Tidbits Quotations on September 14, 2010
To Accompany the September 14, 2010 edition of Tidbits
Bob Jensen at Trinity University


This is not a forwarded politically-biased message since David Walker is leading a very bipartisan effort to save the United States from economic disaster. Former Andersen Partner David Walker was appointed U.S. Comptroller General by President Bill Clinton and retained in the same position under President Bush ---

In his government position David Walker became staggered by the pending economic doom of the United States.

At the American Accounting Association 2010 annual meetings in San Francisco in August, David Walker will be the only person inducted this year into the Accounting Hall of Fame. Since leaving government service, David became the CEO of the Peterson Foundation that is trying to aid our government in saving the United States from entitlements bankruptcy. (By the way, as I read it, the Peterson Foundation supported the latest health care legislation that, in theory, will reduce deficit spending, although I personally think it should’ve been a full-fledged national health plan).

President Obama has appointed a joint task force to find ways of preventing total economic disaster of the United States that exists not so much because of current trillion dollar deficits as the threat of unfunded future entitlements obligations, with Medicare being the biggest unfunded entitlement as baby boomers retire.

Before viewing the Town Hall video, you might want to view the following earlier video:

You can watch a 30-minute version at
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/   (Scroll Down a bit)
Note that great efforts were made to keep this a bipartisan panel along with the occasional video clips of President Obama discussing the debt crisis. The problem is a build up over spending for most of our nation’s history, It landed at the feet of President Obama, but he’s certainly not the cause nor is his the recent expansion of health care coverage the real cause.

One take home from the CNN show was that over 60% of the booked National Debt increases are funded off shore (largely in Asia and the Middle East).  

 This going to greatly constrain the global influence and economic choices of the United States.

By 2016 the interest payments on the National Debt will be the biggest single item in the Federal Budget, more than national defense or social security. And an enormous portion of this interest cash flow will be flowing to foreign nations that may begin to put all sorts of strings on their decisions  to roll over funding our National Debt.

The unbooked entitlement obligations that are not part of the National Debt are over $60 trillion and exploding exponentially. The Medicare D entitlements to retirees like me added over $8 trillion of entitlements under the Bush Presidency.

Most of the problems are solvable except for the Number 1 entitlements problem --- Medicare.
Drastic measures must be taken to keep Medicare sustainable.



Watch National Town Meetings


Video on IOUSA Bipartisan Solutions to Saving the USA

If you missed Sunday afternoon CNN’s two-hour IOUSA Solutions broadcast, you can watch a 30-minute version at
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/   (Scroll Down a bit)
Note that great efforts were made to keep this a bipartisan panel along with the occasional video clips of President Obama discussing the debt crisis. The problem is a build up over spending for most of our nation’s history, It landed at the feet of President Obama, but he’s certainly not the cause nor is his the recent expansion of health care coverage the real cause.

One take home from the CNN show was that over 60% of the booked National Debt increases are funded off shore (largely in Asia and the Middle East).
This going to greatly constrain the global influence and economic choices of the United States.

By 2016 the interest payments on the National Debt will be the biggest single item in the Federal Budget, more than national defense or social security. And an enormous portion of this interest cash flow will be flowing to foreign nations that may begin to put all sorts of strings on their decisions  to roll over funding our National Debt.

The unbooked entitlement obligations that are not part of the National Debt are over $60 trillion and exploding exponentially. The Medicare D entitlements to retirees like me added over $8 trillion of entitlements under the Bush Presidency.

Most of the problems are solvable except for the Number 1 entitlements problem --- Medicare.
Drastic measures must be taken to keep Medicare sustainable.


I thought the show was pretty balanced from a bipartisan standpoint and from the standpoint of possible solutions.

Many of the possible “solutions” are really too small to really make a dent in the problem. For example, medical costs can be reduced by one of my favorite solutions of limiting (like they do in Texas) punitive damage recoveries in malpractice lawsuits. However, the cost savings are a mere drop in the bucket. Another drop in the bucket will be the achievable increased savings from decreasing medical and disability-claim frauds. These are important solutions, but they are not solutions that will save the USA.

The big possible solutions to save the USA are as follows (you and I won’t particularly like these solutions):



Watch for the other possible solutions in the 30-minute summary video ---
(Scroll Down a bit)


Here is the original (and somewhat dated video that does not delve into solutions very much)
IOUSA (the most frightening movie in American history) ---
(see a 30-minute version of the documentary at www.iousathemovie.com )

If you missed Sunday afternoon CNN’s two-hour IOUSA Solutions broadcast, you can watch a 30-minute version at
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/   (Scroll Down a bit)
Note that great efforts were made to keep this a bipartisan panel along with the occasional video clips of President Obama discussing the debt crisis. The problem is a build up over spending for most of our nation’s history, It landed at the feet of President Obama, but he’s certainly not the cause nor is his the recent expansion of health care coverage the real cause.

