Obama’s Watergates

Denial, evasion, “Let me be perfectly clear” — is this 2013 or 1973?

The truth about Benghazi, the Associated Press/James Rosen monitoring, the IRS corruption, the NSA octopus, and Fast and Furious is still not exactly known. Almost a year after the attacks on our Benghazi facilities, we are only now learning details of CIA gun-running, military stand-down orders, aliases of those involved who are still hard to locate, massaged talking points, and the weird jailing of Nakoula Basseley Nakoula.

We still do not quite know why Eric Holder’s Justice Department went after the Associated Press or Fox News’s James Rosen — given that members of the administration were themselves illegally leaking classified information about the Stuxnet virus, the Yemeni double agent, the drone program, and the bin Laden document trove, apparently to further the narrative of an underappreciated Pattonesque commander-in-chief up for reelection.

Almost everything the administration has assured us about the IRS scandal has proven false: It was not confined to rogue Cincinnati agents; liberal and conservative groups were not equally targeted; and there were political appointees who were involved in or knew of the misdeeds.

The NSA debacle can so far best be summed up by citing Director of National Intelligence James Clapper, who has now confessed that he lied under oath (“clearly erroneous”) to the U.S. Congress. Even his earlier mea culpa of providing the “least untruthful” statement was an untruth. 

TIMELINES
Yet the truth does come out. None of these scandals so far has been as ignored as the initial Watergate break-in and associated Nixon-administration misdeeds. If the doctrinaire press is now leading from behind, instead of launching a full-scale attack as it did in the Watergate years, the media as a whole are far more diverse than in 1973, with so many different venues and agendas that it’s difficult to suppress the truth for long.

Remember, between when the Nixon operatives drew up their initial plans to commit illegal acts in early 1972 and when the media furor over cover-ups and lying forced Nixon out of office in late summer 1974, the time elapsed was over 30 months — a period as long as or longer than the gestation of the present scandals. Recall also that no one died in Watergate; that the IRS resisted, not abetted, calls to go after critics of the president; and that Attorney General John Mitchell did not lie under oath to Congress. Scandals wax and wane, but until the truth is told, they never quite end.

THE DENIALS
There is also nothing new in administration denials. Both President Obama and his press secretary, Jay Carney, characterized the Benghazi, IRS, AP, and NSA allegations as “phony.” So too Nixon’s press secretary, Ron Ziegler, characterized the Watergate break-in as “a third-rate burglary attempt” and insisted that “Certain elements may try to stretch the Watergate burglary beyond what it is.” In August 1972, when news of the break-in first got out, Nixon himself assured the nation, “I can say categorically that . . . no one in the White House staff, no one in this Administration, presently employed, was involved in this very bizarre incident.” The Obama administration’s variation on outright denial is “What difference, at this point, does it make?” And when Jay Carney declares, “I accept that ‘stylistic’ might not precisely describe a change of one word to another,”  I am reminded of Ron Ziegler’s quip, “This is the operative statement. The others are inoperative.”

THE EXODUSES
By the summer of 1974, Richard Nixon was almost alone. His attorney general, John Mitchell; his closest two advisers, Bob Haldeman and John Ehrlichman; his White House counsel, John Dean; and a score of others — some of them directly involved, others only tangentially mentioned — had resigned, had been fired, or had been indicted. Those not involved simply wanted out of the administration, lest they suffer from guilt by association.

Less than a year after Benghazi, all the chief participants in reacting to the attack are gone from their positions: Susan Rice left the U.N. ambassadorship and is now a very quiet national-security adviser; Hillary Clinton is no longer secretary of state; we have both a new defense secretary and a new CIA director; the ranking military officer responsible for the area around Benghazi, General Carter Ham, commander of U.S. Africa Command, has retired.

Likewise there have been several resignations and suspensions from the IRS. I don’t think James Clapper will last long as director of national intelligence — such a high-ranking official simply cannot confess to lying under oath to a congressional committee and expect ever again to be taken seriously. Eric Holder may prove to be Obama’s version of a steadfast-to-the-very-last General Haig; yet, like the mostly silent Susan Rice, he has been so tainted with scandal as to have little reputation left other than for being loyal to the president, and is thus irrelevant.

THE ELECTION
I think it is a fair guess that had the public learned the truth about the Benghazi deaths — that a videomaker had no role in the violence and that the administration was paranoid about drawing attention to an ascendant al-Qaeda, U.S. missile-running, and lax diplomatic security — or about the IRS targeting or the NSA surveillance or the AP/Rosen monitoring, Barack Obama would have lost a close election. All these scandals had their geneses before the 2012 election, and all were adroitly hushed up until after Obama’s second inauguration.

That too is in accord with the Watergate pattern. The Nixon administration covered up in Machiavellian fashion the June 1972 Watergate break-in, almost five months before the president’s landslide win. At least six weeks before the election, the nation knew that there were members of the Nixon administration or the Nixon reelection committee involved in Watergate-related misdeeds — but they found that in comparison to Vietnam, the Chinese initiatives, or the economy, the Watergate news was boring. Again, that the Obama scandals were successfully kept hushed up before the 2012 election is not unusual. 

