US Economy

[Redeye]

Confederation Bridge's private owners get a subsidy of about $44 million/year from the Federal Government (based on the subsidies the ferry service got), and it doesn't sound like they make much money at all from what I've read.

 

[observor 69]

Looks like everyone is happy.


The Confederation Bridge project was awarded the Gold Award for Leadership in Public-Private Partnerships at the 12th Annual National Canadian Council for Public-Private Partnerships Awards Dinner in Toronto on December 3, 2009.  Andrew Lin, Senior Vice President of Borealis Infrastructure and Michel Doiron, Regional Director General for Transport Canada accepted the award on behalf of the private and public sector partners.

The Gold Award is the most prestigious award granted by the Canadian Council for Public-Private Partnerships. Each year, the Council celebrates successful public-private partnerships through its National Awards Program held concurrently with the annual conference. Awards are presented to public institutions/governments and their private sector partners for outstanding achievement in Canadian public-private partnerships.

Strait Crossing Development Inc. (SCDI) is the private partner in the Confederation Bridge Project and is owned by BPC Maritime Inc. (Borealis), VINCI Concessions Canada Inc. and Strait Crossing Inc. “The Confederation Bridge has been open for business for over 12 years now and not only is the bridge an engineering success, it has also proven to be the new operational and maintenance standard for infrastructure across Canada. We acknowledge and thank Transport Canada for their continuous support in all aspects of this undertaking” said Andrew Lin on behalf of SCDI.

Speaking on behalf of Transport Canada, Michel Doiron said “the team is to be commended for a job well done.” He added, “the positive and professional working relationship that has developed between our team, SCDI and the other project partners has contributed to the success of this project as recognized by this award. It represents an excellent example of a successful public-private partnership”.

The Confederation Bridge satisfies Canada’s constitutional obligation to provide a transportation link to Prince Edward Island. By way of agreements signed with the federal government in October 1993, SCDI designed, financed and built the Confederation Bridge and agreed to operate and maintain the facility for 35 years. After this period, the bridge will revert to the government to operate for the remainder of the 100-year design life.

http://www.confederationbridge.com/en/corporate_information.php

http://www.pppcouncil.ca/

 

[Redeye]

Looks like everyone is happy.

I'm not so sure about that:

From: http://www.cbc.ca/news/canada/prince-edward-island/story/2007/05/31/bridge-business.html

"The group generally doesn't release financial information, but it is known that at the end of 2003 the owners got a dividend payment of $2.6 million, not very much on a billion-dollar bridge."

Most of the toll revenue goes to the bondholders who financed the construction... however, a big chunk of those bonds are held by the same people who own the bridge (OMERS, for example), so it's not totally clear how good the deal is I suppsoe.

 

[Edward Campbell]

...
Most of the toll revenue goes to the bondholders who financed the construction... however, a big chunk of those bonds are held by the same people who own the bridge (OMERS, for example), so it's not totally clear how good the deal is I suppsoe.

"I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.”
James Carville, political advisor to U.S. President Bill Clinton, Source: Bloomberg

 

[Bruce Monkhouse]

The "economics" suggests that a competitive private sector always outperforms the public sector because, inter alia, it is better able to control costs.

Well in my [in total] 33 years of leaching of the Govt. teat I have yet to see one instance of this.......

 

[a_majoor]

The biggest problem with historical examples is that everyone, including Reagan, Thatcher and Mike Harris did not cut spending. The gains to the treasury from the sale of assets was swiftly consumed, and all that really happened was the day of reckoning was pushed back from then to now.

Selling Crown or State assets might work today in the sense that the author was discussing (raising revenues to pay down debt without raising taxes to unsustainable levels) because there really is no more room to wiggle out of the debt trap. Canada's $500 billion+ of Federal debt and @$500 billion in unfunded liabilities would consume the entire GDP, and we would still be in the hole for hundreds of billions in Provincial and Municipal debt and unfunded liabilities, so the first argument for privatizing assets is clear; there is no other practical way to pay it down in the short run. (Any poster who argues for hiking taxes is invited to research the results of the various "millionaire tax" laws implemented in several US States, look at the behaviour of companies like Amazon who were suddenly subjected to special levies, or contemplate why the one place in the United States which is still creating jobs is also one which has some of the lowest taxes and regulations [Texas]).

