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Friday, January 28, 2011

Better off bankrupt

Op-Ed

States should have the option of bankruptcy protection to deal with their budget crises.

By Jeb Bush and Newt Gingrich
January 27, 2011

During the 2008 financial crisis, the federal government reacted in a frantic, ad hoc fashion, tapping taxpayers for bailouts galore, running roughshod over the rights of bondholders and catching the American people unaware and unprepared. In contrast, we still have time to prepare for the looming crisis threatening to engulf California, Illinois, New York and other state governments.

The new Congress has the opportunity to prepare a fair, orderly, predictable and lawful approach to help struggling state governments address their financial challenges without resorting to wasteful bailouts. This approach begins with a new chapter in the federal Bankruptcy Code that provides for voluntary bankruptcy by states, a proven option already available to all cities and towns across America.

The figures for next year's budgets are staggering. California, which faces a $25.4-billion budget shortfall, will pay $100,000+ pensions to more than 12,000 state and municipal retirees this year. A Stanford study puts the state's unfunded pension obligations at more than half a trillion dollars. Illinois has a $15-billion budget deficit, prompting its governor and lame-duck Legislature to hike its personal income tax rate by 66%. New York, where 73% of the government workforce is unionized, is staring at a $10-billion deficit.

There has been an organized federal bankruptcy process for municipalities since the 1930s, and a handful of cities, towns and counties — most notably California's Orange County in 1994 — have gone through municipal bankruptcy and gotten their fiscal houses back in working order. A bankruptcy option for the states would look very similar to Chapter 9 municipal bankruptcy, with some necessary modifications.

First, as with municipal bankruptcy, it would have to be completely voluntary. This means that neither the federal government nor state creditors could push an unwilling state into bankruptcy, no matter how catastrophic the state's finances may be, as this would violate the U.S. Constitution's protection for a state's sovereign immunity.

Second, as with municipal bankruptcy, a new bankruptcy law would allow states in default or in danger of default to reorganize their finances free from their union contractual obligations. In such a reorganization, a state could propose to terminate some, all or none of its government employee union contracts and establish new compensation rates, work rules, etc. The new law could also allow states an opportunity to reform their bloated, broken and underfunded pension systems for current and future workers. The lucrative pay and benefits packages that government employee unions have received from obliging politicians over the years are perhaps the most significant hurdles for many states trying to restore fiscal health.

Third, the new law should allow for the restructuring of a state's debt and other contractual obligations. In a voluntary bankruptcy scenario, states, like municipalities, will have every incentive to file a reorganization plan that protects state bondholder claims and their ultimate recovery. States will evaluate their future access to bond markets and their prospective borrowing rates as they formulate the optimal restructuring plan.

When California refused to bail out Orange County, the county entered bankruptcy and emerged within 18 months. Within three years, the county returned to an investment grade rating, and it repaid 100% of the principal of the vast majority of its investors by 2000 without raising taxes.

The lesson is that voluntary bankruptcy offers taxpayers the option to restructure state finances responsibly to achieve long-term fiscal health — which can only improve California's bond rating since it is the worst in the nation— instead of simply having to accept the Sacramento solution of another tax increase.

Fourth, the federal judge reviewing the state's reorganization plan would have the power only to accept the plan as permissible under the federal bankruptcy law, or reject it as inconsistent with that law. Just as with municipal bankruptcy, this new law for states must explicitly forbid any federal judge from mandating a tax hike or carrying out any other government function.

Fifth, the new law should provide for triggering mechanisms to initiate the bankruptcy process that respect the sovereignty of the people of a state. A state legislature acting by a majority vote, with the governor, would fit this test. The new federal bankruptcy law should also allow those states that provide for the right of initiative, like California, to put the question to voters whether they support a reorganization of their state government under the U.S. Bankruptcy Code.

