Tidbits Quotations x
To Accompany the June 20, 2011 edition of Tidbits

Bob Jensen at Trinity University

The only thing more dangerous than an amateur economist is a professional economist.
Berta’s Fundamental Law of Economic Rent as quoted in Simoleon Sense

The latest Census Bureau report provides details of the 2008-09 school year, as the nation was in the midst of the recession. That year, 48,238,962 students were enrolled in the U.S. K-12 public education system. That was a decline of 157,114 students from the previous year. They were taught by 3,231,487 teachers (full-time equivalent). That was an increase of 81,426 teachers from the previous year.
Kyle Olson, "What Teachers Unions Won't Tell You About School Layoffs," Townhall, June 16, 2011 ---

Per-pupil spending rose 2.6 percent, and spending on employee compensation (salaries and benefits) rose 2.3 percent. The United States average for per-pupil spending was \$10,499, with 25 states spending more than \$10,000 per student.
Kyle Olson, "What Teachers Unions Won't Tell You About School Layoffs," Townhall, June 16, 2011 ---

June 16, 2011 reply from George Wright's sister

This is the kind of statistic that drives me nuts, because it mashes together too much information and effectively obscures any useful information about trends. If it is true (and I don't care to spend the time to research it), I can certainly think of reasons why.

Let's start with unfunded mandates. My district runs a special education "center program" for autistic kids. Federal regs dictate 1 teacher and 1 aide per 6-7 kids. You have any idea how much the autistic population has exploded in recent decades? Per-pupil and special education funding does not begin to cover the costs.

My state has 783 school districts. Well, okay, 40% of those are charter schools, but we still have over 500 traditional districts. The smallest has THREE students: Bois Blanc Island in Lake Huron. Presque Isle has 58; Beaver Island 71. There is no practical alternative to these undersized districts, but they have to affect the overall pupil-teacher ratio.

Fully 369 "districts" have fewer than 900 students. I chose that cut-off because most of them are K-8 public charters and that means 10 or fewer students per grade. Since charter teachers are non-unionized and have no pensions and cheap health insurance analogs, they tend to have smaller class sizes. How much of the growth in teacher numbers is traceable to that trend?

While I'm ranting, having spent the past week studying budget numbers, my little (6000-student) district spends \$460,000 on federally mandated "medical aides" for children. This can include anything from clearing breathing tubes to helping physically disabled kids get around and get fed. The federal reimbursement for the level of service they prescribe is 22% of the cost. Before everyone was mainstreamed, much of these costs were borne by health insurance of Medicaid. Now it all comes out of the per-pupil funding for every other kid. (That's more, by the way, than the entire amount we spend on athletic programs districtwide.) I'd bet you serious money that all the hundreds of charter academies don't serve more than a handful of "medically fragile" children. So, I'm ending with unfunded mandates, too....

"The NAACP vs. Black Schoolchildren Apparently, the teachers come first," by William McGurn, The Wall Street Journal, June 9, 2011 ---
http://online.wsj.com/article/SB10001424052702304432304576369851402441110.html?mod=djemEditorialPage_t

There are two ways to look at our big city public schools. The first way is to see them as institutions that give our children the tools they need to make their way in society. When the education is good, it is a great equalizer for those boys and girls without the advantages of wealth or social standing.

The second way to look at our big city public schools is this: as a vast jobs program for teachers.

Those who assume the first view find it hard to understand why it is so difficult to fire bad teachers, pay the good ones more, or close down failing schools. In the same way, they cannot understand why one of the nation's oldest and most venerable civil rights organizations—the National Association for the Advancement of Colored People—would be suing with the United Federation of Teachers to stop New York City from closing about two dozen of its worst schools and opening charters. Even the Washington Post, which ran a terrific editorial criticizing the NAACP, called it a "mystifying decision."

The truth is that the decision is not in the least mystifying. For those who understand that our big city public school systems have become jobs programs for teachers and administrators, the NAACP's response makes perfect sense. That's because there are many African-American teachers in these systems, many of whom presumably belong to the NAACP.

Yes, there are political and ideological affinities between the organizations. The NAACP has long been a key part of the same Democratic coalition of which the teachers unions are the most powerful component. Yes, on the 990 Forms filed by, say, the National Education Association you will find the occasional contribution to the NAACP. The NAACP, however, does not have to be bribed.

The reason is simple: The NAACP is doing in New York what the United Federation of Teachers is doing, and for the same reason: protecting the interests of its members.

Now, standing up for black teachers has an honorable chapter in the NAACP's storied history. In 1938, for example, the NAACP filed a lawsuit in Norfolk targeting the discrimination of a school system that paid black teachers less than whites. The NAACP lost the first round, but two years later its agitation bore fruit when a federal appeals court came down on the side of another Norfolk teacher in a similar case.

Unfortunately, while black teachers no longer suffer from the kind of discrimination that kept them out of our public schools or working for less pay than whites, equal opportunity for black schoolchildren still lags behind. The NAACP's own website is filled with the grim performance statistics. Still, when forced to choose between the teachers and those on the losing side of what President Obama recently called "the civil rights issue of our time"—the chance for a decent education—the NAACP has come out foursquare for the teachers.

That decision sent thousands of black moms and dads out to protest the NAACP in Harlem on May 26. For these parents, charters provide one of the few sources of hope. The charter population reflects this dynamic. According to the Center for Education Reform's Annual Survey of America's Charter Schools, 52% of charter students are minorities, 50% are at-risk, and 54% are considered poor.

What sets charters apart is that they are not in the excuse business. Take Boys' Latin in Philadelphia, a charter whose student body is almost entirely African-American. In the Philly public schools, fewer than half the African-American young men will leave with a high school diploma. At Boys' Latin, which had its first class graduate yesterday, almost all its students graduated, and almost all are going to college.

"Look, the issue should be educating children," says David Hardy, the school's chief executive officer. "Suppose somebody came up with a program that could educate a child without the intervention of teachers. If it worked, I'd be for it, even if it cost us some jobs.

"But they [the NAACP and the teachers unions] wouldn't. They aren't about learning. They are about jobs."

Continued in article

"Iran, Syria—and Seymour Hersh Why won't the New Yorker reporter debate me?," by Bret Stephens, The Wall Street Journal, June 9, 2011 ---
http://online.wsj.com/article/SB10001424052702304474804576369191445114876.html?mod=djemEditorialPage_t

When does a half-cooked notion, a conspiracy theory or a tissue of vaguely sourced and improbable claims become an item of journalistic "fact"? If you're a person of normal intelligence, the answer is: never. If, however, you're a faithful reader of the New Yorker, it happens roughly every time investigative reporter Seymour Hersh commits a word to print, presumably after having undergone the rigorous review of the magazine's world-famous fact-checking department.

So it was with some anticipation that I agreed last week to debate Mr. Hersh on CNN about his latest bequest to what the magazine likes to call its "Annals of National Security": Several thousand words in the June 6 edition on the subject of "Iran and the Bomb," along with the portentous subtitle, "How real is the nuclear threat?"

For readers who fail to grasp Mr. Hersh's point from the subtitle alone, his central contention is that there exists no "irrefutable evidence of an ongoing hidden nuclear-weapons program in Iran"—which is surely right, since the word "irrefutable" allows for no ambiguity. As for his subtext, this too was clear: By taking an increasingly hard line on Iran, the Obama administration risked blundering into another Iraq-style intelligence fiasco.