Argument two; the relative efficiency of private market vs public service is answered in theory by the fact that a private entity has every incentive to increase profits (which includes providing better service, lowering internal costs and so on), while public service entities have a perverse incentive to maximize their share of the budget, since relative and absolute power inside the bureaucracy is measured by how much of the budget you can get. The inverse is also true, workers in collectives have no incentive to work hard or produce good products since their "share" of the profit is divorced from their actual output. The low levels of agricultural and non military output in the former USSR (despite having a massive resource base to work from) is proof of that. The real world has many factors and degrees of freedom which make one to one comparisons difficult (including measuring outcomes; often people arguing for a particular point are cherry picking which outcome they wish to highlight). Other factors like "crony capitalism" or the addition of other metrics besides financial profit in Public/Private partnerships cloud the picture.

However, there are a few clear one to one comparisons, private garbage collection is cheaper than public collection, and private city bus lines run at a profit (no cost to the taxpayer) while public transit requires large subsidies (30% in the case of London's LTC). Since a large portion of the bill is covered, the LTC has little incentive to adjust routes or otherwise provide the high level of service nearby Kitchener's private bus system does.

If the Highway 407 did not provide a fast, efficient means of bypassing Toronto, then no one would take it, and indeed no one is forced to take the 407, so once again the owners have every incentive to keep the highway well maintained and patrolled.

A final checksum that military readers understand is the mess. They are subsidized by dues which members pay out of after tax dollars. Many messes across Canada which I have personally seen run at minimal capacity, have highly limited hours, service etc. and only remain open due to their life support. None of the bars or other establishments outside the base have this degree of subsidization, soldiers go there because they provide a service they are willing to pay for. Establishments that don't provide the service or entertainment customers expect close quickly.

I expect this argument to be mooted fairly soon anyway. Forward thinking governments will start selling assets in order to cover obligations and pay down debt in a controlled manner, while the spendthrifts will end up having a fire sale of assets as their economic positions collapse (i.e. their bonds either do not sell on the bond market or the risk premiums become unsustainable).

 

[Redeye]

The biggest problem with historical examples is that everyone, including Reagan, Thatcher and Mike Harris did not cut spending. The gains to the treasury from the sale of assets was swiftly consumed, and all that really happened was the day of reckoning was pushed back from then to now.

Selling Crown or State assets might work today in the sense that the author was discussing (raising revenues to pay down debt without raising taxes to unsustainable levels) because there really is no more room to wiggle out of the debt trap. Canada's $500 billion+ of Federal debt and @$500 billion in unfunded liabilities would consume the entire GDP, and we would still be in the hole for hundreds of billions in Provincial and Municipal debt and unfunded liabilities, so the first argument for privatizing assets is clear; there is no other practical way to pay it down in the short run. (Any poster who argues for hiking taxes is invited to research the results of the various "millionaire tax" laws implemented in several US States, look at the behaviour of companies like Amazon who were suddenly subjected to special levies, or contemplate why the one place in the United States which is still creating jobs is also one which has some of the lowest taxes and regulations [Texas]).

Agreed on the first para.  Many will claim that they did, but the reality is of course that that didn't actually happen.  In many cases, there's just a shell game of shifting costs - Martin downloaded costs to the provinces in some cases, Harris downloaded them to municipalities for example.  I always point to Ontario's disjointed highway system as the best evidence of this - shifting provincial highways to municipal roads makes all those old maps obsolete.

As for tax increases, I don't buy into the claim that tax increases are bad, period.  The trick, of course, is that where revenues must be raised  any tax hikes must be done in a way so that avoidance doesn't defeat the purpose.  Whenever businesses are looking to locate they tend to try to bargain for tax deals.  This can lead to perverse consequences.  For example, a call centre company, Convergys, set up several centres in Nova Scotia, primarily lured by some sort of tax credit mechanism.  As soon as those credits expired, however, they shut down the operations immediately.  Essentially, Nova Scotia taxpayers subsidized the creation of short-term, low paying jobs.  With their facilities simply leased, Convergys had absolutely no incentive to stay here, and simply relocated the jobs as soon as the deals expired.  Provinces or states can very easily get trapped into a race to the bottom on these jobs.

Argument two; the relative efficiency of private market vs public service is answered in theory by the fact that a private entity has every incentive to increase profits (which includes providing better service, lowering internal costs and so on), while public service entities have a perverse incentive to maximize their share of the budget, since relative and absolute power inside the bureaucracy is measured by how much of the budget you can get. The inverse is also true, workers in collectives have no incentive to work hard or produce good products since their "share" of the profit is divorced from their actual output. The low levels of agricultural and non military output in the former USSR (despite having a massive resource base to work from) is proof of that. The real world has many factors and degrees of freedom which make one to one comparisons difficult (including measuring outcomes; often people arguing for a particular point are cherry picking which outcome they wish to highlight). Other factors like "crony capitalism" or the addition of other metrics besides financial profit in Public/Private partnerships cloud the picture.

