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Connie Brouwer 1921 — 2009

Kurt Brouwer November 3rd, 2009

Connie Brouwer  1921 — 2009

My Mom died last week.  She was 88.  I suppose I’m very lucky to have had her so long.  Don’t feel lucky though.

She was not feeling well, so my sisters checked her into the hospital.  Mom cracked a joke about the handsome doctor who checked on her.  Twenty minutes later she slipped away with her daughters holding her hands.

Here she is near the water where she was happiest.

I have lots of great stories about my Mom, but I’ll hold those for some other time.  One story is worth recounting though.

My Mom and my wife and I were leaving a concert in San Francisco’s Tenderloin district.  The Tenderloin is SF’s ‘red light’ district.  It’s generally fine, but not always.  I was walking ahead with a few people and my Mom and wife were with another group slightly behind us.   I turned back to look and saw my Mom with surrounded by three guys.  That didn’t look good, so I went back.  The three guys ran off and I asked my wife what happened.

She told me the guys pulled a knife and demanded the camera my Mom was carrying.  She grasped the camera tighter, looked at them directly and said, “That’s my son’s camera.”  I told her she could have just given them the camera because I would rather have my Mom than the dang camera.  She looked at me as though I was crazy.  She was holding something of mine and no knife-wielding thug could intimidate her.

She was made of sterner stuff than that.

I miss my Mom

How do we fix the Federal deficit?

Kurt Brouwer October 21st, 2009

In my post on the $1.4 trillion budget defict ($1.4 Trillion Federal Budget Deficit), I wrote:

…Neither the Republicans nor the Democrats can claim any glory when it comes to spending control.  Politicians seldom get criticized for spending our money, so they keep right on doing it.  We can assign blame to different players and parties, but that still begs the question: ‘What the heck do we do?’

…We cannot run such massive deficits indefinitely on that much there is agreement.  But, where is the plan for how we bring spending and revenues more closely into balance?  If there is one, I have not seen it.

In response, one of my readers asked this in a comment:

So how do we go about fixing the deficit?

Answer #1: Balance the budget. 

One obvious answer would be to argue for balancing Federal spending and revenues.  There is one problem though, which is that we have only had something like 12 years out of the past 78 (since 1930) in which we had a balanced budget or a budget surplus.  So, being a practical sort, I am suggesting that a balanced budget is a pipe dream.

As you can see from the chart below, Federal spending (red line) and receipts (blue line) have been out of balance for long periods.  The pattern seems to be that deficit widens during recessions (gray bars) and narrows during times of economic expansions.  However, the trend for many years — with the exception of the late 1990s — has been to be in deficit. That is, Federal spending has almost always outpaced tax revenues.

Source: St. Louis Federal Reserve

As you can see, Federal spending and revenues seldom balance. Here is the same chart covering the period 1970 - 2008:

Source: St. Louis Federal Reserve

Must we balance the budget?

It would seem that we seldom actually balance the budget and we primarily operate in a deficit.  So, that begs the question: do we need to balance the budget?  In terms of a family or a business, the answer is unquestionably yes because the family or the business would eventually go bankrupt when it ran out of cash to spend.  Some families or businesses could last longer than others, but eventually the reckoning would come.

But, the Federal government is different because it is a permanent entity unlike a family or a business.  And, it can issue debt that is backed by the government’s ability to tax us in order to pay off the debt.  So, to answer the question, does the Federal government need to balance its budget, the answer is not necessarily.  It might be better for monetary reasons to do so, but it’s not absolutely necessary.

If we don’t have to balance the budget, what should we do?

Answer #2:  Keep the deficit in an acceptable, long-term range:

We have not balanced the budget very often, so an exact balance may not be necessary, but we should try to keep deficit spending in a range of $200 billion or less in times of economic expansion and $400 billion or so in times of recession.  Over time, that range would expand a bit to keep pace with inflation.