If Californians were given the opportunity to do an end run around the politicians in Sacramento and vote to reform their state government under the U.S. Bankruptcy Code, it would almost certainly trigger a proposition fight. In such a circumstance, the proposition could provide that a yes vote would trigger the cancellation of all state government employee union contracts. Even if the proposition were defeated, the debate surrounding it would make abundantly clear to the people of California and the rest of the country just how much of a stranglehold government employee unions have on state and federal budgets.

An additional benefit of a new voluntary bankruptcy law for states is that its mere existence may deter any state from ever availing itself of its provisions. If government employee union bosses know that they could have all their contracts annulled under federal bankruptcy law, either through a plan of reorganization voluntarily entered into by state leaders or by the voters through proposition, they may be far more accommodating with state governments to restructure government employee union workforces, pensions and work rules.

Federal bailouts must come to an end. Federal taxpayers in states that balance their budgets should not have to bail out the irresponsible, pandering politicians who cannot balance their budgets. Congress must allow a safe, orderly way under federal bankruptcy law for states to reorganize their finances.

Jeb Bush is the former governor of Florida and president of the Foundation for Excellence in Education. Former House Speaker Newt Gingrich is the general chairman of American Solutions for Winning the Future.

Paul Ryan makes the case for fulfilling the promise of health security


HouseBudgetCommittee | January 26, 2011 |  likes, 0 dislikes
Finally, as Democrats attempted to shift attention from their own unpopular law, Chairman Ryan contrasted the Medicare reforms he's introduced, which protect those 55 and over, with the cuts and government price controls in the Democrats' law, which would affect seniors today:

"Do we empower consumers, or do we price-control from the government? What works best? ... Medicare is the biggest driver of our debt. We're all kidding ourselves if we think the program can just go on as is, and the sooner we address this the better off everybody is -- the better we can guarantee my mom, who's been on it for a number of years, and everybody else's mom and dad, can have the program they organized their lives around, and that future retirees have a program they actually can count on. That's the purpose of this particular bill that I introduced, and that's hopefully the purpose of what we're all trying to achieve."

Why corporate tax reform will be hard, in one graph


By Ezra Klein
Binyamin Appelbaum, as an addendum to this sobering look at the realities of corporate tax reform, points to the work of NYU's Aswath Damodaran, who has compiled a rough estimate of the effective tax rates in various industries. You might already anticipate that the rates vary. But not that they vary this much:
taxratescorporate.jpg
You can see more of the data here (warning: Excel doc), if you'd like. But the basic takeaway is that there are plenty of industries that are benefiting from the current corporate tax code, and are likely to fight like hell to preserve the breaks they're currently getting. Moreover, as Appelbaum notes, a lot of these industries are the sympathetic ones: "High-tech industries pay relatively little in taxes. Utilities and other infrastructure providers pay some of the highest rates. ... Mr. Damodaran says much of the difference is a question of life cycle. Young industries tend to be plowing more of their revenues into research and equipment and other kinds of spending that the government rewards with tax breaks."
And that's really what corporate tax reform will be about. "Loopholes" sound like bad things. "Incentives to plow more revenues into research and development and equipment" don't. Nor do tax breaks to locate manufacturing in America. But that's the sort of stuff we'll have to get rid of to substantially lower the rates in a revenue-neutral way. And this conversation, remember, is going to happen inside a political system that can't even decide to tax the earnings of hedge-fund managers like income.
By Ezra Klein  | January 28, 2011; 9:37 AM ET 

Free Enterprise Nation

Hidden Cost of Government

The Threat:

Virtually every public sector entity utilizes multiple “sets of books” to account for debt, deficits, and unfunded liabilities of welfare programs and the costs of their own employee benefits. In some cases, most notably concerning health insurance continuation coverage, there is virtually no unfunded liability disclosed to taxpayers. The federal government does not include the unfunded liabilities of Medicare, Social Security, or its own retirement programs as part of the official US debt. All federal and most non-federal public sector entities also pay higher salaries and offer better benefits to their employees than can be provided in the private sector. The massive cost of early retirement for public sector employees, available 10-25 years earlier than is allowed by Social Security, together with free or highly subsidized health insurance during the early retirement years, is generally hidden from taxpayers. Virtually every government entity has huge understated and underfunded liabilities that are either not represented at all, or are misrepresented to taxpayers via employing misleading or incomplete actuarial and accounting methods that the government itself will not tolerate of the private sector. A report prepared for FEN by Andrew Biggs, a scholar from the American Enterprise Institute, states that the disclosed “debt” of non-federal entities is approximately $2.2 trillion (the sum total of all bonds), and that the additional “off the balance sheet” unfunded liability for non-federal public sector pension plans is currently stated to be around $400 billion. Biggs concluded that the actual unfunded liability for these public sector pension plans would be $3.5 trillion if more realistic and conservative interest rate assumptions were utilized. Attempts by others to determine the true federal debt (including unfunded obligations) result in the determination that if one federal “balance sheet” were utilized, the total federal debt would exceed $107 trillion, not the $12.3 trillion currently stated as “debt”. The result is that the total federal and non-federal debt (if unfunded liabilities are included) is an estimated $112+ trillion, or SEVEN TIMES higher than the total $15 trillion currently disclosed to taxpayers.!!

The Initiative:

Introduce the Taxpayer Disclosure Act and seek Congressional, State and local level support for it. We will support the Open Government Directive and will also seek support for the adoption of unified balance sheets to be provided by all public sector entities, done in accordance with the same accounting standards that are required in the private sector (FASB) and in accordance with actuarial valuation and reporting standards that comply with FEN’s, "Best Practices for Valuation and Reporting of Public Employee Pension Plans."

The Community Health Data Initiative




  The Challenge

The Department of Health and Human Services (HHS) holds vast amounts of data that could help improve health – including data on community health performance (e.g., smoking rates, obesity rates, rates of potentially avoidable hospitalizations), determinants of health (e.g., local access to healthy food), hospital quality, nursing home quality, and much more.  The question faced by HHS:  how best to unleash the power of this data to help improve health?  

The Solution

HHS’s answer:  the Community Health Data Initiative.  The fundamental approach being taken by the Community Health Data Initiative is inspired by the weather – or more specifically, what the National Oceanic and Atmospheric Administration (NOAA) has done with weather data.  NOAA collects enormous amounts of weather data, which it then makes available to the public on the Internet in downloadable, machine-readable form, free of charge and without intellectual property constraint.  A diverse array of innovators outside NOAA then turn that data into weather websites, newscasts, mobile applications, research, and other products and services that create great benefit for the public.
The Community Health Data Initiative is turning HHS into the “NOAA of health data.”  HHS is supplying to the public – free of charge and without intellectual property constraint -- a growing array of online, easily accessible, downloadable health data.  Simultaneously and very importantly, HHS is also proactively marketing the availability of this data to innovators outside HHS – innovators from the worlds of technology, business, media, academia, public health, and health care, who are engaging with the data and using it to power a growing array of applications that benefit the public.

The Benefit

These applications include community health maps and dashboards, health data integrated with web search, health care provider finders, educational games, powerful new analytical tools for clinical providers, journalists, and community leaders, and much more.  They represent a growing wave of applications that can help consumers, care providers, employers, local officials, and community leaders make better decisions and improve health.  And they are applications being built by a diverse and inspiring array of companies, entrepreneurs, nonprofit organizations, advocacy groups, academic organizations, and others in a remarkable display of the power of American innovation.
For more information on the Community Health Data Initiative, including how to get involved, please email: healthdata@hhs.gov

Blue Button


Blue Button

Veterans Health Records, One Click Away
The Blue Button on the online personal health portal, My HealtheVet, allows Veterans to download their health information to their own home computer or portable memory device. They can share that information with other providers, caregivers, or family members safely, securely, and privately.
Learn More