Watch the World Premiere of I.O.U.S.A.: Solutions on CNN
Saturday, April 10, 1:00-3:00 p.m. EST or Sunday, April 11, 3:00-5:00 p.m. EST

Featured Panelists Include:

  • Peter G. Peterson, Founder and Chairman, Peter G. Peterson Foundation
  • David Walker, President & CEO, Peter G. Peterson Foundation
  • Sen. Bill Bradley
  • Maya MacGuineas, President of the Committee for a Responsible Federal Budget
  • Amy Holmes, political contributor for CNN
  • Joe Johns, CNN Congressional Correspondent
  • Diane Lim Rodgers, Chief Economist, Concord Coalition
  • Jeanne Sahadi, senior writer and columnist for CNNMoney.com

Watch for the other possible solutions in the 30-minute summary video ---
(Scroll Down a bit)


CBS Sixty minutes has a great video on the enormous cost of keeping dying people artificially alive:
High Cost of Dying --- http://www.cbsnews.com/video/watch/?id=5737437n&tag=mncol;lst;3
(wait for the commercials to play out)

U.S. Debt/Deficit Clock --- http://www.usdebtclock.org/

"The Looming Entitlement Fiscal Burden," by Gary Becker, The Becker-Posner Blog, April 11, 2010 ---

"The Entitlement Quandary," by Richard Posner, The Becker-Posner Blog, April 11, 2010 ---

David Walker --- http://en.wikipedia.org/wiki/David_M._Walker_(U.S._Comptroller_General)

Niall Ferguson --- http://en.wikipedia.org/wiki/Niall_Ferguson

Call it the fatal arithmetic of imperial decline. Without radical fiscal reform, it could apply to America next.
Niall Ferguson, "An Empire at Risk:  How Great Powers Fail," Newsweek Magazine Cover Story, November 26, 2009 --- http://www.newsweek.com/id/224694/page/1
Please note that this is NBC’s liberal Newsweek Magazine and not Fox News or The Wall Street Journal.

. . .

In other words, there is no end in sight to the borrowing binge. Unless entitlements are cut or taxes are raised, there will never be another balanced budget. Let's assume I live another 30 years and follow my grandfathers to the grave at about 75. By 2039, when I shuffle off this mortal coil, the federal debt held by the public will have reached 91 percent of GDP, according to the CBO's extended baseline projections. Nothing to worry about, retort -deficit-loving economists like Paul Krugman.

. . .

Another way of doing this kind of exercise is to calculate the net present value of the unfunded liabilities of the Social Security and Medicare systems. One recent estimate puts them at about $104 trillion, 10 times the stated federal debt.

Continued in article --- http://www.newsweek.com/id/224694/page/1


Niall Ferguson is the Laurence A. Tisch professor of history at Harvard University and the author of The Ascent of Money. In late 2009 he puts forth an unbooked discounted present value liability of $104 trillion for Social Security plus Medicare. In late 2008, the former Chief Accountant of the United States Government, placed this estimate at$43 trillion. We can hardly attribute the $104-$43=$61 trillion difference to President Obama's first year in office. We must accordingly attribute the $61 trillion to margin of error and most economists would probably put a present value of unbooked (off-balance-sheet) present value of Social Security and Medicare debt to be somewhere between $43 trillion and $107 trillion To this we must add other unbooked present value of entitlement debt estimates which range from $13 trillion to $40 trillion. If Obamacare passes it will add untold trillions to trillions more because our legislators are not looking at entitlements beyond 2019.


The Meaning of "Unbooked" versus "Booked" National Debt
By "unbooked" we mean that the debt is not included in the current "booked" National Debt of $12 trillion. The booked debt is debt of the United States for which interest is now being paid daily at slightly under a million dollars a minute. Cash must be raised daily for interest payments. Cash is raised from taxes, borrowing, and/or (shudder) the current Fed approach to simply printing money. Interest is not yet being paid on the unbooked debt for which retirement and medical bills have not yet arrived in Washington DC for payment. The unbooked debt is by far the most frightening because our leaders keep adding to this debt without realizing how it may bring down the entire American Dream to say nothing of reducing the U.S. Military to almost nothing.

Niall Ferguson,
"An Empire at Risk:  How Great Powers Fail," Newsweek Magazine Cover Story, November 26, 2009 --- http://www.newsweek.com/id/224694/page/1

This matters more for a superpower than for a small Atlantic island for one very simple reason. As interest payments eat into the budget, something has to give—and that something is nearly always defense expenditure. According to the CBO, a significant decline in the relative share of national security in the federal budget is already baked into the cake. On the Pentagon's present plan, defense spending is set to fall from above 4 percent now to 3.2 percent of GDP in 2015 and to 2.6 percent of GDP by 2028.

Over the longer run, to my own estimated departure date of 2039, spending on health care rises from 16 percent to 33 percent of GDP (some of the money presumably is going to keep me from expiring even sooner). But spending on everything other than health, Social Security, and interest payments drops from 12 percent to 8.4 percent.

This is how empires decline. It begins with a debt explosion. It ends with an inexorable reduction in the resources available for the Army, Navy, and Air Force. Which is why voters are right to worry about America's debt crisis. According to a recent Rasmussen report, 42 percent of Americans now say that cutting the deficit in half by the end of the president's first term should be the administration's most important task—significantly more than the 24 percent who see health-care reform as the No. 1 priority. But cutting the deficit in half is simply not enough. If the United States doesn't come up soon with a credible plan to restore the federal budget to balance over the next five to 10 years, the danger is very real that a debt crisis could lead to a major weakening of American power.


Entitlements Warnings --- http://www.cs.trinity.edu/~rjensen/temp/Entitlements7-21-10%20-%20EOTM%20-%20Twilight.pdf
Thank you for giving me permission to post this Michael Cembalest [michael.cembalest@jpmorgan.com]
Michael Cembalest, Chief Investment Officer, J.P. Morgan Private Banking

"Peter G. Peterson: Tax Aversion Syndrome and Our Deficit Future:  We've run out of painless options. Higher taxes and reduced entitlement benefits for the well-off are the only solutions," The Wall Street Journal, July 24, 2010 ---

People fret about the current public debt rising to 60% of GDP, which many economists believe should be the maximum debt level. But they ignore Congressional Budget Office (CBO) projections that, under current policies, the public debt will reach a staggering 233% of GDP in 30 years and nearly 500% in 50 years.