Whereas Nixon suppressed the truth and won big in 1972, by the 1974 midterm elections there had been enough blowback from the Watergate scandals that the Democrats picked up four Senate seats and 49 House seats. In other words, 2014 is still a long time away.

THE TARGETS
The Obama administration’s methods and aims — going after political opponents, monitoring a supposedly leaking press, fingering fall guys, soiling the IRS — are likewise Nixonian to the core.

Nixon tried to use the IRS to punish his enemies, although Lois Lerner and William Wilkins appear to have had far less integrity than did Nixon’s IRS chief, Johnnie Walters, who resisted rather than abetted Nixon’s illegal efforts. As in the case of doctoring CIA talking points and pressuring CIA operatives, so too Nixon tried to cloak misdeeds as “national security” operations. Nixon went after members of the press; Obama had the communications of James Rosen of Fox News — and even those of Rosen’s parents — monitored. Mr. Nakoula was the poor soul the authorities almost immediately jailed for his supposedly right-wing, Islamophobic film. He proved a sort of updated version of the caricatured crazy Cuban burglars and the unhinged Gordon Liddy, whose freelancing zeal allegedly caused the Watergate problem in the first place. The only difference is that the latter really did commit relevant illegal acts, while Nakoula’s videomaking was uncouth, not criminal — and irrelevant to the Benghazi deaths.

THE FIFTH
Lois Lerner’s resort to the Fifth Amendment is not new and will not be successful in covering up her record at the IRS. During the Watergate scandals, almost everyone from Charles Colson to John Dean took the Fifth at one point or another while under oath in front of various committees and grand juries. Such stonewalling delayed but did not stop the investigations. I expect more participants in the Obama-administration misdeeds will invoke the Fifth, and the dodges will ultimately have little effect, other than to remind us that many in the administration have lots to hide.

THE FALLOUT
Nixon left office with historic low poll numbers and the economy a wreck. His successful feat of Vietnamization was undone by Congress’s refusal to make good on American promises of aid. His foreign trips were seen as failed efforts to regain political stature back home.

So too already with the unraveling of Obama. Cap-and-trade, green energy, and the idea of global warming are politically dead. So is a new gun-control initiative. The president, not his critics, is dismantling key elements of Obamacare, his signature achievement. Cabinet posts resemble musical chairs. About all we can expect is a new Nixonesque war on someone — post–Trayvon Martin “bigots,” conservatives supposedly waging a “war on women,” “nativists” who sabotaged “comprehensive immigration reform.” In other words, there will be no positive initiatives, just attacks on Them.

The president’s poll numbers are tanking, and even some of the liberal press feels increasingly betrayed. The Middle East is a mess: Syria a charnel house, Egypt pure chaos, Libya the new Somalia, Iraq abandoned, Afghanistan ignored. Al-Qaeda is on the run — toward Westerners everywhere.

The common denominators are perceived presidential weakness, and inattention. But whereas Richard Nixon was seen as a brilliant foreign-policy realist, Obama prior to his scandals was already struggling to overcome the reputation of being a naïf about foreig and cool, distant, and inept at home.

Because something terribly wrong occurred in Benghazi, with the IRS, with the treatment of the Associated Press and James Rosen, and perhaps with Edward Snowden and the NSA, and those involved are seeking to mask their culpability, the scandals grind on. They will not end until the truth sets us all free. So expect a long-drawn-out and sordid saga.

If the administration continues to stonewall and taunt its critics, there will soon appear updated Obama versions of diehard Nixon defenders like Rabbi Korff and Representative Sandman — with plenty of the same old “Let me be perfectly clear” and “Make no mistake about it” presidential denials.

http://www.nationalreview.com/article/355157/obamas-watergates-victor-davis-hanson

Obama Who?

Critics of the president are convinced that Barack Obama will do lasting damage to the U.S. I doubt it.

Obama came to power in the third year of large Democratic congressional majorities. In his first referendum, he lost the House and he may soon lose the Senate; in other words, there followed a somewhat normal reaction against a majority party. Obama’s popularity rating is well below 50%, despite an obsequious media and a brilliantly negative billion-dollar campaign that long ago turned Mitt Romney into a veritable elevator-using, equestrian-marrying, canine-hating monster.

In the second term, there is little of the Obama bully pulpit left. “Make no mistake about it” and “let me be perfectly clear” can incur caricature, not fainting. “Really,” “I’m not kidding,” “I’m serious,” “in point of fact,” and “I’m not making this up” often prove rhetorical hints that the opposite is true. When Obama warns about gridlock in Washington, the “same old tired politics,” the dangers of a tyrant or king in the White House, the need for an honest IRS, or the perils of government surveillance, these admonitions have tragically become a psychological tic to warn us about himself. Former jokes about siccing the IRS on his enemies or using Predator drones to go after suitors of his daughters are as eerie as they are comedic.

