Am I the only one who remembers when Alan Greenspan was the darling of the conservatives? He kept being reappointed by both Democratic and Republican presidents because his reputation was solid. Then he came out and said that he might have made some policy mistakes when the economy crashed because of a housing bubble. Editorials at pro-business publications Wall Street Journal and Bloomberg today are reporting that Greenspan thinks the Bush Tax Cuts should expire.

The WSJ piece reports on an ABC [sic] “Meet the Press” appearance on Sunday and then reaches back to an earlier “Meet the Press” interview where Greenspan replied to a question about tax cuts paying for themselves, “’They do not,’ Mr. Greenspan said at the time, adding that the U.S. has been funding spending programs and tax cuts with borrowed money. ‘And at the end of the day that proves disastrous. My view is I don’t think we can play subtle policy here.’” (Note: “Meet the Press” is an NBC program, not an ABC program.)

Bloomberg didn’t give NBC’s highly rated show to ABC, but focused on a different set of remarks by Greenspan. Although they mentioned that Greenspan thinks the Bush Tax Cuts should expire, they focused on his opinion that entitlements need to be fixed.

Certainly the catalyst for a Greenspan appearance on “Meet the Press” yesterday was the looming battle over raising the debt ceiling. Boehner has said that there will be no change in the debt ceiling without some other strong measures. Tea Party members are as supportive of not raising the debt ceiling as they were of a government shutdown. Wall Street Analysts are scared to death of what would happen to financial markets if the debt ceiling is not raised and the U.S. defaults on its debt. Many financial products are pegged to U.S. Treasuries, deemed to be one of the safest investments on the planet. As investment and/or lending risk increases, the spread over Treasuries increases, reflecting the increased risk. A default by the U.S. Government would change the risk profile of U.S. Treasuries, and trigger interest rate increases on Treasuries and on every financial product pegged to them.

This may be the first time that GOP ideology meets reality. Greenspan is right, tax cuts do not pay for themselves. The trend in deficits is alarming. The Bush Tax Cuts have a negative effect on deficits, and have done nothing to create jobs since they were enacted 10 years ago. It is time for them to expire.  

The last link in the Homework section today, is an analysis of the events that are contributing to deficits in the economy. It is wonky, but worth your time to read it, if for no other reason than it demonstrates how Heritage Foundation reports on the deficits are misleading. With the influence of Fox News and the Heritage Foundation on conservative thinking, it is no wonder that the Tea Party is misinformed about everything financial, and most things Constitutional.

Homework:

Wall Street Journal Blog About Greenspan

Bloomberg Story About Greenspan's Remarks

June 2010 Analysis of Causes of Deficit

While you were watching the fireworks surrounding Obama’s speech on the federal budget, the Colorado state legislature was busy passing its budget for the year. Colorado is ahead of the game, they are actually working on the fiscal budget for the year to come, not the year that is halfway finished.

This budget wasn’t without drama. There were reputed shouting matches, including a dinner that the Senate President decided to leave before the meal was served. He even threatened to submit his own budget because he was having so much trouble getting to an agreement with the House leadership.

Both the House and the Senate have passed a budget, and it is good news for WalMart, but bad news for poor kids who might fall out of a tree and break an arm or leg this summer. They won’t have any health insurance, so the rest of us will be paying for that childhood accident with higher health insurance premiums when the kid visits the emergency room. WalMart will get a break on collecting sales taxes.

According to a Sentinel story written by Charles Ashby, Judy Solano, a Democrat from Brighton said, “When we give $9 million to the wealthiest corporation in the world … and we’re cutting our schools $250 million, it’s unconscionable for me to vote for this budget,” referring to Wal-Mart’s vendor fee. “To give away 98.8 percent of the vendor fee to large corporations when they speak out of one side of their mouth and say, ‘Education is important,’ and they speak out of the other side and say, ‘Yeah, but we need this extra money,’ we cannot be 50th in the nation for school funding.”