This is an unthinkable and unsustainable path. In less than 50 years, for example, the CBO projects that interest payments on the national debt alone will represent nearly 20% of the entire U.S. economy and consume 100% of government revenues. This leaves not a penny for any government programs, including critically needed education, R&D and infrastructure. With plummeting savings rates, already 47% of the public debt is held by foreign nations. Borrowing trillions more from China, the Middle East and elsewhere will leave us more beholden to lenders whose interests may not align with our own. Given the growing concerns about the global debt crisis, we need to build confidence we are getting our fiscal house in order. This added confidence will help our recovery.

Continued in article

Federal Government warns against travel in some parts of the United States ---

Blessed are the young, for they shall inherit the national debt.
Herbert Hoover --- http://www.brainyquote.com/quotes/quotes/h/herberthoo110353.html

Video forwarded by Auntie Bev
Obama at Bat (humor, sort of) --- http://www.angelfire.com/ak2/intelligencerreport/obama_at_bat.html 

Historic Political Humor --- http://myloc.gov/exhibitions/hopeforamerica/Pages/default.aspx

Industrial Reserve Army --- http://en.wikipedia.org/wiki/Industrial_reserve_army

Reserve army of labour is a concept in Karl Marx's critique of political economy. It refers basically to the unemployed in capitalist society. It is synonymous with "industrial reserve army" or "relative surplus population", except that the unemployed can be defined as those actually looking for work and that the relative surplus population also includes people unable to work. The use of the word "army" refers to the workers being conscripted and regimented in the workplace in a hierarchy, under the command or authority of the owners of capital.

Prior to the capitalist era in human history, structural unemployment on a mass scale rarely existed, other than that caused by natural disasters and wars. Indeed, the word "employment" is linguistically a product of the capitalist era.

A permanent level of unemployment presupposes a working population which is to a large extent dependent on a wage or salary for a living, without having other means of livelihood, as well as the right of enterprises to hire and fire employees in accordance with commercial or economic conditions.

Marx argued that there are no substantive laws of population that hold good for all time; instead, each specific mode of production has its own specific demographic laws. If there was "overpopulation" in capitalist society, it was overpopulation relative to the requirements of capital accumulation. Consequently, demography could not simply just count people in various ways, it also had to study the social relations between them as well. If there are enough resources on the planet to provide all people with a decent life, the argument that there are "too many people" is rather dubious.

"Report: Castro says Cuban model doesn't work," by Paul Haven. Associated Press, Yahoo News, September 8, 2010 ---
Forwarded by Paul Bjorklund [paulbjorklund@AOL.COM]

Fidel Castro told a visiting American journalist that Cuba's communist economic model doesn't work, a rare comment on domestic affairs from a man who has conspicuously steered clear of local issues since stepping down four years ago.

The fact that things are not working efficiently on this cash-strapped Caribbean island is hardly news. Fidel's brother Raul, the country's president, has said the same thing repeatedly. But the blunt assessment by the father of Cuba's 1959 revolution is sure to raise eyebrows.

Jeffrey Goldberg, a national correspondent for The Atlantic magazine, asked if Cuba's economic system was still worth exporting to other countries, and Castro replied: "The Cuban model doesn't even work for us anymore" Goldberg wrote Wednesday in a post on his Atlantic blog.

He said Castro made the comment casually over lunch following a long talk about the Middle East, and did not elaborate. The Cuban government had no immediate comment on Goldberg's account.

Since stepping down from power in 2006, the ex-president has focused almost entirely on international affairs and said very little about Cuba and its politics, perhaps to limit the perception he is stepping on his brother's toes.

Goldberg, who traveled to Cuba at Castro's invitation last week to discuss a recent Atlantic article he wrote about Iran's nuclear program, also reported on Tuesday that Castro questioned his own actions during the 1962 Cuban Missile Crisis, including his recommendation to Soviet leaders that they use nuclear weapons against the United States.

Even after the fall of the Soviet Union, Cuba has clung to its communist system.

The state controls well over 90 percent of the economy, paying workers salaries of about $20 a month in return for free health care and education, and nearly free transportation and housing. At least a portion of every citizen's food needs are sold to them through ration books at heavily subsidized prices.

President Raul Castro and others have instituted a series of limited economic reforms, and have warned Cubans that they need to start working harder and expecting less from the government. But the president has also made it clear he has no desire to depart from Cuba's socialist system or embrace capitalism.

Fidel Castro stepped down temporarily in July 2006 due to a serious illness that nearly killed him.

He resigned permanently two years later, but remains head of the Communist Party. After staying almost entirely out of the spotlight for four years, he re-emerged in July and now speaks frequently about international affairs. He has been warning for weeks of the threat of a nuclear war over Iran.

Castro's interview with Goldberg is the only one he has given to an American journalist since he left office.

Small businesses are less likely to benefit from bonus depreciation, because they can already write off 100% of equipment costs up to $250,000, under so-called Section 179 expensing. The Senate bill also proposes to increase that limit to $500,000. "A really large firm or medium-sized firm will be more interested in bonus depreciation, because Section 179 expensing is not on the table," said Alan Viard, an economist at the American Enterprise Institute.
Martin Vaughan, "US Senate 'Small-Business' Bill Holds Plenty For Large Firms," Automated Trader ---

A Senate bill that is being touted as a boon to small businesses also includes no shortage of tax benefits for large firms.