Each new “historic” speech is by now mostly history repeating itself as farce. The Victory Column oration gave way to a flat vignette at the Brandenburg Gate. The Cairo speech follow-ups were mostly confusion about Egypt and Syria, without the fictions of the West’s underappreciated debts to Islam. The second Trayvon Martin aside on racial look-alikes was even more disturbing that the first. I don’t think Obama’s advisors will allow him to proclaim any more “deadlines,” or “red lines,” or any sort of lines at all in the Middle East.

Aside from Obama himself, no one in the post-Benghazi, -AP, -NSA, and -IRS scandal era references the president any longer as the former “professor of constitutional law.” In Obama’s case even the inflated title has become an oxymoron.

Ever so slowly, the press, albeit still for the most part privately, is learning that it has been had by one of its own. The breach of journalistic ethics turned out not to be a necessary means to an exalted liberal end, but instead was interpreted cynically by Obama as exemption for doing pretty much what he pleased — like going after AP reporters for leaking national security in a way the administration could only envy, given its own less impressive efforts to divulge what should not have been divulged. How odd that a truly adversarial press is an aid to conservatives in power, in keeping them on their toes about scandal, and how ironic that liberal media obeisance green-lights wrongdoing among those whom they deify.

What does the Arab Spring conjure up? Or “lead from behind”? Or “reset”? (If only Obama could envision Putin as George Zimmerman, we might get real on Russia.) Or an “OK” from the Arab League to act? Or CIA gun-running in Libya? Or the military non-response to Benghazi? Or the incarceration of Mr. Nakoula, the supposedly evil filmmaker? Or “al-Qaeda on the run”? Or the successive flip-flops on Mubarak, Morsi, and the Egyptian military? Or serial “deadlines” to Iran, or consecutive “red lines” in Syria? (If only these threats abroad carried as much weight as Obama’s promises to “bankrupt” coal companies and send our power bills “skyrocketing.”) Or the “peace-process” with the Palestinians? Or closing down the embassies of the Middle East? (If only Islamists were Republicans, they might be on the receiving end of real presidential threats like “punish our enemies.”) What do all these misadventures abroad have in common? I think the answer is nothing and everything: no consistency other than confusion.

In terms of future elections, Obama has created a new racial paradox for Democrats, the ironic wage of his own racial divisiveness.  As Obama turns off independent voters of all backgrounds by the now monotonous rhetoric — from “typical white person” to his racial grandstanding in the Trayvon Martin matter, with help always from the reliably polarizing Eric Holder (“my people,” “cowards”) — the president grows even shriller to make up the losses of moderate voters. Polls now show that the public is more likely to consider Obama racially divisive than a healer. In the upcoming midterm election, it is still unclear whether minority voters will continue to turn out in record numbers and vote in record lockstep Democratic fashion, a scenario increasingly critical to Obama as he loses independents. When one plays at zero-sum identity politics, each voter energized by racial referencing also means one voter — or more — polarized.

Cap and trade is dead. EPA director Lisa “Richard Windsor” Jackson proved a hushed-up embarrassment, a sort of asexual version of “Carlos Danger.” In any case, her quiet departure was no more noticed than was the entire tenure of Hilda Solis. Steven Chu and his hopes for gas prices to reach European levels will be as memorable a wish or prediction as was his sigh that California agriculture would dry up and blow away. Drivers have paid over $1 trillion more in collectively higher gas prices since Obama took office. That fact will be more remembered than the promised wave of new green electric cars and high-speed rail.

When Obama occasionally soars with the old “wind and solar” and “millions of new green jobs” tropes, most associate those references with “Solyndra.” How odd that those in the fracking business — reducing carbon emissions, lowering electricity prices, reducing dependence on foreign energy sources — have done Obama far more political good than his often inept and corrupt friends in the green subsidy racket.

One way or another, Obamacare will be repealed. If a House representative in 2009 had suggested that those in the executive branch should not enforce the employer mandate of the newly passed Obamacare, he would have incurred charges of being disloyal to the Constitution. Now the author of the bill calls it a “train wreck,” and the president chooses not to faithfully execute elements of his own law, his “signature” legislative achievement. With friends like these, why does Obamacare need enemies?

Why would the IRS, charged with enforcing Obamacare, wish its own employees to be exempt from the statutes it will enforce on others? Beware, Democrats: maybe Lois Lerner & Co. will do more freelancing and punish those who spiked their health care premiums. The more vehemently a group in 2009 demanded Obamacare — unions, government employees, pro-Democratic businesses — the more likely they were by 2013 to wish exemption from it. Is the lesson something like: “I should be excused from it, since I promoted it more than others”?

If anyone were to repeat the Obama reform mantra of 2008 — a new transparency, an end to lobbyists, no more revolving doors — it would incur laughter. A Larry Summers or Peter Orszag forgot Obama’s promises not to make millions of dollars from the influence gained during their government service. Citibank seems to be bankrolling the retirement plans of all those who worked at Obama’s Treasury Department. I think Obama will do the same when he leaves office, in the fashion of both Hillary Clinton and Lisa Jackson. Expect soon his $1 million speaking fees to lecture Citibank and Goldman Sachs on diversity and green energy.