I never thought I’d see the day that Colorado is last in the nation when it comes to education. I agree with Judy Solano, it is unconscionable. If you keep electing Republicans who are only guided by ALEC, as Steve King admitted in an E-mail to me, you are going to have kids who don’t learn, can’t get a good job, possibly end up as criminals, and in any event will not be productive members of society. In fact, I remember in debates that Steve King was convinced that there is nothing wrong with Colorado’s education system. He kept pointing to his own kids whenever I brought up the idea that we are killing both public K-12 and higher education with continued budget cuts. If you are poor you can forget about getting a good education in Colorado. Thank a Republican, but be warned, he isn’t listening to you, he is listening to ALEC.

P.S. Kevin King, I mailed a check to the state of Colorado yesterday for my Colorado taxes. I just wish more of them went to schools and kids who need a break.

Homework

Charles Ashby Story (Subscription Required)

Under the Gold Dome Fighting Words

Denver Business Journal Story about Budget

Recent attitudes in the liberal blogosphere regarding President Obama have been increasingly negative. He’s been criticized for not closing down Guantanamo, for escalating the war in Afghanistan, for giving away the store in negotiations with the U.S. House of Representatives, for not fighting hard enough for the middle class, and for caving in on an extension of the Bush tax cuts. Today the blogosphere is cautiously celebrating. The analysis at the link points out both the strengths and the weaknesses in the Obama plan for cutting deficits—which explains the caution in the celebration.

It is safe to say that the speech President Obama gave yesterday was his first speech in his bid for reelection. Liberals were afraid that he would move so far to the right in his reelection campaign that they’d have permanent bus-tire-tracks on their ideals. Instead, Obama delivered a hair-on-fire pro-values speech, albeit with a calm and measured delivery. No Drama Obama.

The Obama plan reduces deficits by $4 trillion over the next 12 years, and limits the growth of national debt to economic growth. The point that conservatives will most likely attack vigorously is the fact that taxes will have to increase if we are ever going to pay down the national debt. As usual, they will look at only one side of the budget equation. Any balanced budget requires that Revenues equal Expenses. The Paul Ryan plan provides for a decrease in revenues and decreases in spending, so long as the decreases in spending don’t touch the military industrial complex. Revenue is already down, thanks to continued high unemployment, and the refusal of the Republicans to allow the Bush tax cuts to expire--as originally planned when they were passed. Any further decrease in revenues will require extraordinary spending cuts, which will all fall on programs that support the very young, the very old, and the infirm if the military/industrial complex can’t be included in the mix for cuts.

The GOP has gotten so used to saying that taxes need to be cut that they are unable to see that there might be another way to balance the budget. When a family has trouble making ends meet, they often send a family member out to find a job, thus increasing revenues. It is time that the GOP looked at the revenue side of the equation for a change. Obama is a realist. People living in a fantasy world are those who think one can balance a budget by allowing the wealthy to pay a smaller and smaller share of taxes, by playing games with accounting for two wars, and by thinking that the only thing hurting the budget is schools for kids, health care for seniors and people with disabilities, and transportation that moves goods to market and people to work. This fantasy world came crashing down in 2008. It is time for a healthy dose of reality.

Homework

CBPP Analysis of Obama's Budget Plan

Text of Speech as Prepared for Delivery

TGIF was cancelled in Washington yesterday. Nobody was celebrating the end of the work week on Friday afternoon; instead legislators were negotiating an eleventh hour stop gap funding bill that would avoid an expensive shutdown of the federal government. John Boehner may be the ultimate winner in this legislative dance. He managed to get two things done: Democrats moved beyond the Republican starting point for cuts; and he got the GOP freshmen to see the reality that they have to compromise if they want to get anything done. They only control one of the levers of government.

TGIF was replaced by a wake in Denver yesterday, because on Thursday, the GOP voted to deny people living together, without benefit of marriage, some of the legal rights of married couples.  After listening to eight hours of testimony, Colorado Senate Bill 11-172 was killed, with the GOP voting against and the DEMs voting for a civil unions bill. The GBLT community is still a community of second class citizens. Read the link below to see some of the passion that was exhibited in the eight hours of hearings.