One of the costliest provisions in the bill--reducing federal revenue by $5.5 billion over the next 10 years--is a tax break for large capital purchases that would benefit firms like FedEx Corp. (FDX) and Qwest Communications International Inc. (Q). Economic stimulus legislation put the "bonus depreciation" tax break in place for 2008 and 2009, but it expired at the beginning of this year. The Senate bill extends the tax break for equipment purchased in 2010.

. . .

The added feature will help make annuities marketed by life insurers more attractive. "We support partial annuitization. It will make it easier for a lot of annuity owners to access lifetime income while continuing to build their nest eggs," said Frank Keating, president and chief executive of the American Council of Life Insurers, in a statement.

The annuities provision is even more attractive to lawmakers because it actually raises revenue in the short term, providing nearly $1 billion to help offset the cost of other items in the small-business bill.

Cellphone service providers would win a change they have sought to remove cellphones as property that the Internal Revenue Service considers a fringe benefit, and thus taxes for personal use.

That would also benefit small business, by removing a requirement that they keep detailed phone use records to support their claim for deductions of cellphones provided to employees.

Beyond those provisions, the broader Senate bill includes more than a dozen tax breaks that are tailored specifically to small firms.

"There is a lot in the bill that will be helpful," said Bill Rys, tax counsel for the National Federation of Independent Business. He mentioned specifically the increase in Section 179 expensing limits and a proposal that would give the self-employed the same tax breaks for health insurance that employees now receive.

As proposed by Obama, the bill would eliminate capital gains taxes on certain small-business stock. It would increase Small Business Administration loan limits and provide $30 billion in loans to community banks to be used for small-business lending.

Even the bonus depreciation tax break may be useful to small businesses in certain situations, Rys said. Purchase of heavy equipment, such as what might be used by a farm or a tool and die shop, could exceed the limits of the small-business expensing provisions.

Continued in article

Bob Jensen's small business helpers are at

"Illegal Immigrants Estimated to Account for 1 in 12 U.S. Births ," by Miriam Jordan, The Wall Street Journal, August 17, 2010 ---

One in 12 babies born in the U.S. in 2008 were offspring of illegal immigrants, according to a new study, an estimate that could inflame the debate over birthright citizenship.

Undocumented immigrants make up slightly more than 4% of the U.S. adult population. However, their babies represented twice that share, or 8%, of all births on U.S. soil in 2008, according to the nonpartisan Pew Hispanic Center's report.

"Unauthorized immigrants are younger than the rest of the population, are more likely to be married and have higher fertility rates than the rest of the population," said Jeffrey Passel, a senior demographer at Pew in Washington, D.C.

The report, based on Pew's analysis of the Census Bureau's March 2009 Current Population Survey, also found that the lion's share, or 79%, of the 5.1 million children of illegal immigrants residing in the U.S. in 2009 were born in the country and are therefore citizens.

In total, about 11 million undocumented immigrants live in the U.S. Latinos account for 75% of undocumented U.S. immigrants and about 85% of the births among that population.

A spokesman for the Federation for American Immigration Reform, a national group that lobbies for curbing immigration, said Wednesday its studies have yielded numbers similar to those estimated by Pew.

Amid a heated national debate over illegal immigration, some Republican politicians have been calling for changes to the Constitution's 14th Amendment, which grants citizenship to "all persons born or naturalized in the United States and subject to the jurisdiction thereof," in order to deny citizenship to children born in the U.S. to unlawful residents.

Late last month, South Carolina Republican Sen. Lindsey Graham announced his support for reconsidering automatic U.S. citizenship for babies born to undocumented immigrants. He said the status quo enticed people to enter the country illegally and have children to qualify for U.S. benefits.

Under U.S. law, children have to wait until they reach the age of 21 before they can petition for permanent legal residency for their parents.

Recently, Mr. Graham's idea has been embraced by several other lawmakers, including Sen. Jon Kyl of Arizona, where state legislators passed a controversial law to quash illegal immigration. A federal judge stayed major portions of the law on July 28; the case has been appealed.

Legislation to amend birthright citizenship stalled when it was introduced in the past decade in the House. It would require a vote of two-thirds of the House and Senate, and would have to be ratified by three-fourths of state legislatures.

Proponents of amending the 14th Amendment, which was enacted in 1868, say it was intended to guarantee citizenship to freed slaves after the Civil War, not the offspring of illegal immigrants. Their proposals are expected to appeal to conservative Republican voters as immigration emerges as a central issue in November's elections.

GOP opponents of repealing birthright citizenship say it undermines the party's electoral prospects among Hispanics, the nation's largest minority and fastest-growing group. Generally, Democrats are strongly opposed to repeal.

Mr. Passel said that the Pew analysis found that more than 80% of the undocumented immigrant mothers who gave birth in the U.S. had been in the country at least a year, and that many had been here about a decade.


"Racial Stupidity and Malevolence," by Walter E. Williams, Townhall, September 8, 2010 ---

The white liberal's agenda, coupled with that of black race hustlers, has had and continues to have a devastating impact on ordinary black people. Perhaps the most debilitating aspect of this liberal malevolence is in the area of education.