Might this be true? Who knows: Mr. Hersh loves to affect the air of a journalist who has been brought into the loop of the most sensitive national security secrets. His expectation of readers is that they will take him at his word that the typically anonymous sources for his most explosive claims—often concerning highly specific descriptions of CIA operations in enemy nations—are credible and sober government officials (or former officials) who would never compromise vital secrets to our enemies. Yet these same insiders, Mr. Hersh would have readers believe, would gladly see those secrets disclosed in the pages of the New Yorker.

To get a better sense of Mr. Hersh's record, I turned from the Iran article to some of his earlier work. In January 2005 he wrote that Donald Rumsfeld would play the starring role in President Bush's second term. In fact, Condoleezza Rice did. In April 2006 he suggested that President Bush had all but made up his mind to bomb Iran before it started enriching a single kilo of uranium. All Mr. Bush did was pursue sanctions at the U.N. and support European efforts to engage Tehran diplomatically.

In March 2007, Mr. Hersh reported that the U.S. had provided "clandestine support" to the Lebanese government, which in turn had aided a Sunni terrorist group called Fatah al-Islam. Shortly thereafter the Lebanese government went to war against Fatah al-Islam. In February 2008, Mr. Hersh claimed that the mysterious Syrian facility Israel bombed the previous September "apparently had little to do with . . . nuclear reactors." Last month, International Atomic Energy Agency Director General Yukiya Amano wrote that "the Agency concludes that the destroyed building was very likely a nuclear reactor." In April 2009, he returned to Syria to write a hopeful piece about the prospects of a U.S.-Syria rapprochement, strongly hinting that Damascus could gradually be peeled away from Tehran. The evidence of the past two months suggests otherwise.

More recently, Mr. Hersh gave a speech in Qatar alleging that Gen. Stanley McChrystal was a member of a religious order known as the Knights of Malta, and that senior U.S. officers seek to "change mosques into cathedrals." The retired general denies the allegation categorically.

How, then, does this bear on Mr. Hersh's current reporting about Iran? The article makes much of a 2007 National Intelligence Estimate that found that in 2003 Iran had halted its nuclear-weapons program. And he hints that an as-yet unreleased 2011 NIE says much the same thing.

Yet what's mainly remarkable about Mr. Hersh's reporting is that it makes no mention of what the IAEA itself says about Iran's most recent nuclear progress. "As previously reported by the Director General," goes the May 24 report, "there are indications that certain of these [undisclosed nuclear related] activities may have continued beyond 2004."

Among those activities: "producing uranium metal . . . and its manufacture into components relevant to a nuclear device"; "testing of explosive components suitable for the initiation of high explosives in a converging spherical geometry"; "experiments involving the explosive compression of uranium deuteride to produce a short burst of neutrons"; "missile re-entry vehicle redesign activities for a new payload assessed as being nuclear in nature."

Continued in article

June 9, 2011 reply by Dean Blake

Beginning with the editorship of Tina Brown, The New Yorker magazine has been tinged with anti-semitism and anti-Israeli writers and voices. Brown's other contribution was to introduced color cartoons. Both were intended to demonstrate change in a successful attempt to booste readership. Readership did go up, but I don't think it was based on those contributions; those were just her hallmarks, like cat scratches and p;ss on the sofa to mark her territory. Ultimately, a magazine of that type survives on its writers, Hersh isn't one of them.

I was a faithful subscriber since 1967 thru 2010, but I've dropped my subscription based on Hersh's and other anti-semitic articles and cartoons. Its really both too much and too little, too left, and too old.

Its time the current editors dropped Brown's anti-semitic 'signature' and appealed to a current generation's sensibilities and developed their own editorial 'style' and content.

June 9, 2011 reply from Claudia Pillar

Mr Hersh is yesterday's news. The same old leftist bias, packaged in the same old leftist way.

"An Ethanol Miracle:  A Senate supermajority turns against King Corn," The Wall Street Journal, June 16, 2011 ---
http://online.wsj.com/article/SB10001424052702304186404576388113046850414.html#mod=djemEditorialPage_t

Loaves and fishes. Water into wine. Healing lepers. And yesterday, the Senate voted to end ethanol's purchase on the federal Treasury.

The 73-27 vote on an amendment sponsored by California Democrat Dianne Feinstein—33 Republicans, 38 Democrats and both independents in favor—was the kind of supermajority that usually waves through new subsidies for the fuel made from blending corn and tax dollars. Ending the annual \$6 billion subsidy, along with the tariff on foreign ethanol, marks the first time in memory that the ethanol lobby has lost a major vote, as the left-right coalition that wants to eliminate its subsidies and mandates continues to grow.

For now, this victory for energy and fiscal sanity is incomplete, because the underlying bill—a new engine for green subsidies—is unlikely to pass the Senate, let alone the House. Still, ethanol's decades on the public dole appear to be numbered. The 27 "nays" were essentially the Farm Belt contingent, with the disappointing addition of Ohio Republican Rob Portman.

The House also voted yesterday, 283-128, to bar public spending on the special blender pumps and tanks necessary for higher concentrations of ethanol. This is significant because the ethanol lobby has been counting on the pump and tank subsidy to replace the tax credits and tariffs. The Senate defeated a similar amendment from John McCain yesterday, so House Members will need to be on the lookout for this to appear at 3 a.m. in some "must have" legislation.

Continued in article

Jensen Comment
Even long-time supporter of corn ethanol Al Gore now admits that his support for the corn ethanol subsidies and the tariffs blocking Brazil's more efficient sugar cane ethanol was political rather than green science. He at last admits the fact that corn ethanol requires more BTUs (mostly natural gas) to make than it generates after production and that it is a pollution disaster. Farmbelt legislators should learn from Al Gore's belated honesty.

University of Illinois: Gaming Initiative --- http://www.library.illinois.edu/gaming/index.html

The Realities of High Corporate Tax Rates in States Like Illinois and the Realities of Rotten Governmental Accounting
The same thing that drives corporations to set up sham corporate headquarters off shore (to keep profits out of reach of the IRS) also drives corporations to flee states that impose high corporate tax rates (like Illinois, New York, New Jersey, and California) to states that took on less unfunded entitlements burdens (like Texas and North Carolina).

"Illinois Tax Firesale:  A case study in high corporate rates and special favors," The Wall Street Journal, June 9, 2011 ---
http://online.wsj.com/article/SB10001424052702304474804576370102955207570.html#mod=djemEditorialPage_t

Illinois gained nationwide notoriety in January when Governor Pat Quinn signed into law a 67% hike in the personal income tax rate while lifting the corporate tax rate to 9.5%, the fourth highest in the nation. How is that working out?

The good news is that corporate tax receipts in Springfield are up by about \$300 million amid the economic recovery—though the state comptroller's office announced in April that the state still faces \$8 billion in unpaid bills. The bad news is that, according to the state's Department of Commerce, Illinois has already shelled out some \$230 million in corporate subsidies to keep more than two dozen companies from fleeing the state. And more are on the way.