Meanwhile, back in Wisconsin, election officials are investigating the sudden appearance of just enough votes to give a conservative Wisconsin Supreme Court Justice another term on the court without a vote recount. What I can’t figure out is why the county clerk in Waukesha County stays in office. It seems that she makes huge human errors frequently, and is always having to apologize for getting the initial results wrong. She was even once granted immunity in a criminal case. She sure sounds like the kind of person I want responsible for counting my votes. NOT.

Who needs soap operas when one can just watch politicians tie themselves in knots? If it weren’t so early, I think I’d pour myself a drink…

Homework

No Shut Down

Colorado Civil Unions Bill Dies

Wisconsin Election

With all the news about the budgeting process in Washington, and a looming government shutdown, the budgeting process in Denver isn’t getting the attention it should by either the media or the people of Colorado. But it is just as contentious.

The issues plaguing the two different legislatures aren’t exactly the same, but they are similar. In Washington, the angst is all about the level of deficits and the amount of debt the nation should allow. In Denver, the angst is all about keeping the budget balanced, since no deficits are allowed. Colorado has a balanced budget requirement. Washington does not.

There are two ways to reduce deficits and/or balance a budget. It all comes down to simple arithmetic. Revenues = Expenses. Since there are only two variables in this equation, the balancing act only has two possible solutions increase revenues or decrease expenses. In Washington increasing revenues is an option, but in Denver it is not.

In Denver the argument is that Republicans want to offer new tax breaks to businesses in a year where revenue continues to be sluggish, but has shown some improvement. A tax break decreases revenue, meaning that more expenses need to be eliminated than would be the case if there were no new tax break. In this case, the expenses that would be cut would be school funding. If there is already a revenue shortfall, couldn’t tax breaks for companies and the wealthy wait until the economy is a bit healthier? Why is it that the Republican mindset is always in favor of the wealthy and always at the expense of the poor and infirm? And why is it that the party that wants a balanced budget at all times is so determined to balance it by taking away from the poor and giving to the rich? When do the wealthy pay their fair share? And when do kids get the education they deserve in Colorado?

Homework

Budget Battle in Colorado

The people we sent to Washington can’t seem to get the job done. It is amazing to me that congress is still arguing about a budget that should have been passed before the fiscal year started back in September 2010. It is increasingly looking as though the government will shut down on Friday. Some on the right are excited about the prospect of a shutdown. I’m starting to think that it might be a good thing if they got what they are clamoring for. Call it tough love. If they shut down the federal government, they might find the consequences are not what they are expecting.

According to a Denver Post story, Dianne DeGette’s office has been swamped with calls from people worried about their Social Security and Medicare checks. Paychecks for military personnel will also be delayed. How do the blockheads clamoring for a shutdown think that the families of soldiers are going to continue to live indoors and eat regularly if they don’t get their monthly paycheck? I remember stories about how many military families need food stamps in order to make ends meet. Missing a paycheck, even if it is eventually received, is disastrous for families already on the edge.

Mesa Verde and Rocky Mountain National Park will shutdown at a time when lots of families have Spring Break. So, merchants selling souvenirs, lodging, and meals to visitors to these parks, during a traditionally peak time, are going to see a drop in sales instead of the increases they had planned for. It is a bit ironic that the Representative from Congressional District 3, Scott Tipton, is one of those merchants. His business relies on tourism at Mesa Verde.

If you are one of those merchants, you won’t be able to get any loans to carry you over this unexpected bump in the road, because banks rely on SBA guarantees for a lot of small business loans, and the SBA will be shut down. Don’t expect to get your income tax refund from the federal government, either. The IRS will be shut down.

Tipton agrees with a strategy to shutdown the government. I don’t think he has considered the consequences, unless he planned to be a one term congressman all along. Looking forward to the next budget crisis, a little birdie told me that a call to Tipton’s office yesterday resulted in a Tipton staffer saying that he would not touch Medicare. Minutes later the Democratic Central Committee sent out a fundraising plea, using Tipton’s support of the Paul Ryan plan to destroy Medicare during the 2011/2012 budgeting process as a reason to donate. Tipton is so caught up in “doing what he was elected to do” that he can’t see the freight train coming at him.

Homework

How a Government Shutdown Would Impact Colorado

Story About Soldier's Increased Usage of Food Stamps

Pence Wants to Shut It Down

Obama: A Shutdown Would Be Inexcusable

The news from both the state and federal level is all about budget dustups.