As you can see from this chart of the deficit/surplus, keeping the deficit in a reasonable range is something we have done quite well, until recently.  In normal times, keeping spending and receipts within shouting distance is doable, with a bit of fiscal restraint from our leadership.  The blue line indicates a deficit when it is below zero and a surplus above zero:

Source: St. Louis Federal Reserve

Tax revenues plummet while spending soared

Recently, the long-term pattern of manageable budget deficits has changed — for the worse.  Spending under the Republican Congress (until the 20006 elections) was largely unrestrained.  Fortunately, beginning in 2003, the economy recovered and tax revenues recovered along with the economy so that the deficits were not bad.  But, then the economy began falling into recession and tax revenues fell off while spending picked up.  Then, with the the financial panic of 2008, economic activity cratered and tax revenues plummeted at the very time that spending went up dramatically.

Now that the recession is winding down, government spending should get cut back and tax revenues should pick up.  Unfortunately, there is no sign that spending is being cut.  In fact, Congress has shown no ability to cut spending or even to stop increasing it.  Hence, the red line is shooting north.  And, individuals are making less money and many millions are unemployed, so individual taxes are down.  However, the big revenue killer is corporate income taxes.  Companies have not made much money in a long time and corporate tax receipts are down about more than 50%.  That hurts.

On its Tax Vox Blog, the Tax Policy Center made this point quite well:

…Corporate income tax revenues took the biggest hit, down by more than half from 2008. The deep recession wreaked havoc on corporate profits, leaving a large majority of firms with no tax liability. The consequent $165 billion drop in corporate taxes accounted for nearly 40 percent of the total revenue decline…

Source: Tax Vox Blog

Big deficits as far as the eye can see

Tax Vox continues:

Total federal revenue in 2009 amounted to just 14.9 percent of GDP, the smallest fraction since 1950 and far below the 26 percent of GDP spent by the federal government. That gap will narrow in coming years but CBO projects that it will average more than 4 percent of GDP over the next decade, and that’s only if the 2001-2006 tax cuts expire in 2011 as scheduled. Extending those cuts, even only for President Obama’s broad middle class, will mean deficits as far as the eye can see.

Fiscal restraint 

Congress controls the Federal government’s spending so Congress is the root of the problem.  Or, maybe you could say that we are the problem because we elect representatives who do not focus on fiscal or spending restraint.  This is not a partisan comment because it applies equally to Republicans, Democrats and Independents.  Our representatives in Congress get their clout through passing legislation which means spending government dollars.

In other words, Congress is the solution as well as the problem.  I believe Congress needs some kind of powerful restraint from its bipartisan spending habit.  Ideally, voters would elect fiscally responsible folks to Congress, but that has not happened or it may be that life in Washington brings out the spendthrift in the best of us.  Absent voters, where will the restraint come from?

Divided government & the Clinton years

As you can see, we have been in deficit for most of the past 38 years.  The only time period where we were in surplus was 1997-2000, the last four years of President Clinton’s presidency.  During that period we had divided government, with President Clinton (a Democrat) on one side and Congress (controlled by Republicans) on the other side.

Looking back on that time period, it occurred to me that divided government may have its merits.

See also:

Can our government borrow unlimited sums?

Government: It ain’t broke yet, but just wait

50 Ways the Feds Waste Our Money

50 Ways the Feds Waste Our Money

Kurt Brouwer October 9th, 2009

We frequently are told by politicians that the only solution to our budget deficits at the Federal, state and local levels is to raise taxes.  I might buy this argument if those same politicians had made efforts to cut government spending that is not needed or is wasteful.  Unfortunately, those types of efforts get short shrift except when it is time to campaign.

From the Foundry blog, here are 10 examples of eggregious government waste:

50 Examples of Government Waste. (Foundry, October 6, 2020, Brian A. Riedl)

…Reducing wasteful spending is not easy. Even the most useless programs are passionately supported by the armies of recipients, administrators, and lobbyists that benefit from their existence. Identifying inefficiencies and abuses is much easier than devising a system to fix them. Many lawmakers focus more on bringing home earmarks than on performing the less exciting task of government oversight. Exasperated taxpayers see the cost of government rise with no end in sight.

