Saturday, March 6, 2010

Hard Times and Hard Choices

Now, it isn't necessarily the intent of MAC to talk about Missouri a lot... it just happens to be a place we like a lot. AND it is a state which could reasonably be considered as a good cross-section of America, which, until the last presidential election (when McCain won the state by a slim 4,000 votes), had been one of the most accurate bell-weathers for the county's political outcomes.

Missouri is also, not surprisingly, dealing with many of the same budget-crunching problems as most other states in the union. And being as I live here, I tend to notice more of the goings-on that occur as a result of the budget problems, and some of the proposed "solutions." MAC is all about trying to look at problems affecting ALL OF US, and talking about responsible ways of dealing with them, rather than clinging to ideology. Missouri's budgetary troubles and the solutions being bandied about are a perfect example of how competing ideologies are at loggerheads... and how at the end of the day it is the people who suffer.

Currently, the state has undergone a series of budget cuts, with more sure to be on the way. Money is tight, services are being slashed, state employees are being laid-off while seeing their benefits cut right and left. All the while, the state's Republican dominated senate is looking at experimenting with a complete tax overhaul, which would replace the state's income tax system with a heightened sales-tax, including taxes on services which are not currently taxed (such as child-care, and legal work).

It isn't just the state-budget which is feeling the squeeze -- Kansas City and St. Louis have been the center of continual crises, including a plan to close 26 schools due to education funding shortfalls, all while a multi-millionaire Rex Sinquefield (a retired investment banker) crusades against the Kansas City and St. Louis "earnings tax," claiming it drives people out of Missouri's most populated cities and across the borders to find work outside of the state.

It doesn't seem to matter to Sinquefield that the earnings tax is a significant source of both cities' budgetary incomes, and that a number of services are funded through the tax (40% of which is paid for by non-residents -- such as rich professional baseball and football players!) A handful of Missourians have made it a point to take on Sinquefield, as if he alone is the source of the state's troubles.

Sinquefield's charge against the tax is purely ideological. The state government refuses to look at ways of generating revenue in order to close the budget gap, relying purely opon cuts to services and state-employees' pay and benefits, despite having a multitude of options available at raising revenue. This is also purely ideological. It is estimated that by simply catching up with the times, Missouri could raise an additional $200 million by collecting sales taxes on internet purchases.

The one thing that is certain in all of this is that Missouri residents pay. Whether the state government takes away funding for essential services OR residents continue to pay an earning tax and a state income tax -- PEOPLE pay. If we eliminate the earnings tax in KC and St. Louis -- that revenue will be replaced by some other tax (most likely an increased property tax, BRILLIANT!!), which defeats the entire purpose of eliminating it to begin with, and probably hurts more than it helps.

Who pays for it when the state cuts state employee benefits, and state employees leave for greener pastures? Who pays for it when our schools consolidate into larger class-sizes because cities and school districts can't afford to hire more teachers? Answer: WE DO.

Hard times force us to make hard choices... but too often the ones who are making the hard choices aren't the ones feeling the effects. Rex Sinquefield doesn't feel a thing when a city is forced to make huge budget cuts... Governor Nixon and the state legislature don't feel a thing when the state employees are asked to take a hit to their pension plan or their 401k contributions... or do without a holiday. But we do.

The hard choice affects the people the most... because the people are the ones who pay for it one way or another. I don't know about you, but it seems to me that there is a middle road. Let's make cuts when it makes sense, but lets not close the book on looking for ways to raise revenue when it makes sense to do so. Let's not end an earnings tax without thinking about the consequences of doing so.

Simply taking the ideological stance of being against a tax for the sake of being against a tax doesn't solve anybody's problems. It doesn't address the issue of the NEED for funding police departments and fire departments and other essential public services. Simply making cuts without looking at raising revenue as an alternative smacks of short-sightedness and ideological rigidness.

This kind of decision-making does nothing to help solve a problem, and really isn't even decision-making. It simply says to Missouri's residents that we are going to pay for it by way of decreased services... whether that makes sense or not. The hard choice SHOULD be a choice, not some proscribed "solution" put forth by an ideology. Whatever happened to taking a look at EVERY possible solution, and weighing those options equally? THAT is a choice. It is a hard choice, but at least its a choice. So far, we've seen nothing but the short-sighted slashing of budgets, which equates to nothing more than a knee-jerk reaction to budget short-falls.

Hard times call for hard choices. Missouri deserves a real choice in the matter.

Tuesday, January 19, 2010

Low Energy Costs = Low Motivation?

Missouri, you've just had it too good for too long. So why not try and stretch it a little bit longer?

