Monthly Archives: March 2012

Private vs. Government Economic Stimulus

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The New Orleans writer Douglas McCollam, in a recent The Wall Street Journal op-ed, described a New Orleans organization that is having an impact on that city’s economic welfare.  The nonprofit organization, Idea Village, it seems, has in its 10 years of existence helped raise $2.7 million

in seed capital for more than 1,100 local entrepreneurs, creating more than 1,000 jobs and $83 million in annual revenue—and these days helping the city’s unemployment rate stay about a point to a point-and-a-half below the national average.

That’s money raised from private sources and voluntarily paid in, not tax money collected by a government.  In addition to Idea Village’s efforts, health care and education are benefitting from private enterprise efforts, rather than government handouts:

Today about 80% of the city’s public schools, formerly among the nation’s worst, are charter schools competing on performance to attract students.  The city’s antiquated Charity Hospital will soon be replaced by a state-of-the-art medical center, part of a larger, 2.4-square-mile medical corridor anchored by a new cancer research facility and BioInnovation Center.

With tax incentives (read tax cuts), New Orleans is about to replace New York City as the second largest venue for making feature films (Los Angeles remains No. 1).

Look again at Idea Village.  In its 10 years, it’s returned on those $2.7 million 30 times that amount in annual revenue.  And those jobs have cost $2,700 per each.

How does that private stimulus money raising and spending compare with government stimulus money taxing and spending?

President Obama and Vice President Biden are constantly claiming that Obama’s Stimulus spending has “created or preserved” millions of jobs in just three years.  They have steadfastly refused, though, to provide any evidence that that’s true, or that jobs created or preserved are the result of that trillion-dollar spending spree in 2009 and not the result of a struggling, otherwise ordinary, business recovery cycle—beyond anecdotal claims from state agencies beholden to the Obama administration for that money and for other billions they each hope to get in the future.

Let’s accept arguendo that the Obama claims are reasonably accurate, though.  $1 trillion dollars from the Stimulus Bill of three years ago has created or saved 3.2 million (the most frequently tossed about number) jobs in these last three years.  That works out to $312,500 per job created or saved.  Sorting out only the created jobs (were that possible) would drive that cost per job even higher.

And the return on those trillion dollars isn’t at all positive.  Meanwhile, the unemployment average remains, three years after Obama’s promise, above 8%.

Hmm….

Pause for Commercial

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My book, A Conservative’s Manifesto: A Brief Discussion of some Principles, has been published, and it can be found, among other places, at Amazon.com (paperback, Kindle, or hardcover) and at Barnes & Noble (paperback, Nook, or hardcover). Links also can be found nearby in the column to the right and on the newly added Books page.

The book lays out, in so many words, a set of (modern) Conservative principles that are tied back to the 18th Century Liberal principles that guided our Founding Fathers in developing our American social compact.  I begin with a description of those 18th Century Liberal principles and continue with a description of our drift away from them over the last 80 years, beginning with FDR’s administration.  I also describe a modern Conservatism that is those 18th Century Liberal principles brought forward to today, and I apply those principles to a number of critical aspects of American life: faith, citizenship, the nation, our economy, and our government.  I close by contrasting modern Liberal/Progressive concepts with these modern Conservative concepts and offering a path back to those modern Conservative tenets that made our country so exceptional and so great.

I hope you find it both enjoyable and useful.

A Risk to Federalism

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It always starts from the best of intentions.  The Senate is unhappy with the lack of uniformity of driving laws governing teenage drivers across the States, so it wants to impose national standards.  Specifically, the Senate wants to use a two-year, $109 billion highway bill currently under consideration as the, umm, vehicle for imposing national standards for teenager cell phone use while driving and for teenage driver licensing requirements, among others.  The thinking seems to be that the Feds got away with this concerning minimum drinking ages, so they can do it again in this area.