Of course, eliminating waste cannot balance the budget. Lawmakers must also rein in spending by reforming Social Security and Medicare and by eliminating government activities that are no longer affordable. Yet government waste is the low-hanging fruit that lawmakers must clean up in order to build credibility with the public for larger reforms…

I have not cherrypicked these items, just took the first 10 from the Foundry’s list and added three bonus items from further down the list: [emphasis in the original]:

  1. The federal government made at least $72 billion in improper payments in 2008.[1]

Okey dokey.  Has anyone thought of asking for these improper payments back?

  1. Washington spends $92 billion on corporate welfare (excluding TARP) versus $71 billion on homeland security.[2]

We should be able to get to bipartisan agreement on this one.  Some don’t like waste, some don’t like welfare and some don’t like corporations.  It’s a match made in heaven.

  1. Washington spends $25 billion annually maintaining unused or vacant federal properties.[3]

D’uh…Why not sell these properties?  We’d save $25 billion a year in maintenance savings alone plus the value of the properties, which are undoubtedly worth something.

  1. Government auditors spent the past five years examining all federal programs and found that 22 percent of them-costing taxpayers a total of $123 billion annually-fail to show any positive impact on the populations they serve.[4]

Unfortunately, lawmakers do not seem to feel that positive impact from government spending is critical.  Witness the Cash for Clunkers program and many others.  Nonetheless, this is definitely low hanging fruit.  But still, $123 billion for programs that show no positive impact?

  1. The Congressional Budget Office published a “Budget Options” series identifying more than $100 billion in potential spending cuts.[5]

This report from the CBO contains hundreds of recommendations to cut spending.  Again, we’re talking $100 billion per year.  $100 billion here and $100 billion there.  After a while, it adds up to real money.

  1. Examples from multiple Government Accountability Office (GAO) reports of wasteful duplication include 342 economic development programs; 130 programs serving the disabled; 130 programs serving at-risk youth; 90 early childhood development programs; 75 programs funding international education, cultural, and training exchange activities; and 72 safe water programs.[6]

Do we really need 342 Federal economic development programs?

  1. Washington will spend $2.6 million training Chinese prostitutes to drink more responsibly on the job.[7]

We previously said all we had to say on this one here: In this era of budgetary constraint and fiscal rectitude, we are pleased to report that our political leaders and bureaucratic chieftains have really gotten the message.  Otherwise, they would fund all kinds of crazy things.  Oops.

U.S. Will Pay $2.6 Million to Train Chinese Prostitutes to Drink Responsibly on the Job (CNS News, May 12, 2020, Edwin Mora)

The National Institute of Alcohol Abuse and Alcoholism (NIAA), a part of the National Institutes of Health (NIH), will pay $2.6 million in U.S. tax dollars to train Chinese prostitutes to drink responsibly on the job.

Dr. Xiaoming Li, the researcher conducting the program, is director of the Prevention Research Center at Wayne State University School of Medicine in Detroit.

The grant, made last November, refers to prostitutes as ”female sex workers”–or FSW–and their handlers as “gatekeepers.”

“Previous studies in Asia and Africa and our own data from FSWs [female sex workers] in China suggest that the social norms and institutional policy within commercial sex venues as well as agents overseeing the FSWs (i.e., the ‘gatekeepers’, defined as persons who manage the establishments and/or sex workers) are potentially of great importance in influencing alcohol use and sexual behavior among establishment-based FSWs,” says the NIH grant abstract submitted by Dr. Li…

This study certainly seems essential doesn’t it?  After all, what could be more important to people in Detroit, home of Wayne State University, than that Chinese prostitutes drink responsibly?  And, since this ’study’ is funded by the Federal government, it’s not as though we have any problems closer to home, right?