Workers in for-profit businesses often are similarly divorced from the profits of the business, unless they participate in some sort of profit-sharing scheme.  Those, however, are fairly common and are increasingly part of the benefits packages of many employers.  One of Wal-Mart's successes in keeping the unions out of their operations is their profit-sharing/stock purchase plan, which they've made no secret of the fact it would disappear were unionization to take hold.  Collectives (ie the Soviet Union's system) have an even more perverse outcome - "managers" had every incentive to over-report production, so while the USSR reported good wheat harvests for example, they'd still be importing from us.

However, there are a few clear one to one comparisons, private garbage collection is cheaper than public collection, and private city bus lines run at a profit (no cost to the taxpayer) while public transit requires large subsidies (30% in the case of London's LTC). Since a large portion of the bill is covered, the LTC has little incentive to adjust routes or otherwise provide the high level of service nearby Kitchener's private bus system does.

I'll have to look into this at some point.  I wasn't aware that Kitchener's service was privatized.  I'm going to admit I'd be quite amazed if a transit system runs without subsidies in some form.

If the Highway 407 did not provide a fast, efficient means of bypassing Toronto, then no one would take it, and indeed no one is forced to take the 407, so once again the owners have every incentive to keep the highway well maintained and patrolled.

The question is, are they making money at it - they've jacked up the prices quite substantially and as I recall that's been a source of major debate in Ontario.  It's not a particularly efficient bypass method, either, because it ends in the middle of nowhere on the eastern terminus, forcing you onto a secondary road (Brock Road) which has a lot of traffic lights.  It is, however, of benefit to people who live along it, but again, at substantial cost to its users.

A final checksum that military readers understand is the mess. They are subsidized by dues which members pay out of after tax dollars. Many messes across Canada which I have personally seen run at minimal capacity, have highly limited hours, service etc. and only remain open due to their life support. None of the bars or other establishments outside the base have this degree of subsidization, soldiers go there because they provide a service they are willing to pay for. Establishments that don't provide the service or entertainment customers expect close quickly.

Having been PMC of a mess (although it was just a reserve unit mess), there's more to this - restrictions on how we could operate made it very difficult for us to seek opportunities to increase revenue.  For example, we weren't allowed to advertise for rental business so as not to compete with the private sector, and we had such a staff process to hold "special events" that we couldn't really run in a way that was anything beyond breakeven.  It was not for lack of trying.

I expect this argument to be mooted fairly soon anyway. Forward thinking governments will start selling assets in order to cover obligations and pay down debt in a controlled manner, while the spendthrifts will end up having a fire sale of assets as their economic positions collapse (i.e. their bonds either do not sell on the bond market or the risk premiums become unsustainable).

You are correct here - but my difference of opinion stems from my belief that asset sales alone simply will not solve the problem - a combination of prudent cuts and prudent tax increases are necessary... particularly in the USA - people need to learn and understand that they have not paid their own way in some time, and they have to pay more if they want the services they have.

 

[observor 69]

Couple of thoughts:

In the GTA there are reports that a mix of public private garbage collection provides the best service and economy.
"The blended system helps keep both services honest and on top of their game at all times,” said Councillor Russ Powers, chair of Hamilton's public works committee."
http://www.thestar.com/news/article/935380--cities-thrive-with-public-private-garbage-systems

Regards the 407, does a driver have any other choice to get home? All the main arterial roads are at 110% capacity. Who ever owns it has an assured customer base. Was it smart of Mike Harris to sell it?

Again private bus lines, do they serve the parts of the city that are unprofitable but serve a public need,
same applies to rail lines and airplane routes. Hence the private operation is essentially cherry picking.
I recently had a hernia operation at the privately owned Shouldice Hospital. They have a near 100% success rate with there operations. They also will refuse to operate on anyone who does not fit their profile of good health and weight within the normal BMI range, again a case of private cherry picking. Those not fitting within their profile have to go to a public hospital.

 

[Redeye]

Again private bus lines, do they serve the parts of the city that are unprofitable but serve a public need,
same applies to rail lines and airplane routes. Hence the private operation is essentially cherry picking.
I recently had a hernia operation at the privately owned Shouldice Hospital. They have a near 100% success rate with there operations. They also will refuse to operate on anyone who does not fit their profile of good health and weight within the normal BMI range, again a case of private cherry picking. Those not fitting within their profile have to go to a public hospital.