The ink was barely dry on the new taxes before major employers announced their unhappiness. The equipment giant Caterpillar, the spinal cord of the Peoria economy, says the higher business and personal income taxes will cost the company and its 23,000 Illinois employees \$40 million a year. "I want to stay here, but as the leader of this business I have to do what's right for Caterpillar when making decisions about where to invest," CEO Doug Oberhelman said in the wake of the tax increase, adding that Illinois "is not favorable to business."

Caterpillar has long built new facilities outside Illinois to avoid the United Auto Workers, most recently in Texas. And after the Quinn tax hike, at least six states—from Virginia to zero income tax South Dakota—offered lower costs if the firm relocated. Caterpillar is staying put for now.

When the cellphone business Motorola Mobility hinted this spring that it might leave for San Diego, Mr. Quinn bounced into action. "I know how to work with the big businesses," he declared to the media, as he rushed—taxpayer checkbook in hand—to keep the company in the state. Motorola pocketed \$100 million in tax incentives last month to stay in Libertyville.

Mr. Quinn's latest quest is to keep Sears in the state. In May, the retailer—based in Hoffman Estates with some 6,000 workers—hinted that it may look for a new home because of expiring tax breaks. The suitors include Georgia, North Carolina, Tennessee, Texas and even New Jersey. "We will sit down with the Sears people," Mr. Quinn promised. "I'm sure we'll work something out."

No doubt he will, since in two years in office Mr. Quinn has doled out corporate welfare to at least 80 firms, costing the state nearly \$500 million, according to a tally by the Chicago Tribune. Late last year Navistar, the commercial truck engine maker, secured \$65 million in handouts. Continental Tire nabbed \$19 million. Even deal-of-the-day Web business Groupon, which is preparing an IPO to raise \$750 million, grabbed \$3.5 million in tax credits to stay in Chicago. U.S. Cellular got a \$7.2 million package to keep its headquarters in the Chicago area, while Chrysler received an "investment package" worth \$62 million for its Belvidere assembly plant.

Continued in article

Jensen Comment
Some states suffer worse from unfunded long-term entitlements obligations --- like Illinois and California made promises they may not be able to keep for retired state worker and teacher pension and medical plans relative to North Carolina that has much more conservative fiscal management.

Some state governments have made entitlements promises that they may just not be able to keep. Governmental accounting has been a game of shadows and mirrors and wonderland dreams.

Voters are just beginning to realize how the accounting profession aided and abetted the deceits of lousy fiscal management in local, state, and national government
http://www.trinity.edu/rjensen/Entitlements.htm

http://www.trinity.edu/rjensen/Theory02.htm#GovernmentalAccounting

How KPMG will be specifically affected by any fallout will be interesting to see.
"KPMG UK Report Shows Libya’s Qaddafi Held Billions in US and UK Banks," by Lisa Chapman, Big Four Blog, May 28, 2011 ---

In the Big Four world, truth sometimes appears to be stranger than fiction. A tale of how the Big Four firm KPMG is involved in a global financial intrigue is revealed by globalwitness.org which has obtained papers which were prepared by KPMG UK on Libyan leader Col. Muammar el-Qaddafi’s ill-gotten and stashed wealth.

First, globalwitness.org has obtained a leaked full investment profile of Libyan Investment Authority for the period ending June 30, 2010. http://www.globalwitness.org/sites/default/files/LIA.pdf

This report appears to be prepared by KPMG UK.

The New York Times notes, “The document, independently verified as authentic by The New York Times, is a summary of the Libyan Investment Authority’s investments, created for the fund by the London office of the KPMG consulting firm and dated June 30, 2010. “

And it is clear from this document that Qaddafi stashed \$53 billion of Libyan oil revenues, with some big amounts with HSBC, Goldman Sachs, JP Morgan, HSBC Holdings and Société Générale. Goldman Sachs held \$43 million in 3 accounts and HSBC held \$292.69 million in 10 accounts. LIA also invested \$1 billion in structured financial products through Société Générale and JPMorgan Chase; and in Central Bank of Libya, the Arab Banking Corporation and the British Arab Commercial Bank. The fund held large investments in top multinationals such as General Electric, Halliburton, Schlumberger, Caterpillar, BP and Nokia, and United States government bonds.

While this amount is mind boggling, it was not immune from market downtrends, the report notes that total market value of the fund’s investments fell 4.53% from \$55.9 billion in March 2010 to \$53.3 billion in June 2010.

The investments appear to have been legal at the time, although the United Nations, the European Union and the United States in February imposed targeted financial sanctions against the assets of Colonel Qaddafi and his family. The United States also froze the assets of Libyan government-owned and controlled entities.

Global Witness, which issued a statement on its website, said,” However the Libyan people could not know where it was invested or how much it was, because banks have no obligation to disclose state assets they hold. Global Witness asked both banks to confirm that they held funds for the state-owned Libyan Investment Authority, and whether they still hold them. They both refused, with HSBC citing client confidentiality. Numerous other banks and financial firms are listed including Societe Generale, UniCredit and the Arab Banking Corporation.”

Global Witness then pummels the banks….“It is completely absurd that banks like HSBC and Goldman Sachs can hide behind customer confidentiality in a case like this. These are state accounts, so the customer is effectively the Libyan people and these banks are withholding vital information from them,” said Charmian Gooch, director of Global Witness.

KPMG does not appear to be involved in any malfeasance or accused of any misdemeanor, as far as these public reports go, though it appears to have been the author of this leaked investment portfolio report.

How KPMG will be specifically affected by any fallout will be interesting to see.

Bob Jensen's threads on the two faces of KPMG are at
http://www.trinity.edu/rjensen/Fraud001.htm

On San Francisco's Ballot Initiatives to Ban Circumcision
"'Monster Mohel':  There's a fine line between hippy-dippy and hateful.," by James Taranto, The Wall Street Journal, June 9, 2011 ---
http://online.wsj.com/article/SB10001424052702304259304576375540364440776.html?mod=djemEditorialPage_t

. . .

The same can't be said of Matthew Hess, author of the initiatives and of a comic book called "Foreskin Man," one issue of which features a villain called "Monster Mohel," a rabbi who attempts to circumcise a boy (against the mother's wishes but in cooperation with the father), only to be thwarted by the eponymous blond superhero.

The Anti-Defamation League is, not surprisingly, outraged: "Some of the imagery calls to mind age-old anti-Semitic canards such as the blood libel, the accusation that Jews ritually murder Christian children. Another comic in the series also calls up more subtle anti-Jewish themes, such as when a character complains that the 'pro-circumcision lobby' has 'all of the well-connected doctors and lawyers.' "

Continued in article

"Paul Krugman: The Prophet of Socialism A prophet who has been consistently wrong," by Donald Luskin )Editor’s Note: This article is excerpted from Donald Luskin’s new book, I Am John Galt,, National Review, June 13, 2011 ---
http://www.nationalreview.com/articles/269428/paul-krugman-prophet-socialism-donald-luskin

Christiane Amanpour’s eyes darted back and forth in fear, and her mouth twisted in disgust, because she could see where this was going. A guest on her Sunday-morning political talk show, ABC’s This Week, was getting dangerously overexcited, and something very regrettable was about to happen.

She could see that he was winding himself up as he talked about how a recent deficit-reduction panel hadn’t been “brave enough” — because it failed to endorse the idea of expert panels that would determine what medical services government-funded care wouldn’t pay for. When Obamacare was still being debated in Congress, Sarah Palin had created a media sensation by calling them “death panels,” causing most liberals who supported Obamacare to quickly distance themselves from any idea of rationing care as being tantamount to murder.

