Bell Policy Center in denial

"Restoring fiscal sanity to state government" was the hook for donations to The Bell Policy Center in a solicitation I received from them last week via US mail. That slogan was printed on the envelope and highlighted again in Bell's letter cosigned by former Colorado Supreme Court justice Jean Dubofsky and my onetime state Senate colleague Penfield Tate III. The pitch starts by trumpeting, without specifics, this year's "progressive victories [which] will make change possible for all Coloradans." Presumably this means the state's support for Obama, Udall, and Markey as federal candidates, since Bell then admits "tough lessons [from] the failure of several ballot measures" including the TABOR-busting Amendment 59 -- busted decisively by voters -- as well as the defeat of a sales tax hike under Amendment 51 and an energy tax hike under Amendment 58.

In this context, the letter's first line, "Congratulations on a job well done," has the hollow ring of a surgeon claiming the operation was a success but the patient died. Colorado taxpayers can only hope for more such jobs well done from the spending lobby, after the opposition to Amendment 59 won big despite being outspent something like 50 to 1.

Really the whole letter was a most amusing read to brighten my Sunday amidst the sad reality of Bush making nice with the UAW. The Bell promises all of us who donate (sorry, I won't be one of them) a productive 2009 with "in-depth research and analysis [toward] understanding how Coloradans assess the state's fiscal condition."

Come on, guys, you could get a pretty good idea of that by just thinking with an open mind about what message voters were sending with the rejection of Amendments 51, 58, and 59. Seems to me it was a message for the legislature and governor to make do with existing revenues -- prioritize better and spend smarter -- so that working families can keep scrimping their own recession-stressed budgets without a heavier tax burden.

But then, recession is apparently not on The Bell's radar. "These tough economic times" are referred to in this fund appeal only with relation to Center employees "tightening our belts to ensure that we operate as efficiently as possible." Okay, so far so good -- but neither the substance of the letter nor the content of Bell's website acknowledges that the very same prescription is needed for Colorado's fiscal sanity.

Maximizing revenue, not tighter belts and greater efficiency, seems to be their exclusive focus as far as government is concerned. A search of the website turns up nary a word of analysis on why Amendment 59 was crushed and what that might mean for "sane" policies going forward.

What we have here is a think tank suffering from groupthink -- a shrink in denial.

Colorado pension plan in trouble

As some of you may have heard, PERA, Colorado's Public Employee Retirement program, has got a little problem. At latest report, its obligations were down to being about 60% funded, a couple of decadesout, down from 80%, which is considered fully-funded. This is before taking into account paper losses from real estate and other non-equity investments.

The reason that being underfunded 30 years out is a problem is that there are still bills to pay today, and that at some point you start paying out money faster than it can grow. One day, you wake up, and the seed corn is gone and the retirees are at the door.

Yesterday's Denver Post cites a 2004 State AG's report to the effect that there may be some legal limitations to what PERA can do. In all likelihood, benefits to current retirees are sacrosanct, barring a constitutional amendment (aren't you now glad that we rejected Referendum O?) to permit a reduction of benefits.

New hires should be put into the 401(k) without even the option of a defined-benefit plan. Those at or approaching retirement age should probably not have their benefits tinkered with. But some combination of higher contributions by employees, lower benefits, and a higher retirement age (really, who gets to retire on full bennies at 57?) will probably be required.

PERA's Board may have to show to a court's satisfaction that all this is necessary to prevent major street corners from being overrun by former state employees and the inevitable tin cup shortage. At the same time, there's no question that PERA has been operating under one of those unspoken assumptions that the taxpayers will always be there to bail them out, if necessary. Thus the somewhat rosy 8.5% growth assumptions underlying their projections.

We'll probably have to await the 2008 Annual Report to see exactly how bad things are, but there's no question that the sooner we deal with this the better. After all, better to ask public employees now to contribute more to their own financial security than to ask you, 15 years down the road and a few years away from your own golden years, to work for a few more years.

Locking in dependency is Obama's aim

I've been thinking a lot about Barack Obama and his tax plan. I'd prefer to spend my Saturdays thinking about college football, but since an Obama Presidency may force me to get a second job, well, here I am. Steve Charnovitz has a great letter today in the Wall Street Journal, commenting on the Journal's excellent piece entitled Obama's 95% Illusion. Here's what he said: Your editorial is very helpful in pointing out that Sen. Barack Obama's plan would allow 44% of U.S. taxpayers to enjoy no federal income tax liability. Such a policy is wrong in principle. If America is going to use an income tax to pay for the federal government, then all income earners should have to pay some tax.

Whenever any citizen is exempt from having to pay taxes, the untaxed citizen has little incentive to insist upon a responsible government. If we allow the tax rolls to fall to 56%, then we will soon be dangerously close to a tipping point where the majority of the public has no stake in insisting that politicians stop wasteful federal purchases and subsidies to special interests.