When you had your surgery there, though, it was paid for by OHIP, was it not?  They are a private provider of services, just a doctor's office, etc.  It's interesting (though not really related to the topic at hand directly) to note that most healthcare in Canada is still delivered by private sector actors - doctors' clinics and so on.  A lot of people don't seem to be able to wrap their head around that.

 

[observor 69]

When you had your surgery there, though, it was paid for by OHIP, was it not?  They are a private provider of services, just a doctor's office, etc.  It's interesting (though not really related to the topic at hand directly) to note that most healthcare in Canada is still delivered by private sector actors - doctors' clinics and so on.  A lot of people don't seem to be able to wrap their head around that.

Yes OHIP paid for the surgery in the private facility, and my Public Service health plan paid for the three days of meals and room.
But again the parallel I was drawing is that the public hospital caters to all hence must bare a greater expense as it's patient base will not result in optimal outcomes, equaling longer patient stays, complications etc.
On a not related note if you need your hernia repaired Schouldice is the place to go. 

 

[a_majoor]

Found some notes, it turns out that 26 of Ontario's transit systems are private. That would be about 1/3 of all municipal transit systems in Ontario. Even here where the LTC is subsidized, I now see Abouttown buses making runs to the local University. Not sure who the contract is with (UWO? one of the Colleges?), but considering all University and Fanshawe College students must pay for a bus pass as part of their student fee, it makes you wonder why the LTC is unable or unwilling to deliver service to that captive market...

WRT the mess, I understand there are many restrictions, just like my friends in the restaurant and hospitality industry must work under multiple layers of regulation as well. The difference is the mess has guaranteed income in the form of dues while a bar or restaurant does not.

Externalities always complicate these discussions; any private owner of a highway like the 407 would never end it abruptly like the 407; but the Government essentially set the route and many of the other factors behind the highway (public private partnerships often are used to achieve some sort of political goal the government cannot finance on its own). The counter argument is without the P3 arrangement, the 407 would never have been built, period. Drivers still have the choice the use the 407 or not, regardless of the conditions of the other highways.

 

[a_majoor]

And back to the United States:

http://pajamasmedia.com/blog/saving-our-nation-from-debt-an-open-letter-from-rep-jim-jordan/?print=1

Saving Our Nation from Debt: An Open Letter from Rep. Jim Jordan

Posted By Jim Jordan On February 22, 2011 @ 7:21 pm In Money,Politics,US News,economy | 19 Comments

To My Fellow Americans,

Uncle Sam is spending you into the poorhouse. Taxes, inflation, unemployment, interest rates — all could skyrocket if Washington keeps spending trillions of dollars it doesn’t have. Unless we begin to cut spending now (a lot of spending) these four horsemen of debt will ride roughshod over families and businesses already struggling to get by. Fortunately, we still have a chance to kick the spending addiction and keep the American Dream alive.

What Can’t Go on Forever, Won’t

Between 2007 and today, total federal spending rose by almost 36%. Meanwhile, taxpayers’ personal budgets have headed in the opposite direction. From 2007 to 2009 (the latest data available), median family income actually fell by 4.2%.

As a result, the federal deficit will top $1.6 trillion this year — fueling the increasingly rapid rise of our $14 trillion national debt. It should be obvious to all that today’s reckless spending cannot go on forever. But under the budget recently proposed by President Obama, the federal government never comes close to living within its means. In ten years, his plan sees the national debt almost doubling to $26 trillion. If the president’s economic predictions prove too rosy (as his stimulus predictions certainly did), the problem gets even worse.

Picture a family that earns $50,000 while spending $80,000 — every single year. Eventually, this family’s budget will get smaller. Just like Uncle Sam, the only question is whether they cut back now and on their own terms, or later, with far worse options and much more pain. People know it will take tough love to get the federal budget into balance. What they don’t yet know is whether their elected leaders will have the courage to deliver.

The Road Ahead

If Senate Democrats accept Americans’ call for lower spending, Congress will soon avoid a government shutdown and agree on funding levels for the last 7 months of this budget year. But bigger battles await. Sometime in the next few months, Washington will hit its legal limit for borrowing. And before October 1, 2011, Congress must write a budget for next year. Our response to these challenges will determine whether Uncle Sam devours our economy with debt or helps it grow by slimming down and getting out of the way.