The guest said, “Some years down the pike, we’re going to get the real solution, which is going to be a combination of death panels and sales taxes.”

It was all the more horrifying because the guest was not a conservative, not an opponent of Obamacare. This guest was an avid liberal, a partisan Democrat, and an enthusiastic supporter of government-run health care. He was endorsing death panels, not warning about them. He was saying death panels are a good thing. And it was even more horrifying because of who this guest was. This was no fringe lefty wearing a tinfoil hat, churning out underground newspapers in his parents’ basement. This was an economics professor at Princeton, one of the country’s most prestigious universities. This was the winner of the Nobel Prize in economics, the highest honor the profession can bestow. This was a columnist for the New York Times, the most influential newspaper in the world. This was Paul Krugman, live, on national television, endorsing government control over life and death. And while we’re at it, let’s raise taxes on those who are permitted to live.

Who exactly does Paul Krugman think he is? He’d like to think he’s John Maynard Keynes, the venerated British economist who created the intellectual framework for modern government intervention in the economy. Keynes is something of a cult figure for modern liberal economists like Krugman, who read his texts with exegetical fervor. But Krugman will never live up to Keynes. However politicized his economic theories, Keynes’s predictions were so astute that he made himself wealthy as a speculator. Economics is called “the dismal science,” but as we’ll see, Krugman’s predictions are so laughably bad his economics should be called the abysmal pseudo-science.

Most critiques of Krugman as a public intellectual begin with what is apparently an obligatory disclaimer, usually in the very first sentence — something to the effect that Krugman is a very accomplished and well-respected economist. Then comes the “But . . .” and the critique proceeds in earnest, often scathingly.

But why concede this honor to Krugman? So what if he won the Nobel Prize? The real test of Krugman’s mettle as an economist is the accuracy of his economic forecasting. The fact is that, with about three decades of evidence now in, Krugman’s track record, to use a technical term favored by economists, sucks.

He’s not always candid about this. But once, under the pressure of a televised debate with conservative talk-show host Bill O’Reilly, Krugman blurted out an understated if truthful self-evaluation: “Compare me . . . compare me, uh, with anyone else, and I think you’ll see that my forecasting record is not great.”

The most egregious example of “not great” is Krugman’s utterly incorrect 1982 prediction that inflation would soar. He made this prediction from no less lofty a perch than the White House, as staff member of the Council of Economic Advisers in the first Reagan administration. In a memo titled “The Inflation Time Bomb” Krugman wrote with co-author Lawrence Summers, “We believe that it is reasonable to expect a significant reacceleration of inflation . . . at least 5 percentage points to future increases in consumer prices. . . . This estimate is conservative.”

It also turned out to be hilariously, side-splittingly, knee-slappingly, rolling-on-the-floor wrong. Except for a tiny uptick the very next month, inflation didn’t rise; it fell. Four years later, it had fallen to 1.18 percent, a rate so low as to border on deflation.

In late February 2000, two weeks before the peak of the dot-com stock bubble at Nasdaq 5,000, Krugman wrote in his Times column that the Dow Jones Industrial Average was overvalued, saying, “Let the blue chips fall where they may.” As for the Nasdaq — which at that point had almost doubled over the prior year, and more than tripled over the prior three years — Krugman said soothingly, “I’m not sure that the current value of the Nasdaq is justified, but I’m not sure that it isn’t.”

We all know what happened. As of this writing, the Dow is about 20 percent higher than when Krugman wrote those words — and that’s not including a decade of dividends. The Nasdaq is about 42 percent lower. It hit bottom in October 2002, a 75.7 percent loss from where Krugman said not to worry about it. After something of a recovery, stocks fell again. They hit a real bottom — about a week after Krugman wrote a Times column asking the rhetorical question, “Is there any relief in sight?” His wrong answer: “No.”

Perfect bookends: He missed the top, and then three years later, he missed the bottom. But then he outdid himself. In June 2003, with the Nasdaq up 20 percent since Krugman’s “No,” did he recognize his error and reverse course? Again, no. Krugman wrote that “the current surge in stocks looks like another bubble.” From there the Nasdaq was to rally another 75 percent.

At around the same time, afraid of what he called a “fiscal train wreck” that would lead to disastrously high interest rates, he announced in the lead paragraph of a March 2003 Times column: “So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I’m terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.” In fact, rates didn’t rise, even when budget deficits skyrocketed beyond anything he could have imagined then, driven by government “stimulus” spending that he himself urged. Nowadays, on his New York Times blog, he regularly chides deficit-wary Republicans by using today’s low interest rates to prove that the U.S. faces no financial difficulties.

In 2003, I set out to expose Krugman’s various distortions, and to force the New York Times to correct them. I started first on my blog, and soon afterward in a series of columns for National Review Online called “The Krugman Truth Squad” (KTS). The inaugural KTS column appeared on March 20, 2003. The series of columns was structured as what is now called “crowdsourcing”: Within several hours of a Krugman column’s appearing on the Times website, I and a network of fellow bloggers would put it under a microscope and discover all the filthy microbes hiding in every crack. We’d fact-check every claim, confirm every quotation, run down every source, and compare every statement for consistency with statements made in the past. The KTS called Krugman “America’s most dangerous liberal pundit,” and our promise to readers was: “We’ll read Paul Krugman so you don’t have to.”

I won’t cite here very many of the dozens upon dozens of prevarications that my Krugman Truth Squad exposed in 94 columns over five years. If you are interested, look up my name in the NRO author archives, where most of the KTS columns can still be seen. Or you can download a PDF file with the entire collection of KTS columns here.

Continued in article

Bob Jensen's threads on entitlements are at
http://www.trinity.edu/rjensen/Entitlements.htm

Capture” of Regulators by Fannie Mae and Freddie Mac," by Nobel Laureate Gary Becker, Becker-Posner Blog, June 12, 2011 ---
http://www.becker-posner-blog.com/2011/06/capture-of-regulators-by-fannie-mae-and-freddie-mac-becker.html

Political economists describe the process whereby government officials end up being the servants rather than the masters of the firms they are regulating as the “capture” by the industry of their regulators. When regulators are captured, much of what they do is motivated, consciously or not, by a desire to help the companies they are regulating, even when the social goals that the regulators should pursue are very different.

A famous illustration of capture is given by the way airlines were regulated under the Civil Aeronautics Board (CAB) from 1940 to 1978. Large airlines of those times, like American and Delta, naturally had a strong incentive to try to keep new airlines from entering the industry. As a compliant ally of the airline industry, the CAB did not approve one new interstate airline during this almost 40-year period. Many airlines entered the industry when President Carter abolished the CAB, and some of the old standbys, such as Pan Am and Eastern, ceased operations because they could not adjust to a competitive environment.

An economically disastrous example of the capture theory is provided by the disgraceful regulation of the two mortgages housing behemoths, Fannie Mae and Freddie Mac, before and leading up to the financial crisis. In their fascinating recent book, Reckless Endangerment, Gretchen Morgenson and Joshua Rosner explore in great detail how Fannie Mae used political connections and intimidation of anyone who stood in their way to gain a highly dominant position in the residential mortgage market. The authors’ show that various government officials, including congressmen and presidential cabinet members, closed their eyes to what these two government-supported enterprises (GSE) were doing. They allowed them to take on enormous risks, while publicly defending their behavior as not being highly risky.