Recently, I spoke with a Midwestern university engineering professor who was trying to help an inner-city black student who was admitted to the university's electrical engineering program. The student was sure that he was well prepared for an engineering curriculum; his high school had convinced him of that and the university recruiters supported that notion. His poor performance on the university's math placement exam required that he take remedial math courses. He's failed them and is now on academic probation after two semesters of earning less than a 2.0 grade point average.

The young man and his parents were sure of his preparedness. After all, he had good high school grades, but those grades only meant that he was well behaved. The college recruiters probably knew this youngster didn't have the academic preparation for an electrical engineering curriculum. They were more concerned with racial diversity.

This young man's background is far from unique. Public schools give most black students fraudulent diplomas that certify a 12th-grade achievement level. According to a report by Abigail Thernstrom, "The Racial Gap in Academic Achievement," black students in 12th grade dealt with scientific problems at the level of whites in the sixth grade; they wrote about as well as whites in the eighth grade. The average black high school senior had math skills on a par with a typical white student in the middle of ninth grade. The average 17-year-old black student could only read as well as the typical white child who had not yet reached age 13.

Black youngsters who take the SAT exam earn an average score that's 70 to 80 percent of the score of white students, and keep in mind, the achievement level of white students is nothing to write home about. Under misguided diversity pressures, colleges recruit many black students who are academically ill equipped. Very often, these students become quickly disillusioned, embarrassed and flunk out, or they're steered into curricula that have little or no academic content, or professors practice affirmative-action grading. In any case, the 12 years of poor academic preparation is not repaired in four or five years of college. This is seen by the huge performance gap between blacks and whites on exams for graduate school admittance such as the GRE, MCAT and LSAT.

Is poor academic performance among blacks something immutable or pre-ordained? There is no evidence for such a claim. Let's sample some evidence from earlier periods. In "Assumptions Versus History in Ethnic Education," in Teachers College Record (1981), Dr. Thomas Sowell reports on academic achievement in some of New York city's public schools. He compares test scores for sixth graders in Harlem schools with those in the predominantly white Lower East Side for April 1941 and December 1941.

In paragraph and word meaning, Harlem students, compared to Lower East Side students, scored equally or higher. In 1947 and 1951, Harlem third-graders in paragraph and word meaning, and arithmetic reasoning and computation scored about the same as -- and in some cases, slightly higher, and in others, slightly lower than -- their white Lower East Side counterparts.

Going back to an earlier era, Washington, D.C.'s Dunbar High School's black students scored higher in citywide tests than any of the city's white schools. In fact, from its founding in 1870 to 1955, most of Dunbar's graduates went off to college.

Let's return to the tale of the youngster at the Midwestern college. Recruiting this youngster to be a failure is cruel, psychologically damaging and an embarrassment for his family. But the campus hustlers might come to the aid of the student by convincing him that his academic failure is a result of white racism and Eurocentric values.

Some states are rigging achievement tests to get more money and deceive the public
Will future college graduates in President Obama's home town be able to read and divide 37/13?
But they will be college "graduates" if community colleges lower standards like their K-12 counterparts.

"Second City Ruse:  How states like Illinois rig school tests to hype phony achievement," The Wall Street Journal, July 18, 2009 --- http://online.wsj.com/article/SB124786847585659969.html#mod=djemEditorialPage

When President Obama chose Arne Duncan to lead the Education Department, he cited Mr. Duncan's success as head of Chicago's public school system from 2001 to 2008. But a new education study suggests that those academic gains aren't what they seemed. The study also helps explain why big-city education reform is unlikely to occur without school choice.

Mr. Obama noted in December that "in just seven years, Arne's boosted elementary test scores here in Chicago from 38% of students meeting the standard to 67%" and that "the dropout rate has gone down every year he's been in charge." But according to "Still Left Behind," a report by the Civic Committee of the Commercial Club of Chicago, a majority of Chicago public school students still drop out or fail to graduate with their class. Moreover, "recent dramatic gains in the reported number of CPS elementary students who meet standards on state assessments appear to be due to changes in the tests . . . rather than real improvements in student learning."

Our point here isn't to pick on Mr. Duncan, but to illuminate the ease with which tests can give the illusion of achievement. Under the 2001 No Child Left Behind law, states must test annually in grades 3 through 8 and achieve 100% proficiency by 2014. But the law gives states wide latitude to craft their own exams and to define math and reading proficiency. So state tests vary widely in rigor, and some have lowered passing scores and made other changes that give a false impression of academic success.

The new Chicago report explains that most of the improvement in elementary test scores came after the Illinois Standards Achievement Test was altered in 2006 to comply with NCLB. "State and local school officials knew that the new test and procedures made it easier for students throughout the state -- and throughout Chicago -- to obtain higher marks," says the report.

Chicago students fared much worse on national exams that weren't designed by state officials. On the 2007 state test, for example, 71% of Chicago's 8th graders met or exceeded state standards in math, up from 32% in 2005. But results from the National Assessment of Educational Progress exam, a federal standardized test sponsored by the Department of Education, show that only 13% of the city's 8th graders were proficient in math in 2007. While that was better than 11% in 2005, it wasn't close to the 39 percentage-point increase reflected on the Illinois state exam.

In Mr. Duncan's defense, he wasn't responsible for the new lower standards, which were authorized by state education officials. In 2006, he responded to a Chicago Tribune editorial headlined, "An 'A' for Everybody!" by noting (correctly) that "this is the test the state provided; this is the state standard our students were asked to meet." But this doesn't change the fact that by defining proficiency downward, states are setting up children to fail in high school and college. We should add that we've praised New York City test results that the Thomas B. Fordham Institute also claims are inflated, but we still favor mayoral control of New York's schools as a way to break through the bureaucracy and drive more charter schools.