When we recount Fast and Furious, Benghazi, the IRS mess, the AP/James Rosen affair, or the NSA disclosures, we think not of modern scandals per se, but rather in historical terms: which prior administration was more corrupt and dishonest — Nixon’s or Grant’s? Is that comparison fair to either of them? Did Obama, in compensation, give us Reconstruction or an opening to China? Has he accomplished as much as Harding?

Americans are always up for a good class war. Obama gave them one, with all the talk of the “one percent,” “millionaires and billionaires,” and the “pay your fair share” boilerplate. But to be a good class warrior also requires the pretense of populism. Ralph Nader and Dennis Kucinich were at least not habitués of Martha’s Vineyard, did not make second homes out of tony golf courses, did not have the family jetting to Aspen and Costa del Sol to take time off with those who forgot when to quit their profiting. How can a president so rail at the 1% and yet so wish to play, vacation, and be among those who didn’t build their wealth?

The president’s signature achievement? He has established a precedent that the president can play all the golf he wishes without being caricatured as a distracted would-be aristocrat.

Jimmy Carter’s four years had short-term consequences — almost all negative — but little long-term damage. Obama’s eight years in theory should have far more lasting ramifications, given the huge debt, radical appointees, job-killing regulations, and dismal economy of the last five years. Yet we are learning that he is proving even a more inconsequential figure than was Carter. And so likewise in years to come, even his true believers will talk more of an iconic Barack Obama before and after he was president — but rarely during.

http://pjmedia.com/victordavishanson/obama-who/?singlepage=true

BBC ties Tsarnaev to 'right wing' literature

The BBC has degenerated into a propaganda organ dedicated to sanitizing Islam and libeling conservatives. That is the only possible conclusion to draw from this scurrilous report that ignores the elephant in the bathtub that ignores Tsarnaev's expressed Islamic motives and instead directs attention to literature in his possession that is mischaracterized as "right wing."

Tamerlan Tsarnaev subscribed to publications espousing white supremacy and government conspiracy theories.

He also had reading material on mass killings...

The programme discovered that Tamerlan Tsarnaev possessed articles which argued that both 9/11 and the 1995 Oklahoma City bombing were government conspiracies.

Another in his possession was about "the rape of our gun rights".

Reading material he had about white supremacy commented that "Hitler had a point".

Tamerlan Tsarnaev also had literature which explored what motivated mass killings and noted how the perpetrators murdered and maimed calmly.

There was also material about US drones killing civilians, and about the plight of those still imprisoned in Guantanamo Bay.

Neoneocon, writing at Legal Insurrection, demolishes the shoddy slander, pointing out that racism is not the property of either left or right, that  Hitler was a socialist, not a right winger (that myth has been systematically propagated by the left, but is a lie). Moreover, 9/11 truthers are predominantly found on the left, and as for the OKC bombing, there is plenty of evidence that a cover-up took place.

What makes the BBC effort most repugnant, however, is the ignoring of the obvious Islamic radical motives of Tsarnaev. It is an outrage the British TV owners must fund the BBC when it is nothing more than a propaganda outfit.

 http://www.americanthinker.com/blog/2013/08/bbc_ties_tsarnaev_to_right_wing_literature.html#ixzz2bD0JV1p4

The Indebted States of America

States and localities owe far, far more than their citizens know.

Maria Pappas, the treasurer of Cook County, Illinois, got tired of being asked why local taxes kept rising. Betting that the answer involved the debt that state and local governments were accumulating, she began a quest to figure out how much county residents owed. It wasn’t easy. In some jurisdictions, officials said that they didn’t know; in others, they stonewalled. Pappas’s first report, issued in 2010, estimated the total state and local debt at $56 billion for the county’s 5.6 million residents. Two years later, after further investigation, the figure had risen to a frightening $140 billion, shocking residents and officials alike. “Nobody knew the numbers because local governments don’t like to show how badly they are doing,” Pappas observed.

Since Pappas began her project to tally Cook County’s hidden debt, she has found lots of company. Across America, elected officials, taxpayer groups, and other researchers have launched a forensic accounting of state and municipal debt, and their fact-finding mission is rewriting the country’s balance sheet. Just a few years ago, most experts estimated that state and local governments owed about $2.5 trillion, mostly in the form of municipal bonds and other debt securities. But late last year, the States Project, a joint venture of Harvard’s Institute of Politics and the University of Pennsylvania’s Fels Institute of Government, projected that if you also count promises made to retired government workers and money borrowed without taxpayer approval, the figure might be higher than $7 trillion.