Just prior to the New Year, a bipartisan panel of Missouri lawmakers released a report highlighting Missouri's energy future. The mission of the panel was to "Determine the best strategy to ensure a plentiful, affordable and clean supply of electricity that will meet the needs of the people and businesses of Missouri for the next twenty-five years and ensure that Missourians continue to benefit from low rates (emphasis mine)." Considering the Missouri has had it so good for their energy prices, it is only natural that they would want to continue this trend. However, the tension between clean energy and cheap energy is only going to increase.

According to the U.S. Energy Information Administration, Missouri residents have a kilowatt-hour cost for their power almost 25% cheaper than the national average, largely driven by a reliance on coal. Fully 80% of Missouri's power generation is fueled by coal. While this form of power generation is indeed the cheapest, it does have a few other attendant costs that have been so expertly socialized by the power industry, and reliance on this form of power for cheaper rates may prove problematic. If Washington pursues the form of cap-and-trade legislation currently bandied about in Congress, Missouri may face an increase in rates as the cost to pollute goes up.

This startling and unsurprising fact clearly influenced the authors of the report, who proceeded to lambast current federal plans as "devastating to Missouri's economic well-being," and glossed over forms of alternate energy with a circumspection and lack of depth that can only belie disinterest or outright ignorance. As a result, the four Democrats on the panel refused to sign the report. This should not be surprising- the struggle for cleaner energy, particularly at the state level, has proceeded largely along party lines throughout the country. However, this tussle hints at a wider problem that needs discussion as well.

The big question is, why should Missouri continue to enjoy energy rates that are lower than the national average? To me, this seems a prime example of what Tom Friedman refers to as part of the national epidemic of "privatizing the gains and socializing the losses." While Missouri residents get the benefit of cheap electricity, borne by the heavy use of cheap coal, neighbors downwind get the cost of increased emissions. While you can't blame Missouri for trying, in the coming era of climate awareness and pending legislation, it is foolhardy and indeed shortsighted for the state house to seek to maintain these low rates. In the report, the 80% reliance on coal as bandied about as a reason to get used to coal reliance. But lets look at the inverse of that. Is this reliance on coal a reflection of a lack of incentive of Missouri utilities to seek alternative power sources? Is the legislative regime demanding low rates stifling creativity and innovation in the Missouri power industry?

These are questions well worth exploring, but do not expect lawmakers to have any part in acknowledging inevitably higher rates. Consistently, the Missouri Public Service Commission has acted to keep rates low, often below the amounts needed by utilities. As fuel costs keep rising, expect the hard-up utilities to seek increasing to raise the rates in tandem.

The omissions and oversights of the report raise further eyebrows. I was surprised at the lack of attention paid to wind power in Missouri, given that this resource has been extensively studied at the state and federal level. While this form of power generation needs further investment and research, there is potential in this industry, and it curious that lawmakers ignored this potential source of jobs and prestige for the state.

Another factor worth considering, and one largely ignored by the panel, is the potential for alternative fuel sources and increased efficiency. Considering the low costs and high reward for increased efficiency measures, it is laughable that this was not pursued further by lawmakers as a policy goal. Perhaps this is because without the proper price incentives, consumers have no reason to reduce consumption. For a case study, refer to Juneau, Alaska. When faced with avalanches that knocked out transmission lines, threatening a five-fold increase in price, Juneau drastically cut its power consumption. When faced with truly crippling bills, Juneau made the adjustments. In a state such as Missouri, home to several large research universities, it is insulting to insinuate that the state is completely inadaptable.

In all, it seems that Jefferson City has laid out its priorities quite clearly: maintain the status quo, continue to rely on cheap coal, keep rates low, everybody happy. But the time for such policies has come and gone, and change is in the wind. One can only hope that the state house will not maintain such short-sighted policies in the face of change, and seek the opportunity presented by these changes.

Monday, December 7, 2009

Health Care Reform: View from the State Capitol

What Andrew said, about the lack of activity, is all too true. Moving on, no time to lose!

For most of this year, I simply haven't had the stomach to cover the health care debate, because so little of what has been discussed has been relevant, with discourse better suited for a demolition derby- combatants hurling their outdated auto bodies at their enemies, rending their own steel and rubber in the vain hopes of paralyzing the opponent. There's plenty of room for disagreement and discussion on the various health bills before the Congress, with wide-reaching policy and fiscal implications, and we're stuck on whether Nancy Pelosi is going to administratively execute your grandmother.