There are a couple of important things related to this letter that I think need to be addressed:

First, it is increasingly clear that Barack Obama's primary constituency is the non-tax payer. Because Obama's tax plan gives cash payments to those who don't pay any taxes at all, it amounts to another form of welfare. As the Journal points out:

The Tax Foundation estimates that under the Obama plan 63 million Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation's Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.

So, Obama's plan is geared to increasing the number of non-tax payers. He is not trying to assist them in getting jobs that would help them earn enough money to pay taxes in the first place. Rather, by transferring wealth from tax payers to non-tax payers, Obama is actually enshrining a new and larger underclass -- dependent on government handouts for their livelihood. This is, of course, regressive. But it meets Obama's desire to make a large voting class permanently indebted to the Democrats.

Second, we are on a slippery path to having a majority of the nation being dependent on the innovation, hard work and entrepreneurship of a shrinking tax paying class. This is both unfair and unhealthy for the country. A permanent dependent class will be an economic burden and ultimately a killer for economic growth, because it will require new and ever higher taxes to support. What is the motivation for innovation if you know that 50, 60 or 70% of your income will go to supporting people who either don't work or don't pay taxes? How is that equitable?

It isn't equitable. And even worse, it totally ignores human nature. Multiple studies of welfare recipients have shown clearly that people want to be self-sufficient -- there is no pride in taking handouts. People want to feel proud about their lives and the work that they do. I don't believe that they want to be treated like children. The welfare reform of the 1990s proved that putting in place incentives for people to find work is effective. When given the right motivation, people find jobs for themselves. It's basic human behavior.

Unfortunately, Obama and the "well intentioned" Democrats have never understood this basic fact. The opposed welfare reform because they didn't think people could pull themselves up and provide for themselves. Their basic assumption is that we are not capable of taking care of ourselves. And now they are planning a system that will be a massive new entitlement program -- funded on the backs of those who get up every morning and go to work. It is destructive and will result in a massive new dependent class which society will have to deal with for generations.

Is this the kind of country America will become? A Democratic-socialist state with ever higher taxes and ever lower productivity?

This is the America that Barack Obama envisions. His tax plan proves it.

The Howard Beal election

It's hard to turn on the TV these days. The news and images from Washington are like a train wreck. The height of hypocrisy: the crooks who made this mess posturing for a bailout on the backs of the taxpayer... looking stern and serious while they sit in gilded offices paid for by the investment banks and mortgage firms -- those that provided them with cheap loans to their poor constituents, while profiting handsomely from complex, opaque financial instruments that no one understands. While Washington slept the market ran wild, fueled by impossibly cheap money and overabundant credit. The Wall Street Journal ran a picture of J.P. Morgan the other day. He looks like a banker: stern, serious, practical. I wonder if he'd have given people $400,000 stated income loans; not a piece of paper to prove their earning or their ability to pay it back. That's what we did in the hyper-fueled lending world of Freddie and Fannie. You need to buy a house. Can't afford it? No problem, we'll cover you. Can you imagine J.P. Morgan doing anything so stupid?

And now comes the final indignity: the "bail out". The House yesterday decided not to pass a $700 billion bailout bill. They did so to prove that we are still a free market. They did so to save their reelection chances. They did so to protest the Bush Administration and their total mishandling of this crisis from start to finish. Whatever the reason: it failed. And rightly so.Does anyone really think that the Bush, Paulson or Bernanke have any idea what is really going on here? Fortune Magazine reported last week that the $700 billion number that Paulson chose has no analysis behind it:

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."

Wow. How comforting is that? We know that markets operate on psychology, and that the large number is designed to provide confidence in the market that the government has a big enough solution to take care of the problem. I understand that.

But I also understand something that George W. Bush and his team have never understood: this is also a political issue during a presidential election. The Bush Administration remains totally tone deaf to the concerns of the American people. While the $700 billion number may calm financial markets, it has shocked, dismayed and infuriated the American taxpayer.

Hello? Is anyone out there? Does George Bush really want Barack Obama to become president? It sure looks that way.

In fact, Bush's handling of this issue looks a lot like the war in Iraq before General Petraeus went to Baghdad. It looks incompetent, poorly planned and poorly executed. It looks just like the mess that Gens. Casey and Abizaid got us into, with American soldiers dying daily amid violence and chaos on the television. Total mis-management. The American people lost confidence in Donald Rumsfeld in 2004. And what did the President do? He held his course, kept Rummy on and took a beating in the 2006 midterm elections. Bush was shocked to take such a shellacking. He didn't understand the level of discontent among the voters then -- and he doesn't understand it now. Americans in vast numbers are angry at Washington. Mad as hell, as Howard Beale famously yelled out the window in the movie Network. And they aren't going to take it anymore.