The coming budget and debt ceiling debates represent the last real chance to cut spending and keep our economy competitive for the 21st century. A starting point for discussion should be the Republican Study Committee’s plan to cut nearly $2.5 trillion of “discretionary spending” (the part of the budget that funds federal agencies) over the next ten years. Still, our Spending Reduction Act [1] is just a head start in the race to save the economy from crippling debt. To get to the finish line, we’ll have to go farther.

The big budget challenges are in so-called “mandatory spending” or entitlement spending (which accounts for nearly 60% of the budget). Medicare, Medicaid, and Social Security were all created as a safety net for the most vulnerable in our society. Over the decades, however, expanded eligibility and benefits and longer life expectancy have stretched this net to its breaking point. Sadly, President Obama’s budget is completely silent on how to save these programs from their current path to bankruptcy. If the country does not act soon to reform and preserve this safety net, the people who need it most will suffer the consequences.

The Courage of Our Convictions

A few weeks ago, the House Appropriations Committee unveiled legislation to reduce spending for the remainder of the 2011 budget year. While we appreciated their good work, members of the Republican Study Committee also knew that more needed to be done. We sent the bill back to the drawing board, and as a result the House recently voted to cut total spending by more than $61 billion this year, or $100 billion below the president’s request. Now it goes to the Senate.

Although last week’s vote to cut spending was only the first step of many, it should have been a bigger step. To keep this country a land of opportunity and innovation, representatives, senators, and the president himself will need to work together to make the large spending cuts necessary to get the budget on a path to balance. Nearly every politician talks about the dangers of unchecked deficits and debt. In 2011, Americans will learn who has the courage of their convictions.

As we see today in Wisconsin, the Left will fight vigorously to kick the can down the road one more time. At this moment, however, we stand at a fork in the road. Down one path wait higher taxes, rising inflation, painful interest rates, and fewer jobs. Down the other, the chance for individuals, families, and businesses to build a healthier, more prosperous future.

No choice could be easier to make.

God Bless,

Rep. Jim Jordan (R-OH)
Chairman, the Republican Study Committee
http://rsc.jordan.house.gov/ [2]

Article printed from Pajamas Media: http://pajamasmedia.com

URL to article: http://pajamasmedia.com/blog/saving-our-nation-from-debt-an-open-letter-from-rep-jim-jordan/

URLs in this post:

[1] Spending Reduction Act: http://rsc.jordan.house.gov/Solutions/SRA.htm

[2] http://rsc.jordan.house.gov/: http://rsc.jordan.house.gov/

 

[Redeye]

Two observations.

First, without discussing military spending, I assign zero credibility to any discussion, from any party, about fiscal responsibility. Pointing at Social Security as a boogeyman is a bit silly when it is self-funded (and borrowed from heavily).  That said, the reality is that the US has to have a serious national discussion about reforming entitlement programs to move forward.  I find myself scratching my head when I realize I have to agree with the likes of Rand Paul on that, but it's reality.

Second point: events in Wisconsin have revealed that there's more of an agenda about breaking unions than fiscal issues.  Not only have WI public sector unions already made concessions, they have very clearly signalled that they are willing to have constructive discussions on further concessions.  They are not willing to concede their collective bargaining rights, that's really their only firm stand.  That Governor Walker ignores this shows what the real issue is, and as if that wasn't enough, the brilliant prank call he fell for, where he played a perfect sycophant for a man he believed to be David Koch, laid bare what he's really about.  On top of that, while crying poor, he's already signed off on a number of bills which will add $3.8bn to WI's debt, mostly for the benefit of the wealthiest residents of the state, with claims that it will grow revenue dubious at best.  That undermines his poor cries in my view.

Here's an interesting op ed on the situation, not an unreasonable assessment- that the dramatic moves needed must "make everybody hurt": http://www.nytimes.com/2011/02/22/opinion/22brooks.html

And back to the United States:

http://pajamasmedia.com/blog/saving-our-nation-from-debt-an-open-letter-from-rep-jim-jordan/?print=1

 

[observor 69]

Second point: events in Wisconsin have revealed that there's more of an agenda about breaking unions than fiscal issues.  Not only have WI public sector unions already made concessions, they have very clearly signalled that they are willing to have constructive discussions on further concessions.  They are not willing to concede their collective bargaining rights, that's really their only firm stand.  That Governor Walker ignores this shows what the real issue is, and as if that wasn't enough, the brilliant prank call he fell for, where he played a perfect sycophant for a man he believed to be David Koch, laid bare what he's really about.  On top of that, while crying poor, he's already signed off on a number of bills which will add $3.8bn to WI's debt, mostly for the benefit of the wealthiest residents of the state, with claims that it will grow revenue dubious at best.  That undermines his poor cries in my view.