Fannie Mae was created in 1938 as a government enterprise that purchased mortgages from banks that loaned money to homebuyers. It eventually became a private investment company regulated by the government, where investors expected that the government would help out if these companies got into trouble. By the beginning of the crisis in 2008, Fannie and Freddie held or guaranteed about half of the United States’ \$12 trillion of assets in the residential mortgage market. In September 2008, both Fannie and Freddie were taken over by the federal government when they became insolvent. The loss to taxpayers is likely to be in the hundreds of billions of dollars because many of the mortgages are subprime and of little value.

Reckless Endangerment shows how the chief executive officers of Fannie Mae furthered the reach and reduced the regulatory control over their company by assiduously courting congressmen, Fed officials, the Congressional Budget Office, high-level officials of the U.S. Treasury, the Secretary of Housing and Urban Development, and major economists. The prominent and well informed congressman, Barney Frank, gets especially sharp criticism for his continual support of Fannie and Freddie while he was initially a member, and later chairman, of the House Financial Services Committee, the powerful committee charged with oversight of the housing and financial sectors. Barney Frank remained an unwavering supporter of Fannie and Freddie until 2010, when he admitted that they should have been more closely regulated. In a bit of irony, he is a principal author of the 2010 Dodd-Frank act that attempts to reform the financial sector mainly by giving even greater discretion to the regulators.

Fannie and Freddie had so much money and political power at their disposal that it became risky for anyone to oppose what they wanted: large increases in their holdings of subprime and other mortgages, with no questions asked. Different government agencies that were supposed to either regulate or oversee these GSEs ended up as advocates instead. Well-known economists wrote favorable articles downplaying the riskiness of the holdings of Fannie and Freddie. These articles were sometimes published in journals or other publications sponsored by these companies.

A few government officials were brave enough to risk the wrath of Fannie and Freddie. The authors give particular praise to June O’Neill (I am proud to say she is a former student of mine), who was then head of the Congressional Budget Office. A member of her staff wrote a report that was critical of the degree of risk to taxpayers from the assets held by Fannie and Freddie. These companies tried to get June to suppress the report- she refused- and then a few members of the House of Representatives in cahoots with Fannie and Freddie subjected her to vicious attacks when she steadfastly defended the report in testimony before Congress.

Continued in article

"Capture Theory and the Financial Crisis," by Richard Posner, Becker-Posner Blog, June 12, 2011 ---
http://www.becker-posner-blog.com/2011/06/capture-theory-and-the-financial-crisisposner.html

The phenomenon of regulatory capture—the transformation of a regulatory agency into an anticompetitive tool of the regulated industry—is real, but I think Fannie Mae and Freddie Mac are more accurately regarded as examples, though no less unlovely, of something else: a capitalist-socialist hybrid. They were not regulatory agencies; until they collapsed during the financial crisis of 2008 and were taken over by the federal government, they were private corporations that had been chartered by Congress to promote home ownership. Their status as GSEs (government-sponsored enterprises) created an expectation that the government would guarantee their debts. This expectation enabled them to borrow at lower interest rates than other private corporations. They were supposed to promote home ownership by buying or guaranteeing home mortgages. They did that; they also pioneered mortgage securitization—in effect turning mortgages into bonds, which are more liquid than mortgages and so could be sold all over the world, bringing more capital into the U.S. residential real estate market, thus promoting home ownership, just as Congress wanted. Because of the low interest rates they paid, Fannie and Freddie were immensely profitable until the financial crisis brought them down.

As Becker points out, Fannie and Freddie were effective in obtaining congressional and presidential assistance to ward off threats to their activities and their profits. But I don’t think that that assistance, unseemly as it was, and perhaps corrupt as well, was the basic problem of Fannie and Freddie, or the cause of their collapse; nor do I think their collapse was of any great consequence for the nation.

I don’t think there was ever a good reason to promote home ownership over renting (so I would favor the abolition of the deductibility of mortgage interest from federal income tax). It ties up a lot of the capital of individuals and reduces labor mobility. Maybe it makes for more responsible citizens by giving people a property interest, but there must be better candidates for federal largesse. And even if there were a good reason for government to promote home ownership, federal chartering of mortgage institutions would not be a sensible means of implementation. Are the external benefits of home ownership, if any, so great that the mortgage-interest tax deduction is not subsidy enough? True, the lower the interest rates that Fannie and Freddie paid to borrow money, the riskier the mortgage loans they would agree to underwrite by buying or guaranteeing the loans, but home ownership is not promoted in any meaningful sense by the granting of mortgages to people likely to default.

Conservative critics led by Peter Wallison of the American Enterprise Institute lay on Fannie and Freddie a significant measure of blame for the housing bubble of the early 2000s and the ensuing financial crisis of September 2008. But these critics have not persuaded me. Private banks like Morgan Stanley and Goldman Sachs and Countrywide bought mortgages, securitized them, and sold interests in them (these firms also bought mortgage-backed securities created by other financial firms)—a sequence wholly separate from the activities of Fannie and Freddie. It was an immensely profitable activity, so there is no reason to think that had there been no Fannie and Freddie the volume of mortgage-backed securities would have been less than it was. Whether a market has X firms or X – 1 firm is unlikely to affect the volume of market activity. I don’t think Fannie and Freddie took more risks than their competitors; the difference is that they were more deeply committed to the housing market (that was their mission) than most other firms, so less likely to survive a housing bubble.

The financial crisis might actually have been worse without Fannie and Freddie. They collapsed and were simply taken over by the federal government. Had their debts instead been debts of Morgan and Goldman and other private banks, those banks might have collapsed and been taken over by the federal government as well, providing daunting challenges to the government’s ability to run the banking system. The cost to society of the government’s taking over Fannie and Freddie is hard to estimate. The takeover resulted in a transfer payment to creditors of Fannie and Freddie from (ultimately) the federal taxpayer. Had there been no Fannie or Freddie, other mortgage companies would have had more debt, and the owners of that debt would also have been bailed out by the federal government, in all likelihood.

Congress would do well to abolish Fannie and Freddie. But it won’t. The constellation of political forces that supports subsidizing home ownership is too strong.

Continued in article

Barney's Rubble ---
http://www.trinity.edu/rjensen/2008Bailout.htm#Rubble

The largest earnings management fraud in history and the firing of KPMG ---
http://www.trinity.edu/rjensen/Theory02.htm#Manipulation

Population Growth --- http://en.wikipedia.org/wiki/Population_growth
Population Growth from 10000 BC to 2000 AD

The 1970s has many ugly legacies. Surely, however, the cruelest was this leading Western export: the idea that the Earth has reached its limit with us, and that the solution is to persuade other folks who don't yet have what we do to lower both their populations and their expectations.
"The Return of the Population Bomb: When the experts tell you there are too many people, they don't mean too many Swedes," by William McGurn, The Wall Street Journal, June 13, 2011 ---
http://online.wsj.com/article/SB10001424052702303714704576383764019676614.html?mod=djemEditorialPage_t

When Marx wrote that history repeats itself, first as tragedy, then as farce, he had it half correct. In our day, it comes back as the 1970s.