And speaking of charters, the Chicago study says they "provide one bright spot in the generally disappointing performance of Chicago's public schools." The city has 30 charters with 67 campuses serving 30,000 students out of a total public school population of 408,000. Another 13,000 kids are on wait lists because the charters are at capacity, and it's no mystery why. Last year 91% of charter elementary schools and 88% of charter high schools had a higher percentage of students meeting or exceeding state standards than the neighborhood schools that the students otherwise would have attended.

Similar results have been observed from Los Angeles to Houston to Harlem. The same kids with the same backgrounds tend to do better in charter schools, though they typically receive less per-pupil funding than traditional public schools. In May, the state legislature voted to increase the cap on Chicago charter schools to 70 from 30, though Illinois Governor Pat Quinn has yet to sign the bill.

Chicago Mayor Richard Daley deserves credit for hiring Mr. Duncan, a charter proponent. But in deference to teachers unions that oppose school choice, Mr. Daley stayed mostly silent during the debate over the charter cap. That's regrettable, because it's becoming clear that Chicago's claim of reform success among noncharter schools is phony.

Academic Whores: School Systems into Lowering Standards for Achievement Tests and Graduation ---

Bob Jensen's threads on grade inflation are at

Bob Jensen's threads on assessment are at

Bob Jensen's threads on higher education controversies are at

The Fed's New Theme Song:  Behind Closed Doors
Was AIG viewed as really "Too Big to Fail?"

"Rare Fed Tightening The central bank wants to keep its AIG bailout debates a secret," The Wall Street Journal, September 11, 2010 ---
http://online.wsj.com/article/SB10001424052748703597204575483903923110856.html .

Federal Reserve Chairman Ben Bernanke is justly famous for his loose-money policies. But when it comes to preventing disclosure to taxpayers, Mr. Bernanke continues to tighten. In central bank speak, you could say that Mr. Bernanke's operation is not "accommodative" when responding to Freedom of Information Act requests.

This week we received a letter from the Fed regarding documents we requested in February. Specifically, we asked the central bank to release a 2008 staff memo entitled, "Issues Related to Possible IPC Lending to American International Group." Soon after the memo was drafted, the Federal Reserve Bank of New York began lending money to AIG. This might suggest that the Fed staff favored this federal intervention.

But in a CNBC interview last winter, Senator Jim Bunning said that Mr. Bernanke's staff did not think AIG was too big to fail after all. "His staff didn't agree with him," said the Kentucky Republican. "I'm talking about an email that he sent his staff after his staff recommended that the Federal Reserve not touch AIG."

Members of Congress have been able to see this memo, though not to take a copy with them. We think taxpayers should be able to see the staff memo, as well as Mr. Bernanke's response, since the taxpayer exposure at AIG eventually reached $182 billion and the decision may hold lessons for the future. But our request has been "denied in full," according to the Fed, because the documents contain "pre-deliberative intra-agency analyses and recommendations."

This is exactly the type of information that the Financial Crisis Inquiry Commission should be studying and making available to the public. We urge the commission to shine a light on this central episode in the history of the financial panic, allowing taxpayers to learn the truth.

Jensen Comment
I think saving AIG was not the main thing on  Hank Paulson's mind. As former CEO of Goldman Sachs, he wanted to save Goldman and the only way was to save AIG and thereby channel $100 billion to Goldman and other lesser CDS counterparties through AIG. Or am I just being too cynical in my old age?

Credit Default Swap (CDS)
This is an insurance policy that essentially "guarantees" that if a CDO goes bad due to having turds mixed in with the chocolates, the "counterparty" who purchased the CDO will recover the value fraudulently invested in turds. On September 30, 2008 Gretchen Morgenson of The New York Times aptly explained that the huge CDO underwriter of CDOs was the insurance firm called AIG. She also explained that the first $85 billion given in bailout money by Hank Paulson to AIG was to pay the counterparties to CDS swaps. She also explained that, unlike its casualty insurance operations, AIG had no capital reserves for paying the counterparties for the the turds they purchased from Wall Street investment banks.

"Your Money at Work, Fixing Others’ Mistakes," by Gretchen Morgenson, The New York Times, September 20, 2008 --- http://www.nytimes.com/2008/09/21/business/21gret.html
Also see "A.I.G., Where Taxpayers’ Dollars Go to Die," The New York Times, March 7, 2009 --- http://www.nytimes.com/2009/03/08/business/08gret.html

What Ms. Morgenson failed to explain, when Paulson eventually gave over $100 billion for AIG's obligations to counterparties in CDS contracts, was who were the counterparties who received those bailout funds. It turns out that most of them were wealthy Arabs and some Asians who we were getting bailed out while Paulson was telling shareholders of WaMu, Lehman Brothers, and Merrill Lynch to eat their turds.

You tube has a lot of videos about a CDS. Go to YouTube and read in the phrase "credit default swap" --- http://www.youtube.com/results?search_query=Credit+Default+Swaps&search_type=&aq=f
In particular note this video by Paddy Hirsch --- http://www.youtube.com/watch?v=kaui9e_4vXU
Paddy has some other YouTube videos about the financial crisis.