Most states have restrictions on debt and prohibitions against running deficits. But these rules have been no match for state and local governments, which have exploited loopholes and employed deceptive accounting standards in order to keep running up debt. The jaw-dropping costs of these evasions have already started to weigh on budgets; as the burden grows heavier, taxpayers may decide that it’s time for a new fiscal revolt.

Illustrations by Sean Delonas

Most state constitutions and many local-government charters regulate public debt precisely because of past abuses. In the early nineteenth century, after New York built the Erie Canal with borrowed funds, other states rushed to make similar debt-financed investments in toll roads, bridges, and canals—projects designed to take advantage of an expanding economy. But when the nation’s economy fell into a deep recession in 1837, many of the projects failed, and tax revenues cratered as well, prompting eight states and territories to default on their debt. Stung by losses, European markets stopped lending even to solvent American states. The debacle inspired a sharp reevaluation of the role of state governments, with voters looking “more skeptically” on legislative borrowing, wrote political scientist Alasdair Roberts in 2010 in the academic journal Intereconomics. A member of New York’s 1846 constitutional convention even warned that “unless some check was placed upon this dangerous power to contract debt, representative government could not long endure.” Over a 15-year period, 19 states wrote debt limitations into their constitutions.

Since then, the history of state and local debt has been a tug-of-war between those struggling to keep governments from overextending themselves and elected officials seeking legal loopholes for further debt spending. In the second half of the nineteenth century, for instance, some states, now restricted from doing it themselves, used local governments to float debt, producing tens of millions of dollars in new obligations—and calls for limits on local borrowing. The go-go 1920s, a period of unprecedented construction and transformation throughout America, saw states and localities once again borrowing massively, this time to build roads and electrical infrastructure. State and local debt had hit $15 billion ($260 billion in today’s dollars) by the Great Depression’s onset. Arkansas was one of the heaviest borrowers, with obligations reaching $160 million ($2.8 billion today). It defaulted in 1933—one of more than 4,700 Depression-era defaults by state and local government entities, including nearly 900 by school districts.

The wave of bad borrowing led some states to tighten restrictions even more. Even as reformers made progress, however, courts began to sign off on government evasions of debt limits. As a consequence, such limits “have had only a modest effect on aggregate state and local debt,” writes Columbia Law School’s Richard Briffault. Judges, he notes, “appear to share with state governors and legislators a belief in the legitimacy of the modern activist state.” In the words of the New York State Court of Appeals, judges have often proved open to any “modern ingenuity, even gimmickry” that legislators can cook up to get around debt restrictions.

Today, states and localities engineer most of their borrowing through what Briffault calls “non-debt debt,” a term for bonds designed to avoid legal restrictions on borrowing. For example, courts in some states have decided that when a state’s independent authorities issue bonds, that borrowing isn’t restricted by constitutional debt limits—even if taxpayers are ultimately on the hook for it. If a legislature takes on debt itself, that also doesn’t count against constitutional restrictions on borrowing, according to the judiciaries in some states. Briffault estimates that such evasions are responsible for three-quarters of state debt and two-thirds of municipal obligations incurred through bond offerings. The growth of this kind of borrowing helps explain why state and local debt outstanding from municipal securities has blasted from $2 trillion (in today’s dollars) in 2000 to nearly $3 trillion today—real growth of 50 percent in little over a decade.

New York State has turned to court-sanctioned gimmickry again and again. Though New York’s constitution requires that voters approve any new government debt, only 5 percent of the state’s $63 billion in outstanding borrowing has received voter authorization, down from 10 percent a decade ago. Meantime, the cost of servicing that debt has risen by an average of 9.4 percent annually. Partly because of such unsanctioned borrowing, New Yorkers bear the nation’s second-highest per-capita load of state debt, says New York’s comptroller. The state is still paying off what it owes from the infamous 1991 Attica prison deal, in which New York, trying to close a budget deficit, “sold” the facility to one of its independent authorities, which borrowed the money to pay for it. New York also still counts on its books debt from the 1970s bailout of New York City, which, thanks to refinancing, it won’t pay off until 2033.

Other New York deals engineered without voter say-so include a $2.7 billion bond offering in 2003, backed by 25 years’ worth of revenues from the state’s gigantic settlement with tobacco companies. To circumvent borrowing limits, the state created an independent corporation to issue the bonds and then used the money from the bond sale to close a budget deficit—instantly consuming most of the tobacco settlement, which now had to be used to pay off the debt. Legislators engineer such borrowing because they aren’t confident that voters would agree to new debt: of the seven bond offerings that Empire State voters have considered over the past 25 years, four went down to defeat.

Thanks to its low state debt, Texas enjoys a reputation for budgetary restraint. Yet as Texas comptroller Susan Combs found to her dismay, the state’s towns, cities, counties, and school districts have racked up the second-highest per-capita local debt in the nation, behind only New York’s spendthrift municipalities. The total, nearly $8,000 per resident, is more than seven times higher than Texas’s per-capita state debt. Over the last decade, local debt in the Lone Star State has more than doubled, growing at twice the rate of inflation plus population growth. At the moment, Texas localities owe $63 billion for education funding—155 percent more than they did a decade ago, though student enrollment and inflation during that period grew less than one-third as quickly. The borrowing has also paid for a host of expensive new athletic facilities, such as a $60 million high school football stadium, complete with video scoreboard, in the Dallas suburb of Allen.