Challenge.gov


Challenge.gov

Government Challenges. Your Solutions.
Challenge.gov makes it easy for Federal agencies to launch challenges and for the public to share their solutions and innovations with the government. Agencies can use challenges and prizes to find innovative and cost–effective solutions or improvements to ideas, products and processes. The public can find challenges that interest them, support, share and discuss those that are important to them with friends, and solve them.
Learn More

Federal Register 2.0




Federal Register 2.0

The Daily Journal of U.S. Government Transformed for 21st Century Democracy
Federal Register 2.0 is built for the 21st Century reader. Articles are organized into news sections for Business & Industry, Environment, Health & Public Welfare, Money, Science & Technology, and World. The site lets readers browse by agency and by topic, and automatically connects them to the official sites for submitting comments on regulatory actions.
Learn More

U. S. DEBT CLOCK

These links will amaze you because they are live and growing.


US NATIONAL DEBT                              2011 US Total Debt              US Tax Federal Revenue            

US Gross Domestic Product 2011                  2011 Foreign Debt           2011 US Population                                  

 2011 US Work Force                             2011 Actual Unemployed         2011 Official Unemployed      

2011 Imported Oil the total imported oil all nations                     
                                        
2011 Imported Oil Opec total opec oil from all opec nations                                                                                

U.S. National Debt in $100 bills

Pretty impressive and that was back in 2009 it is nearly two years later and the U. S. National Debt is $14,085,115,000,000 approx.

After seeing What does one TRILLION dollars look like?, I've gotten quite a few requests to translate that into the U.S. National Debt, currently 11 trillion dollars as of March, 2009.
So here you go, the U.S. National Debt in $100 dollar bills...
$11 trillion dollars ($11,000,000,000,000)



End
of
Fiscal
Year
Gross
Debt in
$Billions
undeflated
Treas.
Gross
Debt in
$Billions
undeflated
OMB[10]
as %
of GDP
Low-High
Debt
Held By
Public
($Billions)
as %
of GDP
(Treas/MW, OMB
or OMB/MW)
GDP
$Billions
OMB/BEA
est.=MW.com
19102.6538.02.6538.0est. 32.8
192025.9529.225.9529.2est. 88.6
1927[11]18.5119.218.5119.2est. 96.5
193016.1916.616.1916.6est. 97.4
194042.9750.7044.4-52.442.9742.196.8/
1950257.3256.991.2-94.2219.080.2273.1/281.7
1960286.3290.554.6-56.0236.845.6518.9/523.9
1970370.9380.936.2-37.6283.228.01,013/1,026
1980907.7909.033.4711.926.12,724
19903,2333,20656.0-56.42,41242.15,735
20005,6745,62957.4-57.83,41034.79,821
20015,8075,77056.4-56.83,32032.510,225
20026,2286,19858.8-59.03,54033.610,544
20036,7836,76061.6-61.83,91335.610,980
20047,3797,35563.0-63.24,29636.811,686
20057,9337,90563.6-63.84,59236.912,446
20068,5078,45163.8-64.24,82936.513,255
20079,0088,95164.4-64.85,03536.213,896
200810,0259,98669.2-69.65,80340.214,439/14,394
200911,91011,87683.4-84.47,55253.614,237/14,098
201013,56293.49,02362.2/14,512

Fiscal years 1940-2009 GDP figures are derived from 2010 Office of Management and Budget figures which contained revisions of prior year figures due to significant changes from prior GDP measurements. Fiscal years 1950-2010 GDP measurements are derived from December 2010 Bureau of Economic Analysis figures which also tend to be subject to revision. The two measures in Fiscal Years 1980, 1990 and 2000-2007 diverge only slightly.
Fiscal years 1940-1970 begin July 1 of the previous year; fiscal years 1980-2010 begin October 1 of the previous year.
Intergovernmental debts before the Social Security Act are presumed to equal zero.
1909-1940 calendar year GDP estimates are from MeasuringWorth.com. Fiscal Year estimates are derived from simple linear extrapolation.