Bob Jensen’s threads on accounting for credit default swaps are under the C-Terms at

"The Ballad of 'Large Loan' Verrone:  During the boom, Wachovia banker Robert Verrone made money by slicing and dicing billions of dollars in commercial real estate loans. After the crash, he made money by restructuring those loans before they blew up. What has he learned? by Devon Leonard, Business Week, September 9, 2010 ---

Bob Jensen's Rotten to the Core Threads ---

Bob Jensen's threads on the bailout mess are at



"Social Security Bait and Switch," The Wall Street Journal, August 31, 2010 ---

Democrats are trying to keep control of Congress by scaring the wig off grandma with a phantom GOP plot against Social Security. That is not news. Social Security scare tactics have been regular campaign themes since FDR. President Obama's unique contribution is to do this even as he's begging Republicans to help him reduce the deficit and reform entitlement spending.

On the one hand, Mr. Obama has charged his deficit commission with crafting a bipartisan plan to restrain entitlements. "Everything's on the table. That's how this thing's going to work," he said when he created the commission in February. "We now have to, in a gradual way, reduce spending, particularly on those big ticket items" like Social Security, he later added in Racine, Wisconsin. "That's going to be our project for the next couple years."

Yet even as Mr. Obama beseeches Republicans, he and his political allies are playing the Social Security card for all it's worth in this campaign season. This has all the earmarks of a political bait and switch designed to ambush Republicans if they're gullible enough to believe his bipartisan pleas.

Mr. Obama personally teed up the campaign theme earlier this month when he celebrated Social Security's 75th anniversary by claiming that "privatizing Social Security" is "a key part" of the Republican "legislative agenda if they win a majority in Congress this fall." He went on to say that this plan, which does not in fact exist, is "wrong for America" and "I'll fight with everything I've got to stop those who would gamble your Social Security on Wall Street. Because you shouldn't be worried that a sudden downturn in the stock market will put all you've worked so hard for—all you've earned—at risk."

The President's speechwriters missed an opportunity to invoke boll weevils and Tom Joad, though they did find room for a paean to partisan comity. In an echt-Obama touch, he added that "I'm committed to working with anyone, Democrat or Republican, who wants to strengthen Social Security."

Democratic House campaign chief Chris Van Hollen did it again last week at the National Press Club, discovering "a plan that would steer, by the way, billions and billions of dollars of American Social Security retirement savings to Wall Street." Also by the way, this plan would "abolish Medicare in its current form" and "throw seniors to the whims of the uncontrolled costs of the private-insurance market."

This Obama-Van Hollen line of attack is figuring in races across the country, and union groups are spending heavily to give it a political impact, the facts notwithstanding. Earlier this summer the Strengthen Social Security Coalition magically emerged, its backers a roll-call of the progressive left: the AFL-CIO, SEIU, American Federation of Teachers, MoveOn.org, Campaign for America's Future, the American Federation of State, County, and Municipal Employees.

In Nevada, Harry Reid & Co. are inundating the airwaves with claims that Republican challenger Sharon Angle favors cutting off Social Security checks. Mr. Obama showed up at a Las Vegas fund-raiser to chime in that "she wants to phase out and privatize Social Security and Medicare. Phase out and privatize them. . . . I'm not making this up. Harry, am I making this up?"

Cognitive dissonance evidently does not afflict this President. Not long after this Socratic dialogue with Harry, at a recent event in Columbus, Ohio, Mr. Obama explained that "what we've done is we've created a fiscal commission of Democrats and Republicans to come up with what would be the best combination to help stabilize Social Security for not just this generation, but the next generation. I'm absolutely convinced it can be done."

This campaign strategy won't stop huge Democratic losses in a year when the economy is the dominant issue, but it surely will reinforce Republican fears that the deficit commission is nothing but a political trap. Mr. Obama wants the GOP to support entitlement reforms in exchange for tax increases, but when they do he'll pocket the revenue and slam the GOP for the entitlement "cuts."

The irony is that the fiscal condition of Social Security could be substantially improved simply by readjusting its actuarial formulas to slow the growth rate of benefits. But Republicans are unlikely to sign on even to that if they're going to be demonized for such a modest "cut" anyway, much less endorse a reform like raising the future retirement age. Mr. Obama says he wants to cut a deal, but encouraging Democrats this year to box themselves in against any change will make serious reforms that much harder next year.

The President's bad faith is all the more notable because Social Security is less a GOP reform priority than it should be. Republicans never even brought President Bush's private account plan to the floor in 2005. To the extent these attacks have any basis in reality, they're targeting Wisconsin Republican Paul Ryan's "roadmap"—even as Mr. Obama praises him for being serious about the fiscal crisis and knows he's a member of the deficit commission.

This Social Security ploy perfectly illustrates the Obama political method: Bipolar rhetoric that lurches between partisan distortion and bipartisan entreaties—all the while governing hard to the left with Democrats in Congress running the show.

"Cash-Poor Governments Ditching Public Hospitals," by Suzanne Satalite, The Wall Street Journal, August 29 , 2010 ---

Faced with mounting debt and looming costs from the new federal health-care law, many local governments are leaving the hospital business, shedding public facilities that can be the caregiver of last resort.

Officials in Lauderdale County, Ala., this spring opted to transfer their 91-year-old Eliza Coffee Memorial Hospital and other properties to a for-profit company after struggling to satisfy an angry bond insurer.

"We were next to knocking on bankruptcy's door,'' said Rhea Fulmer, a Lauderdale County commissioner who approved the deal with RegionalCare Hospital Partners, of Brentwood, Tenn, but with trepidation. She said the county had no guarantee the company would improve care in the decades to come. "Time will tell.''