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Who will pay the ultimate price for this debacle? John McCain. He's been swallowed whole by this mess and his campaign will never recover. Yes, he miscalculated -- the whole "suspending his campaign" gambit backfired. Frankly, his instincts on the bailout were wrong; his behavior showed him as a legislator. A compromiser. Not as an executive who had to make a tough call in a crisis. He temporized and vacillated.

In fact, McCain missed a golden opportunity: He could have taken the momentum and initiative away from Obama and come out forcefully against the bailout from the beginning. He could have stood up in the debate and said:

I'm against this because I don't believe in taxpayers footing the bill for what is essentially a $700 billion entitlement program. Yes, I know the situation is serious and that we need to provide relief to the credit markets. But there is a better, less-intrusive way to do this: change the "market-based" accounting rules so that firms can revalue their portfolios to something that reflects their true intrinsic value. Provide loans and guarantees that the firms will pay interest on, etc. etc. etc.

But McCain didn't do that. He didn't see the opportunity for bold action and decisive decision-making. He could have put Obama in a corner. And with public opinion running 2:1 against the bailout, the polls would have been on his side.

In the end, this is the kind of crisis that either makes or breaks a candidate. The odds were against McCain from the beginning, but his handling of this issue has fallen short. He was dealt a bad hand by Bush and his bumbling lieutenants; in this case, running against Bush would have been smart for McCain. But it was the kind of "game changing" opportunity that comes about only once in a campaign. If you seize it, you win. If you don't, you lose.

So far, McCain hasn't seized it, and unless Palin pulls out a miracle against Biden and McCain can rally in the last two debates, the Republicans will lose on November 4.

Nothing moral about Dems' budget

It's an article of faith among Democrats that the state budget is a "moral document." They obviously still worship at the altar of big government if that's the case. The fiscal shenanigans at the root of the Colorado state budget should cause anyone who's paying attention to ask if the Democrats' morality is still inspired by Bill Clinton.

The latest estimate from the legislature's nonpartisan economists forecasts a decrease in expected revenues of $693 million over five years, echoing spreading worries of an economic slowdown. But this year's proposed budget calls for no slowdown in spending.

In the 2008-09 budget, general fund spending increases by the maximum allowable six percent or $431 million. A portion of this increase is made possible by last year's infamous property tax hike - Democrats call it a "freeze" - which bypassed the voters and, in just two years, shifts $249 million away from the priorities of local schools and into the hands of state legislators.

Originally, Democrats said this "Colorado Children's Amendment" would shore up education funding, although the amendment contains no assurance whatsoever that schools will receive any of the additional money.

More recently, a spending shell game reminiscent of the Ref C Shuffle emerged in the wake of the property tax hike. During a recent meeting of the legislature's Joint Budget Committee, Democrats acknowledged that part of Gov. Bill Ritter's $25 million expansion of government health care will be funded from - that's right - money freed up by the Children's Amendment.

So state lawmakers forced local school districts to give up money that was to be spent on local priorities and to spend it instead on state priorities, thereby enabling the state to spend its money not on education but to expand entitlements.

A significantly larger splurge takes place in the cash funds budget - paid for by those so-called "fees" that often feel like taxes to anyone who pays them. Although the cash funds budget is roughly one-third smaller than the general fund, Democrat legislators are proposing a staggering $651 million (14.9 percent) increase. By contrast, the state's population grew by just two percent last year; inflation rose by 2.2 percent.

The budget also adds 1,334 new state employees - an increase of 2,763 potential union workers in the first two years under Gov. Ritter and the Democrat-controlled legislature. That's more than double the increase in the final two years under Republican Gov. Bill Owens, even after Referendum C loosened many budgetary constraints.

If taxpayers are to take seriously this mantra that "the budget is a moral document," then perhaps taxpayers should demand that moralizing legislators answer some obvious questions:

* Isn't it reckless for the legislature to increase spending at a time when the economy is slowing and working families are tightening their belts?

* What is moral about putting the whims of labor union bosses ahead of the interests of taxpayers whose hard work pays the bill for state government?

* Isn't it disingenuous - to say the least - to defy the plain language of the state constitution by raising property taxes without a vote?

* What is moral about taking money away from people who earn it in order to provide for themselves and their families and instead giving it to government bureaucrats who perpetuate their own existence by making more people dependent on government?

* How is it moral for lawmakers to take money that belongs to someone else so they can pretend to be morally superior by giving other people's money to their favorite lobbyists, charities and constituents?

Certainly, government can be a force for morality, as it has been in securing our freedoms, restraining abusive officials and agencies, and assuring equality under the law.

On the other hand, moralizing with other people's money is a dangerous addiction which politicians would be wise to avoid.