Evidently in Denver legislative leaders decided to have dinner to discuss their differences about Colorado’s budget, and how to balance it. The dinner was cancelled when Brandon Shaffer decided to go home and have dinner with his family. At least that’s what he said. The GOP leaders at that dinner say that Shaffer stormed out in a huff. Apparently the sticking point is that the GOP has decided that Colorado state workers need to pay more for their retirement benefits. Some Democrats are calling this the “Wisconsinization” of Colorado’s Budget. ColoradoWINS, the union representing state workers, was not amused, and Shaffer has threatened to introduce his own budget in the Senate—the first time that has been done in over 20 years.

Meanwhile back in Washington, a government shutdown is still looming.  Michelle Bachman issued a call to the Tea Party, asking supporters to come to Washington to protest the budget negotiations. A couple hundred (that wasn’t a typo) protestors showed up. There were 50 members of the press at the event. I guess it is the wrecked car syndrome. The media is still gawking at the Tea Party, even though most of America has moved on, and the Tea Party is in the midst of breaking up into hundreds of parts. Locally rumor has it that there are three Tea Party groups, all working against each other in things like City Council elections.

So, even though the Tea Party is disintegrating, the federal budget is being held hostage because the demands of the Tea Party have not been met, and GOP legislators are scared to death that if they don’t support a disorganized bunch of malcontents they’ll face primary challenges and not get to keep their cushy jobs, with full benefits paid for by taxpayers.

The common theme in both state and federal negotiations seems to be that the GOP thinks that getting to a budget deal means constantly moving the goal post away from any policy that might help American workers.

Homework

Denver Post Story About Unpleasant Dinner

Federal Budget Two Step

Tea Party Rally Fizzles

Federal Budget Negotiations

For the past several years lawmakers in Denver have grappled with how to balance Colorado’s budget. We’ve comforted ourselves thinking that this was a short term problem caused by the trickle-down effect of high unemployment. Unemployed workers don’t pay income taxes (actually, that’s a myth, but is a subject for another day) and they don’t buy anything they don’t need to buy, so sales tax revenues decrease. State revenues decrease in any economic downturn. At the same time, applications for things like unemployment benefits and food stamps and children’s health insurance go up, causing the state’s expenses to go up. Since the budget has to be balanced, spending must be cut. When employment goes up sunny days are here again.

Except, the University of Denver blew a hole in that scenario with a report released last week. They called it a “budget tsunami.” Several foundations came up with the money to fund a study of the state’s financial system, which was mandated by the legislature in 2010. The University’s Center for Colorado’s Economic Future reported that there is a problem with how Colorado’s government is organized that will cause budget short-falls long after any economic recovery.

The modeling done by DU predicted that by 2025 Medicaid expenditures will triple and K-12 education expenses will almost double. But General Fund revenues will only increase 86%. Let’s see, a 300% increase in one of the three largest state programs, a 200% increase in another, and only an 86% increase in revenues. It doesn’t take a rocket scientist to see that the numbers don’t add up.

Yesterday one Democratic legislator decided to do something about the structural problems that would cripple education in Colorado. He knows that without a fix Colorado could easily become the only state in the nation with no public university system. Education is an economic driver, so without a strong university system, Colorado’s economy would be trickled upon. In fact, that was the subject of another study released in late 2010 by a commission appointed by Ritter. In a report titled Colorado Must Decide, an increase in taxes to fund higher education was recommended. Yesterday Rollie Heath, a Democrat representing the district housing the University of Colorado, introduced a bill that would allow voters to decide if they want to fund a university system. As a former corporate executive, my guess is that Rollie Heath understands what business needs and will support. The bill may die, because neither party sent cheerleaders to the announcement of the bill, and Governor Hickenlooper was cool to the idea, but it is what is needed if Colorado’s higher education system is going to survive and thrive. I hope legislators let Colorado’s voters decide.

Homework

Story at University of Denver's Website

Economic Reports at DU's website

Study on Colorado's Higher Education Funding

Rollie Heath Taking Tax Hike to Voters