  1. A GAO audit classified nearly half of all purchases on government credit cards as improper, fraudulent, or embezzled. Examples of taxpayer-funded purchases include gambling, mortgage payments, liquor, lingerie, iPods, Xboxes, jewelry, Internet dating services, and Hawaiian vacations. In one extraordinary example, the Postal Service spent $13,500 on one dinner at a Ruth’s Chris Steakhouse, including “over 200 appetizers and over $3,000 of alcohol, including more than 40 bottles of wine costing more than $50 each and brand-name liquor such as Courvoisier, Belvedere and Johnny Walker Gold.” The 81 guests consumed an average of $167 worth of food and drink apiece.[8]

It has been found over and over again that government employees abuse credit cards to the point where they really should be given out sparingly.  No doubt there are plenty of responsible bureaucrats who do not abuse cards, but nearly half of all purchases are either improper, fraudulent or embezzled?  C’mon.  Cut up the cards.

  1. Federal agencies are delinquent on nearly 20 percent of employee travel charge cards, costing taxpayers hundreds of millions of dollars annually.[9]

Apparently, Federal employee not only abuse credit cards, but their agencies are also frequently delinquent in paying the bill.  From the link for this item #9, we read:

The most stunning revelation concerns not how the cards are used but rather how long it takes the government to pay its bill — and what those delays are costing taxpayers.

According to the most recent data from the Office of Management and Budget, in January 2009, governmentwide delinquency rate for centrally billed card accounts — those paid by an agency rather than an employee — was 19.23 percent. The average delinquency rate for individually billed cards was 6.25 percent, data showed.

A card is considered delinquent if a bill is outstanding for more than 60 days.

“A private travel agency would be out of business running this kind of operation,” said Scott Amey, POGO’s general counsel. “This report summarizes problems with individual transactions and, more important, with government agencies that aren’t safeguarding taxpayer dollars.”…

  1. The Securities and Exchange Commission spent $3.9 million rearranging desks and offices at its Washington, D.C., headquarters.[10]

Now, in all fairness, the SEC has been given some new responsibilities, but that is still a lot of dough for a pretty modest task.

And, here are three bonus items:

12.  Over half of all farm subsidies go to commercial farms, which report average household incomes of $200,000.[12]

I have never understood this farm subsidy concept in which we pay well-to-do folks not to do something.  What does it take to kill off something as silly as this?

13.  Health care fraud is estimated to cost taxpayers more than $60 billion annually.[13]

Much has been made of this as a source of ‘found’ money to help pay the cost of health insurance reform.  OK, fine.  Why not just fix this problem first, if it’s so easy.  See this post, Why Not Fix Medicare First? for more on this issue.

And, finally, the Pentagon’s procurement group should be summarily fired. Of course, Congress shares some of the blame for this one because Congressional leaders have frequently put great pressure on the Pentagon to allow wasteful cost overruns.

14.  GAO audit found that 95 Pentagon weapons systems suffered from a combined $295 billion in cost overruns.[14]

This should also be a Congressional ‘no brainer’ because some in Congress don’t like waste and some don’t like the Pentagon.  I don’t want to undercut our military men and women at all.  They do a difficult and often dangerous job and I would like to make sure they have adequate resources.  Yet, cost overruns on big projects do no one any good.

It looks to me as though savings in just these 13 items would be in the hundreds of billions per year.

That’s enough to give insurance tax credits or vouchers to all those who do not have health insurance, with some spare change left over.  No need to do more deficit spending or to raise taxes.  Just cut the waste and do it first.  What’s not to like?

6% Say Congress Listens Well

Kurt Brouwer October 2nd, 2009

Actually, I’m surprised it was that high.  This chart gives the results of a recent Fox New/Opinion Dynamics poll as shown on the American Magazine web site:

…Only 6 percent of those surveyed said that Congress pays a great deal of attention to what regular Americans think when it decides what to do. Thirty percent said Congress paid some attention, 39 percent said not much, and 23 percent said none at all. Although Democrats control both houses of Congress, 49 percent of those who identify as Democrats said Congress pays not much or no attention at all to what regular Americans think.