We, however, are not going to waste any more time on that. Personally, with all the discussion on whether states could/should opt out of the program, I'm getting interested in what implications would be in place for given states. Thankfully, we have just that for Kansas, thanks to Rep. Lynn Jenkins, who formally requested that the Kansas Health Policy Authority (KHPA) analyze both HR 3962 and S. 1796, both of which are currently making the rounds in Congress. The KHPA, for its part, stated their interest as “estimating the impact on the state is tied directly to the Agency’s role in making sure Kansas is positioned to benefit and succeed should reform pass the Congress.” Sounds pretty impartial to me. But just to make sure, they contracted an independent actuarial agency to do the numbers. What they found is striking.

Beyond all the talk of unfunded federal mandates and busted budgets, the KHPA found that Kansas actually stands to save money with either of these bills in force- caveats depending, of course. I'm going to try and break it down to some basics, but I strongly encourage you to read the KHPA's report for more detail.

Under “a fairly wide range of assumptions,” and keeping in mind the previously-mentioned caveats such as the size of Medicaid expansion from the 'woodwork effect,' the KHPA projects reductions in net state expenditures by at least $25-50 million per year under the Senate bill. Even on the low end, if projections are found to be woefully underestimating the need for medical care, savings of $10-20 million annually are expected.

The House bill presents significantly less savings to the Kansas budget, due in part to the mechanics of the bill, including a larger expansion of Medicaid. Nonetheless, KHPA estimates a savings of between $0 to $25 million per year. However, on the low end of the scale, there is the possibility that HR 3962 could cost Kansas up to $5-15 million annually.

The takeaway from this brief analysis is that the health care bills are far more complex than many of our Senators and Representatives would like us to believe. It would be undoubtedly a good thing to increase coverage while reducing costs. The question lies in whether these are actual reductions in cost, or a shifting of the burden from state budgets to federal ones. However, these specific numbers may be a moot point. At this time, these bills should be considered very much of a moving target; what emerges from negotiations, debate and conference committee could bear scarce resemblance to what the KHPA has analyzed in detail. Nonetheless, we would do well to look into these bills with great detail in the weeks and months ahead, and consider the impacts for each of our own states.

Wednesday, December 2, 2009

To Set a Deadline or Not to Set a Deadline?

First off -- Yes, I realize that our postings and updates have been pretty much non-existent this year... I apologize (as I'm sure Pete does too!). I will try to make more time to write for 2010!

Now, on to the post!

Today, the Senate is conducting a hearing in discussion of the President's war strategy in Afghanistan, which he outlined last night in a speech before West Point cadets and a national television audience.

You can "watch" updates of the hearings posted here by the Washington Post online.

It seems that most of the questioning by Republicans in the Senate, led mostly by John McCain, center around the idea of having a date set to begin withdrawing troops. McCain says it "makes no sense" to have a date to withdraw.

I guess I am just a bit puzzled by this line of reasoning. In any endeavor when we are setting goals for ourselves, don't we typically attach those goals to a target date by which time we would like to have those goals accomplished? Why then would we not want to attach our goals in a war to a date? The questioners seem fixated on this date... and keep trying to get the witnesses to downplay the significance of it... But, really, what is the big deal?

The way I see it, we have certain goals we want to see accomplished there. We set a date by which time we want to have those goals accomplished. IF we have reached those goals, we begin the withdrawal of our troops.

And even then, the plan calls for the START of withdrawal. Nowhere has it been said how long this drawback will take. In fact, Defense Secretary Gates even says elsewhere in the hearing that he suspects there will be a "continuing presence" of US troops which will stay there to help with training, etc (just not combat).

McCain contends that there can't be a both a date set for withdrawal AND having the withdrawal set to conditions on the ground.

I really don't see why not. Anybody care to explain why it isn't possible to have a deadline in mind as to WHEN these goals should be accomplished? Doesn't setting a timeframe create a sense of urgency to achieve those goals, rather than leaving them open-ended?

Apparently this just doesn't make sense to the Senate.

Thursday, May 21, 2009

The Geography of Job Loss

The Geography of Jobs

Posted using ShareThis

My mother sent me this the other day- a rather stunning graphical representation of the damage that has been wrought on the job market in this country over the past few years. I strongly suggest you check it out.

Tuesday, May 19, 2009

We're Still Breathing: MAC and US Small Banks

Yes indeed we are; many apologies for the lack of activity over the past few months. Not a single post as we began our new presidential term- perhaps we were waiting with baited breath, as you no doubt were, to see how things were beginning to shape up. Or, perhaps we didn't have internet and got bit by the lazy bug. Who knows... either way, we're still calling, so hopefully others are still reading. Right now, I'm stuck in Kansas City MO, after missing a flight out last night by a few minutes. I'll be on here all day, and figured this would be a good time to kick the tires again, get re-started and re-launched.