Here's an interesting op ed on the situation, not an unreasonable assessment- that the dramatic moves needed must "make everybody hurt": http://www.nytimes.com/2011/02/22/opinion/22brooks.html

And more on Wisconsin and the Governor :

Shock Doctrine, U.S.A.
By PAUL KRUGMAN
Published: February 24, 2011
Here’s a thought: maybe Madison, Wis., isn’t Cairo after all. Maybe it’s Baghdad — specifically, Baghdad in 2003, when the Bush administration put Iraq under the rule of officials chosen for loyalty and political reliability rather than experience and competence.

More at LINK

 

[Haletown]

Charles summarizes the situation quite nicely . . . I'm guessing the days of public sector union largesse are numbered.  The liberal concept of being entitled to their entitlements is losing lustre

"The magnificent turmoil now gripping statehouses in Wisconsin, Ohio, Indiana and soon others marks an epic political moment. The nation faces a fiscal crisis of historic proportions and, remarkably, our muddled, gridlocked, allegedly broken politics have yielded singular clarity.

At the federal level, President Obama’s budget makes clear that Democrats are determined to do nothing about the debt crisis, while House Republicans have announced that beyond their proposed cuts in discretionary spending, their April budget will actually propose real entitlement reform. Simultaneously, in Wisconsin and other states, Republican governors are taking on unsustainable, fiscally ruinous pension and health care obligations, while Democrats are full-throated in support of the public-employee unions crying, “Hell no.”"

http://fullcomment.nationalpost.com/2011/02/25/charles-krauthammer-magnificent-turmoil-threatens-union-power/

 

[Redeye]

At the federal level, President Obama’s budget makes clear that Democrats are determined to do nothing about the debt crisis, while House Republicans have announced that beyond their proposed cuts in discretionary spending, their April budget will actually propose real entitlement reform. Simultaneously, in Wisconsin and other states, Republican governors are taking on unsustainable, fiscally ruinous pension and health care obligations, while Democrats are full-throated in support of the public-employee unions crying, “Hell no.”"

President Obama's budget makes clear the reality that the cuts that have to be undertaken are indeed political kryptonite, which is what's paralyzing getting anything done.

Frankly, anything House Republicans announce is probably overstated.  Since taking the House, when they claimed they were going to focus on "The People's Business" with specific attention to the economy, what have they done?  Well, they passed their repeal of the ACA, which was completely pointless.  They passed HR 3 defunding Planned Parenthood, saving enough money annually to fight the war in Afghanistan for about 3 hours while probably actually increasing demand for abortions by reducing access to contraception and sexual health information AND adding to medical costs including those borne by the public by reducing access to things like cancer screening.  I understand there are some legal issues that might get that foolhardy decision stopped dead in its tracks, but we'll see.

They have a bill in committee that appears to be some kind of limited tort reform that may slightly curtail healthcare inflation, but most studies suggest it's putting a finger in a dyke.  And another that changes a provision about reporting under ACA (wait, didn't they repeal that?!  Oh, right!).  That's really all I can see that substantively deals with the economy and job creation.  So I understand why my American friends are calling & faxing Mr. Boehner's office constantly asking "where are the jobs?"  The GOP has wasted no time in doing absolutely nothing House to further economic recovery.

I understand why people might be optimistic that they plan some sort of huge reform in April.  However, given their track record and the realities of the ground, I am not expecting anything.

 

[a_majoor]

Just wonderful [/sarcasm]...

http://blogs.investors.com/capitalhill/index.php/home/35-politicsinvesting/2479-the-social-security-trust-fund-may-be-worth-less-than-zero

The Social Security Trust Fund May Be Worth Less Than Zero
By Jed Graham  
Fri., Feb. 25, 2011 12:08 AM ET
Tags: Social Security - Debt - Deficit - CBO

It is well known, if not universally acknowledged, that the Social Security Trust Fund doesn’t hold any assets of value to offset the government’s cost of benefits.

Every dollar’s worth of special-issue Treasury bonds held by Social Security — and there are currently about $2.6 trillion worth — is a dollar that Treasury must come up with by issuing new debt, raising taxes or taking away from the rest of government, which is in far worse fiscal shape.
But an analysis done by the Congressional Budget Office last year on the effect of high government debt levels suggests that unless the government gets its fiscal act together, the value of the trust fund is less than zero.