All around us we see its manifestation in the revival of floppy hats, platform shoes and maxi dresses. We can, however, also detect this same retro fashion sense on the op-ed page of the New York Times. There last week Tom Friedman's column carried one of the sentiments most in vogue in the 1970s: "The Earth Is Full."

Mr. Friedman invokes the usual grim specters so beloved of a certain kind of intellectual: natural disasters (tornadoes, floods and droughts); rising prices (food and energy); the threat to stability; and of course the kicker—that there are just too many darn people around these days.

It's a familiar meme, and it comes bearing the familiar scientific credentials. In this case the authority is, Mr. Friedman tells us, "an alliance of scientists" called the Global Footprint Network, "which calculates how many 'planet Earths' we need to sustain our growth rates." Right now they say it is 1.5. Which can mean only one thing unless we cut way, way back: We're doomed.

Back in the days of bad hair and Jimmy Carter, this kind of report was a staple of enlightened thought. Here is but a tiny sampling:

• On the eve of that decade, Stanford University biologist Paul Ehrlich opened his best-selling book "The Population Bomb" with this sunny declaration: "The battle to feed all humanity is over. In the 1970s, the world will undergo famines—hundreds of millions of people are going to starve to death." Of course, nothing of the kind happened.

• The Club of Rome, an international group of academics, scientists and global citizens, commissioned a now-infamous 1972 report called "The Limits to Growth." Like so many others, these scientists informed us that we were running out of . . . well . . . everything.

• Or take Robert McNamara, the "whiz kid" president of Ford Motor Co. Later, as chief of the World Bank, he would throw tens of millions of development dollars into population control because he said—sounding much like Mr. Friedman—the alternative was a world no one would want. If voluntary methods failed, he warned, nations would resort to coercion.

All these things were the received orthodoxies of their day, endorsed by the experts, sustained by the scientists, and challenged by only a few brave souls such as economist Julian Simon. From these pet orthodoxies two clear implications flowed.

First, when the experts tell you there are too many people, they don't mean too many Swedes. They mean too many poor people, mostly brown or black or yellow. In Hong Kong, I stumbled across a 1959 book written by an American entitled "Too Many Asians." Today the focus has shifted from Asia—but the theme remains. Early last month, the New York Times ran a page-one story citing United Nations warnings about the growing population of Africa.

Second, if the experts continue to tell countries they need to control their population or else, Mr. McNamara is absolutely right: That "or else" is going to mean coercion.

We saw that throughout the 1970s as well.

In India, the government of Indira Gandhi launched a massive and brutal sterilization campaign. In China, women's monthly periods were charted on blackboards at their places of work—and even today women are sometimes hunted down and forced to abort if they become pregnant without permission. Meanwhile, in the early 1980s, black women in Namibia complained about being forcibly injected with contraceptives after having their first babies. From Peru to the Philippines, the poor and vulnerable were subject to similar outrages.

Continued in the article

"Current World Population," by Matt Rosenberg, About.com Geography, May 11, 2011 ---

### World Population Growth

 Year Population 1 200 million 1000 275 million 1500 450 million 1650 500 million 1750 700 million 1804 1 billion 1850 1.2 billion 1900 1.6 billion 1927 2 billion 1950 2.55 billion 1955 2.8 billion 1960 3 billion 1965 3.3 billion 1970 3.7 billion 1975 4 billion 1980 4.5 billion 1985 4.85 billion 1990 5.3 billion 1995 5.7 billion 1999 6 billion 2006 6.5 billion 2009 6.8 billion 2011 7 billion 2025 8 billion 2043 9 billion 2083 10 billion
##### Related Articles

Bob Jensen's threads on the entitlements bomb ---
http://www.trinity.edu/rjensen/Entitlements.htm

Question
What "tactics" of this controversial professor led to his resignation/firing?

Alleged misrepresentation of facts.

"Controversial Journalism Prof to Retire," Inside Higher Ed, June 14, 2011 ---
http://www.insidehighered.com/news/2011/06/14/qt#262441

Northwestern University announced Monday that David Protess will retire on August 31. As professor of journalism, Protess won acclaim for leading the Innocence Project, which worked to help falsely accused individuals demonstrate their innocence, but in the last year his tactics have been questioned by law enforcement officials and the university.

David Protess Press Announcement from Northwestern ---
http://www.northwestern.edu/newscenter/stories/2011/04/university-statement-david-protess_mobile.html

Northwestern University generally does not discuss publicly actions regarding its faculty and staff. However statements in the media by Professor David Protess and our desire to be as forthcoming as possible on an issue of great importance to the University, its faculty, our students, alumni and our community prompt us to make the following statement.

This afternoon Medill Dean John Lavine shared information with his faculty that explained his decision several weeks ago not to assign teaching responsibilities to Professor David Protess this quarter.  Protess is on leave from both teaching and directing the Medill Innocence Project this quarter.

Lavine’s decision followed a thorough review by the University and its outside counsel, Jenner & Block, of the information provided by Protess to Lavine and University attorneys in connection with a court case and of the practices and procedures of the Medill Innocence Project, which has been led by Protess. The review uncovered numerous examples of Protess knowingly making false and misleading statements to the dean, to University attorneys, and to others. Such actions undermine the integrity of Medill, the University, the Innocence Project, students, alumni, faculty, the press, the public, the State and the Court.

Under Professor Protess’ supervision, student journalists working with the Medill Innocence Project investigated the murder conviction of Anthony McKinney from Fall 2003 through spring 2006.

In May 2009, the Cook County State’s Attorney’s Office issued a court-approved subpoena to Medill seeking 11 categories of documents relating to the McKinney case, including a request for memoranda created by students as part of their investigative journalism work on the case. The University began working on a way to respond to the subpoena completely and accurately and also protect our students, their privacy and journalistic independence.

To be responsive to the subpoena, Northwestern needed to be certain which materials could be protected by a claim of reporter’s privilege under Illinois law and not be relinquished to the State and what materials would have to be turned over because they had been published or shared with a third party outside Medill. University lawyers repeatedly made that distinction clear to Protess, and Northwestern relied on his representations, as the long-time director of the Innocence Project, regarding what had been shared outside Medill and for which privilege could therefore not be claimed. Based on the information provided by Protess, the University took the position that student memos were privileged.

However, in June 2010 the University discovered that there were many inconsistencies emerging between Protess’ representations and the facts. Mr. McKinney’s lawyers produced in court student memos they said were received from Protess or from the Medill Innocence Project at his direction – documents Protess had said were never shared outside Medill. As a result, it became clear that the position the University had taken in court concerning the students’ memos was not supportable. Additionally, Sidley Austin, the law firm representing Protess and the University, informed the court that statements it had previously made were not accurate and withdrew its representation of Protess.  Northwestern then hired Jenner & Block to determine what had happened in the subpoena response process.

Jenner & Block scrutinized relevant material obtained from computer hard drives related to the McKinney matter and conducted interviews with individuals with first-hand knowledge of the conduct regarding the subpoenas in the case.