Source: American Magazine / Fox News / Opinion Dynamics

Bad News for the News Media

Kurt Brouwer September 14th, 2009

Source: Pew Research

As this chart above shows, news organizations have a serious credibility problem.  This survey from Pew Research’s People and Media Center underscores how far the media has fallen.   In terms of public trust and confidence, news media credibility is at a two-decade low point [emphasis added]:

Press Accuracy Rating Hits Two Decade Low (Pew Research Center for the People & the Press, September 13, 2020)

The public’s assessment of the accuracy of news stories is now at its lowest level in more than two decades of Pew Research surveys, and Americans’ views of media bias and independence now match previous lows.

Just 29% of Americans say that news organizations generally get the facts straight, while 63% say that news stories are often inaccurate. In the initial survey in this series about the news media’s performance in 1985, 55% said news stories were accurate while 34% said they were inaccurate. That percentage had fallen sharply by the late 1990s and has remained low over the last decade.

Similarly, only about a quarter (26%) now say that news organizations are careful that their reporting is not politically biased, compared with 60% who say news organizations are politically biased. And the percentages saying that news organizations are independent of powerful people and organizations (20%) or are willing to admit their mistakes (21%) now also match all-time lows…

Why is the news about the news media so bad?  The advent of the Internet and its many free sources of information have posed a serious problem for media organizations with high cost structures.  Not only has the Internet offered alternative sources of information, but it has also brought along serious competition for classified ads and advertising, both of which are essential to the media business model.  Changes in this realm have caused newspapers to fail, magazines to fail and have hurt the value of media franchises.

However, this series of surveys from Pew Research go back many years and the surveys indicate a steady erosion of trust and confidence in the media.  There is widespread belief that media stories are frequently inaccurate and often biased.  That’s a killer.

Some of my friends are in the media

I know many hard-working folks in the media — broadcast, print and online.  The ones I know have spent years building their skills and their credibility as objective journalists.  They believe in their craft and they work hard at it.  Yet, on the few occasions when this topic of media bias or inaccuracy has come up, my media friends have downplayed the problems of bias or inaccuracy as being rare or unusual.

If that’s the case, why does the media itself get very low marks?  Bad public relations? A few bad apples? Or, is it systemic? And, why has the public’s faith in the media been sliding for decades as we can see from the Pew Research findings?

The Internet passes newspapers

This chart from Pew Research shows the trend and it’s bad news for the traditional news media.  As you can see, the trend for television is down, but it’s going down from a high level.  On the other hand, newspapers are losing ground as a source for national and international news and they have just been passed by online media as a source.

That’s a trend to which I can relate because I get all my news online.  I don’t have television at home and I don’t subscribe to any newspapers or general interest magazines.  So, for me, online is everything.  I do still go to newspaper sites such as the Wall Street Journal, Washington Post and so on, but it’s to their online sites that I go.  And, I spend time at other online sites such as MarketWatch, Bloomberg as well as many financial and general blogs:

Source: Pew Research

Finally, take a peek at this chart which covers classified advertising at Craigslist versus the traditional media.  Craigslist revenues (blue line) are in the millions as seen on the left hand side.  Newspaper classified revenues (red line) are on the right hand side and they are in the billions.  So, this is not a straight comparison, but rather a look at the revenue trend for each side.  Newspaper classified revenues have fallen from $16 billion or so to about $6 billion at the same time that Craigslist revenues have ballooned by a factor of 10:

Source: Clusterstock/Business Insider

As Craigslist online ad revenues have grown, newspaper industry ad revenues have plummeted.  And, along with falling revenues, newspaper valuations have tanked. Ouch.

See also:

Washington Post: Pay for play?

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