As in Cook County, so many different levels of government in Texas can issue debt that taxpayers, bewildered by the complexity of it all, let overlapping districts keep on borrowing. As an example, Combs describes how the residents of a single Houston block must repay debt incurred by the county, the city, the city’s school district, and Houston Community College, among other entities. “I went to dozens of town hall meetings around the state, and when I asked, not a single member of the public knew just how much people in their towns were on the hook for,” she says.

Texas, like New York, amassed all this debt by pushing the limits of the law. Though taxpayers must approve most government borrowing, Texas provides an exception for localities that need to issue debt quickly: a “certificate of obligation,” borrowing that doesn’t require approval unless 5 percent or more of local voters petition to have a say on it (a rare occurrence, since most don’t even know that they have that power). Since 2005, Texas localities have issued nearly $13 billion worth of these certificates, often for dubious ends. In 2010, for instance, Fort Worth borrowed nearly $35 million through certificates of obligation to build a facility for horse shows.

Texas school districts have made use of another controversial financing technique: capital appreciation bonds. Used to finance construction, these bonds defer interest payments, often for decades. The extension saves the borrower from spending on repayment right now, but it burdens a future generation with significantly higher costs. Some capital appreciation bonds wind up costing a municipality ten times what it originally borrowed. From 2007 through 2011 alone, research by the Texas legislature shows, the state’s municipalities and school districts issued 700 of these bonds, raising $2.3 billion—but with a price tag of $23 billion in future interest payments. To build new schools, one fast-growing school district, Leander, has accumulated $773 million in outstanding debt through capital appreciation bonds.

Capital appreciation bonds have also ignited controversy in California, where school districts facing stagnant tax revenues and higher costs have used them to borrow money without any immediate budget impact. One school district in San Diego County, Poway Unified, won voter approval to borrow $100 million by promising that the move wouldn’t raise local taxes. To live up to that promise, Poway used bonds that postponed interest payments for 20 years. But future Poway residents will be paying off the debt—nearly $1 billion, all told—until 2051. After revelations that a handful of other districts were also using capital appreciation bonds, the California legislature outlawed them earlier this year. Other states, including Texas, are considering similar bans.

Judges have proved especially eager to approve evasions of debt limits when they’re the ones demanding that states or localities spend money. Back in 2001, New Jersey’s activist supreme court mandated that the legislature embark on a project of building and refurbishing schools (see “The Court That Broke Jersey,” Winter 2012). To comply, Trenton lawmakers announced a plan to borrow $8.6 billion through a bond offering—a shockingly high sum. Taxpayer groups reacted with such outrage that officials knew that voters would never endorse the move. So the legislature decided to channel the borrowing through an independent authority. The taxpayer groups sued, but the state supreme court brushed their objections aside, arguing that a clear precedent existed for such borrowing. The state quickly burned through half of the borrowed money on patronage and inefficient construction practices, so it borrowed another $3.9 billion, again through the authority. Taxpayers, needless to say, will foot the bill.

If you define municipal debt simply as what states and localities have borrowed, the total nationwide comes to about $3 trillion. Nevertheless, these governments actually owe more than twice that much, according to estimates from groups like the States Project. The reason for the discrepancy is that states and localities carry another kind of debt—promises of retirement benefits to public-sector workers—and they have radically underfunded the systems that must pay for it. As Boston University Law School professor Jack Michael Beermann wrote recently in the Washington and Lee Law Review, the situation is a “double whammy” for future taxpayers, who not only will have to pay for “the consumption of prior generations” but also will receive “reduced government services” as increased spending on retirement debt crowds out other programs.

Some states have laws stating that annual funding of future pension or health-care payments must be considered part of current budgets, but as Beermann points out, many states don’t. Those states can therefore run deficits—even if they have balanced-budget requirements, as most do—by shortchanging retirement accounts. A report by the Pew Center on the States showed 29 states failing to make the necessary payments into their pension systems in 2010, the latest year for which data are available. Over the last decade, Kansas, a prime offender, has contributed less than 80 percent of the necessary dollars to fund employee pensions, according to a recent report by the Kansas Policy Institute. Even in an economically robust year like 2006, the state government managed to set aside just 64 percent of the necessary funds, one reason that Kansas’s state pension system is less than 50 percent funded.

State and local governments have likewise made ambitious promises to finance the health care of their employees when they retire, yet they have set aside almost no money to do it. Instead, they’re purchasing the health care on a pay-as-you-go basis as workers retire. With workers quitting earlier and living longer, governments suddenly find themselves with little room in current budgets and zero reserve funds. State governments owed nearly $700 billion in health-care promises to retirees, the Pew study estimated, but they had set aside only about 5 percent of that amount. The study found that only one state, Alaska, had paid in advance for more than 50 percent of its obligations. Even states with low levels of other debt had done little to finance retirees’ health-care benefits; Texas, for instance, had set aside just 1 percent of the funds. Similarly, a Pew study of 61 big American cities determined that they owed $126 billion in health-care promises and had paid for only 6 percent.