The review uncovered considerable evidence that Protess: authorized the release of all student memos to Mr. McKinney’s lawyers despite his repeated claims to the contrary; knew from the very beginning that doing so waived any claim of privilege; and repeatedly provided false and misleading information to the lawyers and the dean.  As just one example, in December 2009 Protess sent them a falsified communication in an attempt to hide the fact that the student memos had been shared with Mr. McKinney’s lawyers.  This communication included what Protess said was a copy of a November 2007 email, unredacted save for removal of “personal information,” that he had sent to his program assistant.  The email copy he provided stated that: “My position about memos, as you know, is that we don’t keep copies….” However, examination of the original 2007 email, which was only recently obtained by the University, revealed that the original wording actually was: “My position about memos, as you know, is that we share everything with the legal team, and don’t keep copies….”

In sum, Protess knowingly misrepresented the facts and his actions to the University, its attorneys and the dean of Medill on many documented occasions. He also misrepresented facts about these matters to students, alumni, the media and the public. He caused the University to take on what turned out to be an unsupportable case and unwittingly misrepresent the situation both to the Court and to the State.

Medill makes clear its values on its website, with the first value to “be respectful of the school, yourself and others - which includes personal and professional integrity.”  Protess has not maintained that value, a value that is essential in teaching our students.  That is why Medill Dean John Lavine has assigned the course to another faculty member this quarter and Protess is on leave.

The Medill Innocence Project’s work and achievements have been instrumental in pursuing the truth and righting wrongs. Northwestern University and Medill are committed to this work and its continuance, and the investigative journalism class related to the Project is now underway for the quarter with new leadership.

Another very controversial case where a tenured professor was actually fired from the University of Colorado is the Ward Churchill case where Churchill was accused of plagiarism and of false claims that he is a Native American --- The Cherokee Wannabe.
The Saga of Ward Churchill --- http://www.trinity.edu/rjensen/HypocrisyChurchill.htm
In June 2011 Churchill's long-awaited appeal was accepted for deliberation by the Colorado Supreme Court. The Court is expected to rule on this case late in 2011,

Bob Jensen's threads on when professors cheat are at
http://www.trinity.edu/rjensen/Plagiarism.htm#ProfessorsWhoPlagiarize

"Wage Inflation is a B*tch," by Adrienne Gonzalez, Jr. Deputy Accountant, June 15, 2011 ---
http://www.jrdeputyaccountant.com/

Now what you should do is check out this (April 2000) Cleveland Fed paper,

"American Wage Stagnation," by Richard Posner, The Becker-Posner Blog, April 18, 2010 ---
http://www.becker-posner-blog.com/2010/04/american-wage-stagnationposner.html

"Trends in American Income Inequality Prior to the Recession," Nobel Lauriate Gary Becker,  The Becker-Posner Blog, April 18, 2010 ---
http://www.becker-posner-blog.com/2010/04/trends-in-american-income-inequality-prior-to-the-recession-becker.html

"The Trouble with ObamaCare Counting the problems with the president's health care plan," by David Harsanyi, Reason Magazine, June 8, 2011 ---
http://reason.com/archives/2011/06/08/the-trouble-with-obamacare

Democrats will often get irritable when some clingy philistine refers to ObamaCare as "socialized medicine." It's simply not a precise phrase for the Patient Protection and Affordable Care Act. In any event, it's not socialized yet, you ignoramuses! Progress doesn't happen overnight. No worries, though, recent signs portend that ObamaCare will give us the state-run plan we proles deserve.

A new study published in McKinsey Quarterly claims that in 2014, the provisions of ObamaCare will induce 3 in 10 employers to "definitely or probably" stop offering health coverage to their employees. And we can only assume the companies have had the good sense not to read the legislation.

Sure, the president promised we could keep our insurance if we liked it. But why would you want to be mixed up with pitiless corporations that focus on profits, anyway? ObamaCare courageously forces states to implement concocted "exchanges" so that someone much smarter than you can pick participants, regulate prices and keep an eye on things. Sounds like a vigorous marketplace. It's only a wonder that more Americans aren't clamoring for government-run supermarkets, smartphones, and dating exchanges, as well.

You'll also recall that the un-socialized system allowed 20, 30, 40 million (please feel free to come up with any number you'd like; The New York Times won't care) people to go uninsured. Medicare's chief actuary estimated that 400,000 would sign up for these high-risk pools before ObamaCare kicked in. The Congressional Budget Office estimated that the budget would be able to handle 200,000, and others claimed that the program would need eight times the funding to meet demand. This was the driving reason for ObamaCare. But as Megan McArdle of The Atlantic points out, just as with the exchanges, folks have been standoffish, with only about 18,000 people signing up.

Victory, right? The success of a government handout is always measured by how little Americans need to use it, right? Well, judging from the food stamp administration's actions, that would be a big no. What this probably calls out for is more public service announcements or a wider net. Hey, we'll just get some toffee-nosed yacht jockeys to offset the cost.

That's not to say there aren't people out there who really need support. The president has generously handed out nearly 1,400 ObamaCare waivers to the neediest among us. About 20 percent of them have been awarded to an upmarket district in San Francisco that, by pure chance, is represented by Nancy Pelosi. Others, such as the AARP and local unions, had demanded we pass ObamaCare so they could not take part in it immediately.

We'll also soon be hearing more about the lawsuits challenging ObamaCare's individual mandate. Randy Barnett, a professor of constitutional law at Georgetown University Law Center, recently asked, "If Congress can impose this economic mandate on the people, what can't it mandate the people to buy?" Everything and nothing. And that's the beauty of it.

And let's not forget it was Obama, the newfound holy savior of Medicare, who pinned the key cost control component of health care reform on Medicare through his Independent Payment Advisory Board, or what bitter righties call a rationing board.

Continued in article

"The ObamaCare Bad News Continues:  Projected costs escalate and tens of millions will lose their current coverage," by Karl Rove, The Wall Street Journal, June 16, 2011 ---
http://online.wsj.com/article/SB10001424052702304319804576387542318531626.html#mod=djemEditorialPage_t

A kerfuffle was stirred up last week by a devastating McKinsey & Company study that concluded up to 78 million Americans would lose their current health coverage as employers stopped offering insurance because of President Obama's Patient Protection and Affordable Care Act.

The report contradicted Mr. Obama's frequent pledge that under his reform, "if you like your health-care plan, you can keep your health-care plan." And McKinsey's was at least the fourth such analysis calling the president's promise into question.

In May 2010, former Congressional Budget Office (CBO) Director Douglas Holtz-Eakin concluded that employers would drop coverage for about 35 million Americans because of ObamaCare. A month later, in June 2010, the National Center for Policy Analysis (NCPA) pegged the number between 87 million to 117 million. And last November, Allisa Meade, a McKinsey analyst, told health-insurance company executives that 80 million to 100 million people might lose their employer-provided health insurance.

Simple economics is the reason. According to the Kaiser Family Foundation's Employer Health Benefits 2010 Annual Survey, the annual premium for an average policy last year was \$5,049 for a single worker, with the company picking up roughly \$4,150 and the employee the rest. For a family of four, the total cost was \$13,770, with the company picking up \$9,773.

Yet under ObamaCare, businesses can stop providing health-care coverage, paying a \$2,000 per-worker fine instead. For small businesses, the trade-off is even more attractive: They are given a pass on the first 50 workers.

Workers losing coverage will be moved into the "exchange," a government-run marketplace to buy health plans. Those whose insurance costs were more than a specified share of their income (9.5% in 2014) could get subsidies. The exchange starts in 2014 and is fully operational by 2016.