Under the Alternative Fiscal Scenario, which approximates current policy, CBO finds that elevated debt levels would crowd out private investment and restrain economic growth to a significant degree. Specifically, GDP would be 15% smaller in 2035 under the current policy trajectory than it would be if debt stabilizes around current levels, as it would under the baseline scenario.

While CBO assumes the current-law trajectory for Social Security under both the alternative and baseline scenarios, what matters for its crowding-out analysis is suffocating debt levels, not what contributes to the debt.

Debt would be 185% of GDP in 2035 under current policy — vs. 79% under the baseline scenario. By that point, using assumptions from Social Security’s 2010 annual report, redemptions of trust fund bonds would have raised debt levels by about 18.5% of GDP, or $4.5 trillion in 2010 dollars.
In other words, debt incurred by paying unfunded Social Security benefits would account for nearly 1/6th of the crowding-out effect, curbing GDP by about 2.6%.

So, under the current budget trajectory, here is roughly the bottom-line value of the Trust Fund in 2035.

The trust fund would cover $317 billion in unfunded benefits (in today’s dollars), but the government would owe $236 billion in interest on the $4-trillion-plus in extra debt, and taxable wages would be about $235 billion lower (assuming a tight link between wages and GDP).
(These numbers are inexact because they only take account of the impact of crowding out in 2035. If anything, they are likely understated because crowding out in earlier years would mean higher interest rates and higher interest payments, along with modestly lower payroll tax revenue and benefits.)

Even without the crowding-out effect, the real cost of paying unfunded Social Security benefits is much higher than acknowledged. Under the current trajectory, Social Security’s cash-flow deficit would stabilize around 1.3% of GDP after 2030, but interest on the extra debt tied to trust fund redemptions would cost an extra 1.2% of GDP and rising by the time the fund is depleted in 2037. This is not small potatoes.
Instead of costing 6.2% of GDP in 2037, Social Security and the legacy of trust fund-connected debt would cost 7.4% of GDP, up from 4.2% in 2008.
So what does this all mean? At the least, it means that Social Security defenders should spend more of their energy offering realistic ideas to rein in spiraling debt.

And while neither side of the political aisle seems to agree, there really is no more logical time for addressing the unfunded trust fund than concurrent with Social Security reform, perhaps as part of a great fiscal deal.

 

[tomahawk6]

Congress over the years raided the trust fund leaving behind IOU's. Its important to fix the problem ASAP. All it takes is political will. This is just the tip of the iceberg though as the States have a huge unfunded public employee retirement problem and no money to fix the problem. Couple that with increases in unemployment payments and increases in Medicaid the States are headed for bankruptcy.

 

[Edward Campbell]

Here is  fairly long but very interesting analysis of "USA Inc" done by a team led by well known (until recently Morgan Stanley super-star) analyst Mary Meeker. The 'report to shareholders' is (relatively) unprescriptive but it leaves no doubt that everything, including every nut, bolt, project and marine in DoD, must be on the table and cuts must be made everywhere - even as programmes aimed at improving productivity (and the USA is already more productive than Canada!) are implemented.

See, also, this in Time for a (reasonably) fair and dispassionate assessment of the state of play of public employment finances.

These are ticking time bombs for our best friend and most important trading partner, the USA; if they fail to meet the challenges they face we, Canadians, will suffer right along with them - no matter how well we might (have) manage(d) our own affairs.

 

[a_majoor]

Here is a good place to start:

http://online.wsj.com/article/SB10001424052748703749504576172942399165436.html?mod=rss_Politics_And_Policy

Billions in Bloat Uncovered in Beltway

By DAMIAN PALETTA

WSJ's Damian Paletta discusses a GAO report that uncovers billions of dollars in wasteful spending by the U.S. government due to duplicate work done by dozens of agencies.

The U.S. government has 15 different agencies overseeing food-safety laws, more than 20 separate programs to help the homeless and 80 programs for economic development.

These are a few of the findings in a massive study of overlapping and duplicative programs that cost taxpayers billions of dollars each year, according to the Government Accountability Office.

A report from the nonpartisan GAO, to be released Tuesday, compiles a list of redundant and potentially ineffective federal programs, and it could serve as a template for lawmakers in both parties as they move to cut federal spending and consolidate programs to reduce the deficit. Sen. Tom Coburn (R., Okla.), who pushed for the report, estimated it identifies between $100 billion and $200 billion in duplicative spending. The GAO didn't put a specific figure on the spending overlap.