Consider Michigan, where crushing government retirement costs helped push Detroit into insolvency, leading to a state takeover of the city’s fiscal management. With Detroit’s debt crisis in view, Governor Rick Snyder commissioned a study of the level of health benefits promised retirees throughout Michigan. The study, the first of its kind, concluded that the state’s municipalities had put aside, on average, just 6 percent of what was necessary to finance their retirees’ health care; the remainder, some $12.7 billion, hadn’t been funded. The city of Lansing, for example, already devoted $20 million of its $150 million annual budget to retirees’ health care, the study observed; yet its unfunded liabilities were so great that to fund the debt properly each year, it would have to double property-tax rates. Many municipalities, the study added, had done little to control debt. More than half required no annual contribution from government workers to help fund their future health-care costs.

Earlier this year, a commission created by Chicago mayor Rahm Emanuel reported that that city’s health-care costs for retirees would rise from $109 million in the 2013 budget to $541 million in a decade. Chicago has since decided to drop its current health-insurance program and shift all retirees onto the health-insurance exchange being set up in Illinois under President Obama’s Affordable Care Act. That insurance will be cheaper because the federal government will subsidize the rates of the exchanges, basically getting taxpayers nationwide to pick up some of the cost for Chicago workers.

In some places, elected officials have promised benefits to workers without even a cursory effort to calculate what they might add up to. Before the California city of Stockton filed for bankruptcy last year, auditors listed “uncontrolled pension, health, and other benefit cost increases” as a big part of the city’s woes, including a whopping $400 million unfunded liability for retirees’ health care. “No one gave a thought to how it was going to eventually be paid for,” said a financial manager brought in to address the fiscal difficulties.

Stockton may be an extreme example, but after its bankruptcy, officials in other California municipalities began asking what their cities owed. Earlier this year, to take one example, Sacramento officials commissioned a study to measure their city’s debt. In what the Sacramento Bee reported as a “sobering” city council session, the city manager explained that Sacramento had racked up some $2 billion in obligations—a “big and scary” number, the manager said, for a city of 477,000 residents with an annual general-fund budget of just $366 million. Nearly half of that debt was retirement-related, including $440 million for retirees’ health care. To pay down the debt, the city estimated, it would have to put aside $43 million annually, or 12 percent of the general fund. City officials added that it wouldn’t be easy to solve the problem by firing workers, since Sacramento had already cut some 1,200 employees, or 20 percent of its workforce, in the last several years.

Estimates of state and municipal debt have been growing for another reason: more and more independent experts are exposing local governments’ faulty accounting standards. The Chicago-based Institute for Truth in Accounting observes that governments are balancing their budgets using “antiquated budgeting rules and accounting standards,” adding that “hundreds of billions of dollars of unfunded retirement systems’ liabilities are not reported on the face of states’ balance sheets.”

One problem, the group says, is that half of all states don’t bother to file their required annual financial reports on time. Local governments are guilty, too. Though the Securities and Exchange Commission (SEC) requires any government that issues municipal bonds to file a Comprehensive Annual Financial Report, a 2011 study by the California Debt and Investment Advisory Commission estimated that one in four Golden State local governments in that position failed to file the report on time—and one in ten never filed it at all, even though the SEC gives states and cities three times as long to file as it gives private companies. In May, the SEC cited Harrisburg, Pennsylvania, for failing to file reports for two years, even as the city collapsed into insolvency.

Another source of dispute involves the way states and cities calculate pension debt. For starters, they often use a nineteenth-century form of balance-sheet math known as cash-basis budgeting, in which you don’t report expenses until they’re paid. This approach lets local governments ignore costs, such as retirement obligations, that are building up today but aren’t payable for years to come.

Also, the loose accounting standards that states and cities use, recommended by the Governmental Accounting Standards Board, allows them to calculate pension debt using their own projected annual rate of return on the investments that they make, rather than a rate set by an independent body or by some preestablished formula. The higher the projected returns, the lower the pension debt appears to be; unsurprisingly, the projections tend to run high. The rules governing private pensions in the United States, as well as both private and government pension systems in Europe and Canada, are much more restrictive. Economists Aleksandar Andonov, Rob Bauer, and Martijn Cremers noted in a recent paper that corporate pensions in the United States, as well as private and government pension systems in Canada and Western Europe, had significantly lowered their investment projections as interest rates declined, reasoning correctly that lower rates made it harder to hit lofty investment goals. By contrast, government pension funds in the United States responded to lower interest rates by increasing risky investments and maintaining high projections of market returns (see “The Pension Fund That Ate California,” Winter 2013). In the United States, government funds projected gains of 8 percent, on average, the study found; government funds in Canada and in Europe projected returns of 6.7 percent and 3.6 percent, respectively, considering those targets more realistic.