Perversely, ObamaCare both drives up the cost of insurance with mandates and rules while making it attractive for companies to dump the increasingly more expensive coverage and pay a lesser fine. There will be huge ramifications for the country's finances if more workers lose coverage than was estimated.

When Mr. Obama's health-care bill passed in March 2010, the CBO and the congressional Joint Committee on Taxation predicted that 24 million workers would be covered by the exchange. Of these, nine million to 11 million would lose their employer-provided coverage, offset by six million to seven million who would be getting employer-provided insurance, for a net of three million workers losing company-sponsored coverage. The CBO said the exchanges would cost \$511 billion over ObamaCare's first decade.

But what if more people are dumped into the exchange than originally estimated? Costs from the increased subsidies will explode.

Continued in article

Bob Jensen's threads on health care insurance ---
http://www.trinity.edu/rjensen/Health.htm

University of Illinois: Gaming Initiative --- http://www.library.illinois.edu/gaming/index.html

The Realities of High Corporate Tax Rates in States Like Illinois and the Realities of Rotten Governmental Accounting
The same thing that drives corporations to set up sham corporate headquarters off shore (to keep profits out of reach of the IRS) also drives corporations to flee states that impose high corporate tax rates (like Illinois, New York, New Jersey, and California) to states that took on less unfunded entitlements burdens (like Texas and North Carolina).

"Illinois Tax Firesale:  A case study in high corporate rates and special favors," The Wall Street Journal, June 9, 2011 ---
http://online.wsj.com/article/SB10001424052702304474804576370102955207570.html#mod=djemEditorialPage_t

Illinois gained nationwide notoriety in January when Governor Pat Quinn signed into law a 67% hike in the personal income tax rate while lifting the corporate tax rate to 9.5%, the fourth highest in the nation. How is that working out?

The good news is that corporate tax receipts in Springfield are up by about \$300 million amid the economic recovery—though the state comptroller's office announced in April that the state still faces \$8 billion in unpaid bills. The bad news is that, according to the state's Department of Commerce, Illinois has already shelled out some \$230 million in corporate subsidies to keep more than two dozen companies from fleeing the state. And more are on the way.

The ink was barely dry on the new taxes before major employers announced their unhappiness. The equipment giant Caterpillar, the spinal cord of the Peoria economy, says the higher business and personal income taxes will cost the company and its 23,000 Illinois employees \$40 million a year. "I want to stay here, but as the leader of this business I have to do what's right for Caterpillar when making decisions about where to invest," CEO Doug Oberhelman said in the wake of the tax increase, adding that Illinois "is not favorable to business."

Caterpillar has long built new facilities outside Illinois to avoid the United Auto Workers, most recently in Texas. And after the Quinn tax hike, at least six states—from Virginia to zero income tax South Dakota—offered lower costs if the firm relocated. Caterpillar is staying put for now.

When the cellphone business Motorola Mobility hinted this spring that it might leave for San Diego, Mr. Quinn bounced into action. "I know how to work with the big businesses," he declared to the media, as he rushed—taxpayer checkbook in hand—to keep the company in the state. Motorola pocketed \$100 million in tax incentives last month to stay in Libertyville.

Mr. Quinn's latest quest is to keep Sears in the state. In May, the retailer—based in Hoffman Estates with some 6,000 workers—hinted that it may look for a new home because of expiring tax breaks. The suitors include Georgia, North Carolina, Tennessee, Texas and even New Jersey. "We will sit down with the Sears people," Mr. Quinn promised. "I'm sure we'll work something out."

No doubt he will, since in two years in office Mr. Quinn has doled out corporate welfare to at least 80 firms, costing the state nearly \$500 million, according to a tally by the Chicago Tribune. Late last year Navistar, the commercial truck engine maker, secured \$65 million in handouts. Continental Tire nabbed \$19 million. Even deal-of-the-day Web business Groupon, which is preparing an IPO to raise \$750 million, grabbed \$3.5 million in tax credits to stay in Chicago. U.S. Cellular got a \$7.2 million package to keep its headquarters in the Chicago area, while Chrysler received an "investment package" worth \$62 million for its Belvidere assembly plant.

Continued in article

Jensen Comment
Some states suffer worse from unfunded long-term entitlements obligations --- like Illinois and California made promises they may not be able to keep for retired state worker and teacher pension and medical plans relative to North Carolina that has much more conservative fiscal management.

Some state governments have made entitlements promises that they may just not be able to keep. Governmental accounting has been a game of shadows and mirrors and wonderland dreams.

Voters are just beginning to realize how the accounting profession aided and abetted the deceits of lousy fiscal management in local, state, and national government
http://www.trinity.edu/rjensen/Entitlements.htm

"Escape From Illinois, Cont:. Now the Chicago Merc wants relief," The Wall Street Journal, June 15, 2011 ---
http://online.wsj.com/article/SB10001424052702303848104576383872937102498.html#mod=djemEditorialPage_t

The line of businesses looking for tax relief in Illinois keeps growing, with the latest plea coming from the owner of the iconic Chicago Mercantile Exchange and Chicago Board of Trade. CME Group Executive Chairman Terrence Duffy told a shareholders meeting last week that Illinois Governor Pat Quinn's 30% hike in the corporate tax rate enacted in January will cost the company \$50 million this year. "We don't want to leave Chicago," Mr. Duffy said, but "we have to do what's right for our shareholders." A spokesman confirmed that the company is exploring all options to save money.

We reported last week that dozens of major Illinois firms—from Caterpillar to Motorola to Sears—are in open rebellion in the wake of Springfield's \$6 billion revenue grab and new 9.5% corporate rate, fourth highest in the U.S. Mr. Quinn has already carved out some \$230 million in special tax breaks this year to save companies from his own tax policies and keep these firms from fleeing.

Our guess is that Mr. Duffy's statement is also an attempt to bargain for better tax treatment, and it's hard to blame him. The Chicago Tribune reports that CME pays 8.9% of its income in state tax, while most businesses pay well below 7% and many pay no tax at all thanks to rich deductions. Mr. Quinn says he's having an "ongoing conversation" with CME, and we'll bet a February pork belly contract that he'll deliver the bacon.

Continued in article

http://www.trinity.edu/rjensen/Theory02.htm#GovernmentalAccounting

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

Bob Jensen's Tidbits Archives ---
http://www.trinity.edu/rjensen/tidbitsdirectory.htm

Bob Jensen's Pictures and Stories
http://www.trinity.edu/rjensen/Pictures.htm

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

·     With a Rejoinder from the 2010 Senior Editor of The Accounting Review (TAR), Steven J. Kachelmeier

·     With Replies in Appendix 4 to Professor Kachemeier by Professors Jagdish Gangolly and Paul Williams

·     With Added Conjectures in Appendix 1 as to Why the Profession of Accountancy Ignores TAR

·     With Suggestions in Appendix 2 for Incorporating Accounting Research into Undergraduate Accounting Courses

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 ---
http://www.trinity.edu/rjensen/theory01.htm#DoctoralPrograms

AN ANALYSIS OF THE EVOLUTION OF RESEARCH CONTRIBUTIONS BY THE ACCOUNTING REVIEW: 1926-2005 -

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