The GAO examined numerous federal agencies, including the departments of defense, agriculture and housing and urban development, and pointed to instances where different arms of the government should be coordinating or consolidating efforts to save taxpayers' money.

The agency found 82 federal programs to improve teacher quality; 80 to help disadvantaged people with transportation; 47 for job training and employment; and 56 to help people understand finances, according to a draft of the report reviewed by The Wall Street Journal.

Instances of ineffective and unfocused federal programs can lead to a mishmash of occasionally arbitrary policies and rules, the report said. It recommends merging or consolidating a number of programs to both save money and make the government more efficient.

"Reducing or eliminating duplication, overlap, or fragmentation could potentially save billions of tax dollars annually and help agencies provide more efficient and effective services," the report said.

There have been multiple efforts to cull the number of federal programs in recent years, but they often run into opposition from lawmakers in both parties who rush to defend individual spending provisions. In fact, GAO's recommendations are often ignored or postponed by federal agencies and lawmakers, particularly when they could require difficult political votes.

The report says policy makers should consider creating a single food-safety agency because of a number of redundancies. The Food and Drug Administration makes sure that chicken eggs are "safe, wholesome, and properly labeled" while a division of the Department of Agriculture "is responsible for the safety of eggs processed into egg products."

Spokespeople for the Department of Agriculture and FDA pointed to the Obama administration's creation of the Food Safety Working Group, which works to better coordinate the government's regulators.

The report says there are 18 federal programs that spent a combined $62.5 billion in 2008 on food and nutrition assistance, but little is known about the effectiveness of 11 of these programs because they haven't been well studied.

The report took particular aim at government funding for surface transportation, including the building of roads and other projects, which the administration has made a major part of its push to update the country's infrastructure.

The report said five divisions within the Department of Transportation account for 100 different programs that fund things like highways, rail projects and safety programs.

One program that funnels transportation funds to the states "functions as a cash-transfer general-purpose grant program, rather than as a tool for pursuing a cohesive national transportation policy," the report said. Similarly, it chided the government over encouraging federal agencies to purchase plug-in hybrid vehicles while having policies that agencies reduce electricity consumption. It said government agencies have purchased numerous vehicles that run on alternative fuels only to find many gas stations don't sell alternative fuels. This has led government agencies to turn around and request waivers so they didn't have to use alternative fuels.

A spokesperson for the Department of Transportation said the president's budget for fiscal year 2012 "proposes to cut waste, inefficiency and bureaucracy by consolidating over 55 separate highway programs into five core programs, and by merging six transit programs into two programs."

On teacher quality, the report identified 82 programs that often have similar descriptions and goals and are spread across 10 federal agencies, including the Department of Education, the Department of Energy and the National Aeronautics and Space Administration. Nine of these programs are linked to science, technology, engineering and mathematics. Fifty-three of the programs are relatively small, receiving $50 million or less, "and many have their own separate administrative processes."

The GAO highlighted 80 different economic development programs at the Department of Commerce, HUD, Department of Agriculture and Small Business Administration, that spent a combined $6.5 billion last year and often overlapped. For example, the four agencies combined to have 52 different programs that fund "entrepreneurial efforts," 35 programs for infrastructure, and 26 programs for telecommunications. It said 60% of the programs fund only one or two activities, making them "the most likely to overlap because many of them can only fund the same limited types of activities."
 
    “ Rather that cry about this as waste we should look at it as an opportunity to use the dollars spent today in a more efficient process, with a wider reach, instead of all of the overlap. It would not require firing anyone necessarily, just having them more focused. It is the administration of all of these separate groups that is "overhead" waste. ”

—Sandra Schirmang

The report took aim at several military programs, which could prove thorny because many lawmakers from both parties are wary to cut defense spending. It said there were 130,000 military and government medical professionals, 59 Defense Department hospitals and hundreds of clinics that could benefit from consolidating administrative, management and clinical functions.

For example, it said the government "may have developed duplicate" programs to counter improvised explosive devices, with the Marine Corps and the Army paying to develop similar "mine rollers." The Marine mine roller costs $85,000, and the Army mine roller costs $77,000 to $225,000. "Officials disagree about which system is most effective, and [the Pentagon] has not conducted comparative testing and evaluation of the two systems," the report said. The Pentagon didn't immediately respond to a request for comment.

The GAO study was required by a provision inserted by Sen. Coburn into a law that raised the federal borrowing limit last year. This report is the first produced in response to the provision.

Write to Damian Paletta at damian.paletta@wsj.com