So in a way, this post serves as a reminder, not unlike the one that small, community banks across the US are clamoring to remind customers. As detailed in a recent article by the New York Times, many community banks are on rock-solid footing as their larger, more speculative brethren are stumbling their way into federal ownership.

The difference between the two business model is so radically different from the larger investment banks, and by extension contemporary American capitalistm, that 'night and day' does not even suffice. The opposites are so polar as to be stunning:

To spend time with these Indiana community bankers is to step into an alternate universe, where everything sounds a little strange because it makes perfect sense. You hear things like, “If you don’t understand the risk you’re taking, don’t take it.” And, “We want to be around for decades, so we’re not focused on the next quarter.”

Forget “too big to fail.” These banks consider themselves too small to risk embarrassment. They are run by people who grew up in the towns where they work, and their main fear is getting into a financial jam that will shame them in the eyes of their neighbors.

The steep profits earned by national banks didn’t turn their heads in the last decade because they were inherently skeptical of double-digit growth rates.

“We like a nice, gentle, upward slope,” said Donald E. Goetz, the president of DeMotte State Bank, an 11-branch operation in the northwest part of Indiana.

“This kind of growth, like you see in the stock market” — Mr. Goetz ran his hand through the air, tracing the shape of a mountain range — “that doesn’t interest us.”

It is indeed a sad, sad state of affairs when prudent economic practice, accountability to your neighbors and community, and sound decision making eying the long term has become uncommon and noteworthy. Did we all get caught up in the go-go-go of investment banks and credit cards and home loans so strongly that we left our wits behind us? It just might seem that way.

So I'm wondering- is it time to relocate our funds and savings from the massive banks to community banks? They are just as insured as the big ones, so that is not a worry. My only concern is, do they use the same services? My experience with a smaller bank (relatively speaking) was Commerce Bank, located in Missouri/Kansas/Iowa. I found it a great experience, with a true understanding of what their customers needed, prompt attention to concerns and strong support. If that is anything like what smaller banks have to offer, I'm on my way right now. My main bank just got bought out by Wachovia... and you better believe, I still have that Commerce account open.

Monday, January 19, 2009

The State and Marriage

I just got through seeing a ridiculous news story on Yahoo! about a man being forced by the state of Michigan to either 1) pay the medical costs of his daughter's birth or 2) marry the mother.

At first, I was thinking maybe he is a dead-beat dad, and deserves to have the state breathing down his neck -- maybe not for 100% of the medical costs -- but at LEAST half of it. But after reading the article, you find out that he actually lives with the mother and daughter, and has a job (at a nursery, even!) in which he earns a paltry $8/hour... but at least he's trying. He and the mother intend to get married, but she wants it to be a nice wedding... and clearly they can't afford to pay for THAT right now.

When the daughter was born originally, the costs were paid by the state because the mother was on Medicaid. So, now, the state is trying to recoup their spending by forcing the father to pay-up!

This tactic was apparently proscribed by Michigan paternity law -- the law would waive the birthing costs for the father on condition he married the mother.

You wanna take a guess as to the reasoning behind the law? It is "an incentive to 'maintain the sanctity of marriage.'"

Now, maybe I'm being silly... but I don't see how on earth a law like this does anything of the sort. What business does the state have in telling a man and woman, "you need to get married NOW or else you're going to pay!" And how does THAT help to maintain the "sanctity of marriage?!?"

Couldn't this law do just the opposite? Couldn't this law promote marriages which are based on a financial whim other than what a marriage SHOULD be... things like... um... LOVE and committment?

What about dead-beat dads? Isn't it concievable that they could take advantage of a law like this... I'll leave it to you to imagine the details... but it COULD happen. So much for protecting the "sanctity of marriage."

I'm sorry... but I just get tired sometimes of hearing the government tell me about "protecting" something as sacred as marriage by trying to come up with laws which either force people to marry or PAY, or on the other hand, deny certain others the right to begin with.

The state, as far as I'm concerned, really has no business in deciding what has "sanctity" and what doesn't.

Maybe I'm wrong about this law... but the sad thing is that this particular story is talking about a man and woman who clearly are committed to each other and who are trying to make ends meet while raising a child. But now the state is trying to take $500 dollars a month from them unless they get married and produce a marriage license. Shouldn't we be trying to protect the sanctity of strong families, rather than being fixated on whether or not they are married on the state's timetable? Don't people's actions count for something more than a word being attached to a relationship?

Tell me I'm wrong (or right)! If you don't, you're not doing your part to uphold the ideals of this blog... and you should PAY me for that. Hmm... maybe the state's on to something after all!