Clinton County, Ohio, in May sold its hospital to the same company. Officials in Kenai Peninsula Borough, Alaska, are weighing a joint venture with a for-profit company, similar to one the same company made with Bannock County, Idaho. And Prince George's County, Md., is seeking a buyer for its medical complex.

More than a fifth of the nation's 5,000 hospitals are owned by governments and many are drowning in debt caused by rising health-care costs, a spike in uninsured patients, cuts in Medicare and Medicaid and payments on construction bonds sold in fatter times. Because most public hospitals tend to be solo operations, they don't enjoy the economies of scale, or more generous insurance contracts, which bolster revenue at many larger nonprofit and for-profit systems.

Local officials also predict an expensive future as new requirements—for technology, quality accounting and care coordination—start under the overhaul, which became law in March.

Moody's Investors Service said in April that many standalone hospitals won't have the resources to invest in information technology or manage bundled payments well. Many nonprofits have bad credit ratings and in a tight credit market cannot borrow money, either. Meantime, the federal government is expected to cut aid to hospitals.

"We've been hit by that whiplash recently, with industries closing down and the number of insured growing less," said J.D. Mosteller, the attorney for Barnwell County, S.C., which is considering selling its hospital.

The county has raised property taxes in recent years to bolster the hospital, which spends more than $1 million just to pay emergency-room physicians, he said. "We're a county government. We're not set up to run a nursing home or hospital.''

Experience WSJ professionalEditors' Deep Dive: Hospitals Fight Rising CostsDOW JONES NEWS SERVICE Hospitals Work to Lower ReadmissionsCrain's New York Business Soaring Cancer-Care Costs Strain BudgetsThe Atlanta Journal - Constitution Health-Care Facilities Offer Check-In KiosksAccess thousands of business sources not available on the free web. Learn MoreSales and mergers of public hospitals are hard to quantify; the country had 16 fewer government-owned hospitals in 2008 than 2003, says the American Hospital Association, the result of sales, closings or transfers.

Health-care consultants and financial analysts say the pace of all hospital sales is picking up at a rate not seen since the 1990s, the dawn of managed care. James Burgdorfer, a partner with investment banker Juniper Advisory LLC in Chicago, said most public systems would end in the next two decades because the industry has become too complex for local politicians. "By the nature of their small size, their independence and their political entanglements, they are poorly equipped to survive,'' Mr. Burgdorfer said.

During the five-year period that ended Dec. 31, 2009, $52 billion was used to fund hospital mergers and acquisitions of all types, says Irving Levin Associates of Norwalk, Conn., which tracks health-care deals. This amount exceeds by 140% the total amount of capital committed to fund hospital deals announced in the prior five-year period.

In the first half of 2010, there were 25 deals involving 53 hospitals that were bought or merged, for a total of $3.1 billion, according to Levin Associates. If deals continue apace, it would be the busiest time since 2007, when there were 58 deals involving 149 hospitals totaling $9.3 billion.

Public and nonprofit hospitals—the latter of which represent three-fifths of all U.S. hospitals and are sometimes affiliated with a religious denomination—can be appealing targets for private operators, which are betting that the new federal law will eventually yield more paying, insured customers.

Chip Kahn, president and CEO of the Federation of American Hospitals, a trade group for chains that own nearly 1,000 for-profit hospitals, said his industry tends to run operations more efficiently, while adding capital.

Most sales include stipulations that the companies keep services, he said. "You've got to provide the array of services that the community expects," he said. "Otherwise you're not going to get the consumers using them.''

Still, skeptics worry that in the hunt for healthy returns, the for-profits will kill expensive programs and close hospitals with poor revenue. Residents in many towns have fretted over the blow to their civic pride and the loss of their history.

The nation's public hospitals rose in different ways. Some were built with philanthropic donations and were sick houses for society's poorest. Many in the west and south rose through loans and grants made possibly by the Hill-Burton Act of 1946. In exchange, public hospitals provide a large amount of free and reduced-priced care. Some are academic medical centers. Many suburban and rural public hospitals provide care to all members of the community, rich and poor.

Continued in article


Forced Savings in the Private Sector? The public sector is exempted in this legislation!
In an effort to increase the number of Americans who are saving for retirement – roughly 50 percent of employees have no retirement savings at all – the Automatic IRA Act of 2010 has been introduced in the Senate by Sen. Jeff Bingaman (D-NM) and in the House by Rep. Richard Neal (D-MA). The bill establishes IRA accounts for all employees and sets up automatic payroll deductions.

AccountingWeb, August 31, 2010 --- http://www.accountingweb.com/topic/accounting-auditing/democrats-seek-legislate-retirement-savings


    Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

    Return to the Tidbits Archives ---


    Shielding Against Validity Challenges in Plato's Cave ---

    Shielding Against Validity Challenges in Plato's Cave  --- http://www.trinity.edu/rjensen/TheoryTAR.htm
    By Bob Jensen

    What went wrong in accounting/accountics research?  ---

    The Sad State of Accountancy Doctoral Programs That Do Not Appeal to Most Accountants ---


    Bob Jensen's threads on accounting theory ---

    Tom Lehrer on Mathematical Models and Statistics ---

    Systemic problems of accountancy (especially the vegetable nutrition paradox) that probably will never be solved ---

    Bob Jensen's economic crisis messaging http://www.trinity.edu/rjensen/2008Bailout.htm

    Bob Jensen's threads --- http://www.trinity.edu/rjensen/threads.htm

    Bob Jensen's Home Page --- http://www.trinity.edu/rjensen/