But the Feds didn’t, entirely, get away with it concerning drinking ages.  In South Dakota v. Dole, the case concerning the imposition of a national minimum drinking age, the Supreme Court ruled (not entirely correctly) that

[T]he relatively small financial inducement offered by Congress here – resulting from the State’s loss of only 5% of federal funds otherwise obtainable under certain highway grant programs – is not so coercive as to pass the point at which pressure turns into compulsion.

Thus, to comply with the Court’s ruling, the Senate’s use of the spending bill—or any other means—to obtain State acquiescence with the Feds’ national standard must be done carefully.

I claimed above that the Court got Dole only partially right.  Under the Federalism structure of our nation, the Federal government cannot (not just may not) force the States, individually or as a group, to do very much at all.  This is clear from Article I, Section 8; Article I, Section 10 [sic]; and the 9th and 10th Amendments.  Mandating national standards for matters that are internal to the States (vis., the rules by which a State’s citizens might drink, or drive, or etc. within that State) is prohibited by our Constitution.  The Court plainly understood this with its Dole ruling.

However.

The Court’s understanding falls short, as demonstrated by that phrase pass the point at which pressure turns into compulsion.  It waffled on where to draw that line.  It had to waffle, because that line cannot be drawn.  It is the nature and purpose of “pressure” to get the target of the pressure to comply.  The first iota of pressure has as much compulsory content as the last iota that pushes to total over that line to a compulsion that even a Supreme Court can recognize.

The President can use his bully pulpit quite legitimately—and Presidents often do, beginning with Teddy Roosevelt—to jawbone with his target audience to get this or that issue handled “his way.”  So can the Senate, or the House, or the Congress as a whole.  There is, though, a not very fine line between remonstrating, on the one hand, and forcing (or “pressuring” for) compliance—compulsion—on the other.  Putting such jawboning into legislation goes far beyond mere argument and becomes an attempt at compulsion, albeit with a cotton glove.

The greater risk is not to our teenagers, or fellow travellers, from their driving habits, but to the Federal nature of our nation from a central government imposing uniformity on things that properly are within the…province…of our States.  That greater risk includes the risk to our teenagers’ welfare.

On the other hand, this might be a fine opportunity for the States to set a powerful precedent.   This might be the place for the States to start saying, “Done and done.  Keep your Federal highway dollars.  We no longer wish to have your Federal hands in our State pockets.”

Labor Costs and Big Spending

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Karl Rove, former senior adviser and deputy chief of staff to President Bush the Younger, wrote in last Thursday’s Wall Street Journal about President Obama’s campaign fundraising and spending.  Of particular interest to me, he had this:

The Obama campaign’s high burn rate doesn’t come from large television buys, phone banks or mail programs that could be immediately stopped.  It appears to result instead from huge fixed costs for a big staff and higher-than-expected fund-raising outlays.  These are much tougher to unwind or delay.  Left unaltered, they generally lead to even more frantic efforts to both raise money and stop other spending.

Doesn’t that sound an awful lot like public service unions and their drain on the taxpayers’ dollars?  Is there a pattern here?

Energy Taxes

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The oil and gas industry paid, as recently as 2009, nearly $36 billion in corporate income taxes, a value roughly equal to 10% of the Federal government’s non-defense discretionary spending.

Moreover, the Tax Foundation estimates that, between 1981 and 2008, the oil and gas industry paid $1.45 in those corporate income taxes for every dollar of profit earned domestically.

On top of this, President Obama’s 2013 budget proposal contains tax increases that would drive the tax bite up by an additional $44 billion over the next 10 years—Executive Office accounting—or by $85 billion, according to the American Petroleum Institute.

On the other hand, the tax bite for the nuclear power industry is nearly a dollar of American taxpayers’ money paid to the nuclear power companies for every profit dollar those companies earn.  Wind power companies get from us taxpayers payments of $1.64 for every dollar of profit, and solar power companies hit us up for $2.45 for every dollar of profit.  Green energy, indeed.

Who is it that’s not paying its “fair share?”  Energy Secretary Steven Chu and Obama claim to have seen the light and “no longer share that view” concerning rising gasoline prices, and presumably the pricing of oil and gas generally out of our economy.

Who can believe them in the face of these facts?