Different projected returns can result in significantly different debt calculations. In 2011, the nonpartisan Congressional Budget Office pointed out that, according to states’ own accounting methods, their pension systems had $700 billion in unfunded debt. But if you used a lower, more plausible, rate of return, the CBO added, total unfunded pension debt was somewhere between $2 trillion and $3 trillion—and the amount has kept growing since then.

Some states have intentionally used the complexity of pension accounting to mislead taxpayers and investors. Over the last three years, the SEC has accused two states, New Jersey and Illinois, of making deceptive and fraudulent statements to potential investors about the health of their employee-pension funds. The SEC said that Illinois failed to tell investors both that its plan to bail out its troubled pension system wouldn’t actually achieve that goal and that the system was “structurally underfunded,” meaning that without further reform, it would fall still deeper into debt. Illinois also failed to report that it used a form of pension accounting that funds a larger percentage of an employee’s retirement costs near the end of his career, increasing the system’s risk of running out of money. In New Jersey’s case, the SEC disclosed that the state had neglected to tell investors that it wasn’t adhering to a financing plan that it had concocted to stabilize its pension system, creating a “fiscal illusion” that it could meet its financial requirements.

Eventually, such soft accounting slams into reality, and pension systems begin to miss investment projections. Governments then find themselves contributing more and more each year to keep the system afloat. New York City’s average pension contributions have risen from 6.1 percent of its budget in 2005 to 11.5 percent today, according to a recent paper by Manhattan Institute scholar Daniel DiSalvo. In 2005, pension payments consumed 43 percent of income-tax revenue; in 2013, “every penny in personal income tax we collect will go to cover our pension bill,” Mayor Michael Bloomberg recently complained. America’s second-largest city, Los Angeles, has seen its pension payments rise from 3 percent of its budget to 18 percent today. Atlanta’s pension payments increased from $43 million annually in 2002 to $144 million in 2010, consuming 19 percent of its budget, before the city finally initiated pension reforms that capped costs and began reducing debt.

Even as governments scramble to find ways of paying their existing obligations, taxpayers should demand fundamental reforms that will make state and local leaders more fiscally responsible going forward. An easy place to start would be a push for honest accounting and greater transparency. States and cities need to move away from cash-basis budgeting and adopt the accrual accounting that private corporations and the federal government use, in which future expenses are included in current reckonings, providing a clearer picture of long-term debt.

Taxpayers should also demand that states and cities produce timely financial reports. The SEC should slap governments and elected officials with harsher penalties for failing to file on time or at all. To date, the commission has mostly just required states to agree not to miss future deadlines. And reformers should strive to make state balanced-budget amendments rigorous again. Some states that have recently enacted pension reform, such as New Jersey, have written into law that the government must make its required annual pension contributions: a budget wouldn’t be considered “balanced” if officials ignored that requirement.

At the same time, states need to remove some of the discretion that retirement systems have to calculate pension obligations, including their discretion to predict future investment returns. Handing that task to an independent body or determining it with a formula—perhaps one linked to the movement of interest rates—would remove some of the political manipulation of retirement accounting. The ratings agency Moody’s and the Governmental Accounting Standards Board have each proposed new, more accurate, ways of calculating pension debt. But these new standards will have little effect unless states and cities respond to them by contributing more to their pension systems or by cutting benefits.

An even better way to make retirement plans more honest would be to replace defined-benefit plans with hybrid systems, as some states and cities have already done. Such systems start with a 401(k)-style defined-contribution plan featuring individual retirement accounts and then add either Social Security (in places where public workers receive it) or, in lieu of Social Security, a basic, inexpensive defined-benefit plan that pays a small monthly pension. Taxpayer obligations to workers are much clearer in defined-contribution plans, since the government must simply contribute a certain percentage of a worker’s salary into an account each year, eliminating the vexed question of whether it can afford to pay a defined pension many years down the road.

Reformers should also seek to get rid of the many loopholes that state legislators use to get around debt-limit rules. In particular, states should be banned from assuming debt through independent authorities or by direct appropriation of the legislature. Reform should also cap state-supported debt by tying it to some flexible measure of economic or revenue growth, such as state personal income, rather than just stating a dollar limit.

Reformers should strive, too, to end governments’ use of debt to balance budgets, perhaps by introducing a requirement that all taxpayer-supported debt be used for capital projects, such as schools, roads, and bridges. Such structures endure for decades, so it’s reasonable to ask future residents to contribute to their construction through debt payments. By contrast, bonds floated to close a particular year’s budget, pledging to the bondholders that they’ll be paid with future lottery, toll, or tobacco revenues, give today’s residents a benefit at future residents’ expense.

There’s no single cure for the debt crisis afflicting state and local governments. But unless taxpayers start pulling harder in that everlasting tug-of-war, they can expect to keep losing ground.

http://www.city-journal.org/2013/23_3_state-debt.html