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Archive for the ‘DelawareSpends’ Category

Earlier this week Business Insider UK published an article titled, “Conservatives will hate this: Proof That Government Spending Cuts Hurt Economic Growth”. From the article:

“… austerity subtracted about 0.76 percentage points off the real growth rate of the economy between the middle of 2010 and the middle of 2011. If real government spending had remained constant at mid-2010 levels and everything else stayed constant, (yes we know these are big assumptions) the US economy would now be about 1.2 per cent larger.

There’s a secondary conclusion, too: War is good (economically), it turns out.”

They provided a graph (created by Matt Klein of the Financial Times) with data from the U.S. Bureau of Economic Analysis (BEA) “proving” that Keynesianism works. Without public spending, the author argued, our economy can’t grow.

US govt spending growth contribution detail

Enter the Foundation for Economic Freedom, whose founder Leonard Reed once published the famous short story “I, Pencil.” You absolutely should read this, by the way. An economist named Robert Murphy points out the fallacy in the calculations made for the graph above:

“Edwards (the author of the Business Times UK article) seems to think that the above chart shows at least a correlation between government spending and economic growth. After all, he wrote that the BEA chart “seems to show that government has a pretty straightforward effect on GDP.” But… the chart does nothing of the kind.

Look carefully at the legend. The various colored rectangles are different components of government spending. Specifically, the rectangles indicate how the change in each component — positive or negative — relates to the change in overall GDP. The black line is not GDP growth, but is instead the sum of the various components of government spending… if we take the BEA’s word for how much each component of government spending contributed to GDP growth in each quarter, then we can stack those numbers on top of each other and even add them up! Contrary to Edwards, the FT chart doesn’t “show” anything at all, except that the BEA each quarter announces how much various components of government spending contributed to, or subtracted from, GDP growth.

After this discussion, we can see why pretty charts from the FT showcasing government spending’s “contribution to GDP growth” quarter by quarter don’t really mean anything. It’s the same for the ex post “empirical” analyses that concluded that the Obama stimulus package “saved or created” such-and-such million jobs. The underlying models that generate these estimates assume a Keynesian world, and thus cannot test whether the Keynesian model is correct.”

Even though the government prints and issues money, it’s the private sector (both businesses and consumers) who determine the value of a good or service. The government can only run on money taken from the private sector; printing into eternity is Quantitative Easing, which causes inflation if too much is printed. So they tax or borrow it from the people. If government spending really did save economies, both Delaware and America would have people making record amounts of money instead of seeing wages stagnate. The Federal Reserve would not have to continue holding interest rates low in order to convince people to buy things like homes or cars or take out student loans.

Check out CRI’s analysis here and here.

The bottom line is, Keynesianism does not work in the real world, despite efforts by its supporters to say it does. The less the government spends, the less the government needs. Even The News Journal noted that in a recent editorial.

As we approach 2015, here’s to more free markets and less government spending at all levels.

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 green·wash·ing

noun \ˈgrēn-ˌw-shiŋ, –ˌwä-\

the practice of promoting environmentally friendly programs to deflect attention from an organization’s environmentally unfriendly or less savory activities; a superficial or insincere display of concern for the environment that is shown by an organization (dictionary.com definition)

For those of you who have followed CRI’s activities for the last two-plus years, you will recall how we have publicly opposed the state’s cronyist deal with Bloom Energy to hand a private “green” company $529 million in guaranteed state taxpayer revenue over a period of 21 years EVEN IF THE COMPANY GOES OUT OF BUSINESS OR RENEGES ON ITS OBLIGATIONS OR IF ITS TECHNOLOGY BECOMES OBSOLETE.

On Monday, October 20, 2014 NBC Bay Area ran a six-minute long investigation into Bloom Energy and whether the company was misleading the public about its technology. The video is below.

<script type=”text/javascript” charset=”UTF-8″ src=”http://www.nbcbayarea.com/portableplayer/?cmsID=279873632&videoID=rX70SdgdBmnB&origin=nbcbayarea.com&sec=investigations&subsec=&width=600&height=360″></script&gt;

From the article:

“The NBC Bay Area Investigative Unit analyzed performance data provided to the state of Delaware for Bloom boxes that power 22,000 homes in the state. Delaware is home to the largest installation of Bloom fuel cells in the nation, where the technology has been in operation for more than two years.

According to the most recent data available, Bloom boxes have achieved the 773 emission rate just three months out of a 24 month period. The average emission rate is 823.

The company declined numerous requests to discuss their carbon emission rate in an on-camera interview, but in a conference call Bloom representatives said the 773 figure is achieved when the boxes are brand new, noting that CO2 emissions increase as the boxes age.

“If the thing emits more carbon dioxide than they say it does then this is greenwashing,” Leveen said.”

The bottom line: The only thing “green” about Bloom Energy is the taxpayer money flowing from hardworking Delawareans, and even those who are not working, into the pockets of multibillionare business cronies and their allies.

If you agree please visit us a www.caesarrodney.org and donate today!

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From the News Journal and Office of Management and Budget:

These officials were the state’s top-salaried employees in 2013, according to records from the Delaware Office of Management and Budget.

1. Orlando J. George Jr., President, Delaware Technical and Community College: $370,939.92, Total pay=$469,885.84

2. Dr. Vincent F. Carr, Medical Director, Department of Correction: $218,000.12

3. Dr. Gerard Gallucci, Medical Director, Division of Substance Abuse and Mental Health: $211,975.92

4. Tie: Medical Examiner employees: $201,400.42

Deputy Chief Medical Examiner Adrienne Sekula-Perlman and Assistant Medical Examiners Edward McDonough and Jennie Vershvovsky earned the same salary.

5. Dr. Richard T. Callery, Chief Medical Examiner: $198,521.96

6. Myron T. Steele, Supreme Court, Chief Justice: $192,914.50,*now retired

7. Leo E. Strine Jr., Chancellor, Court of Chancery: $191,360,*now Delaware Chief Justice

8. James T. Vaughn Jr, President Judge, Superior Court: $191,359.73

9. Chandlee Johnson Kuhn, Chief Judge, Family Court: $191,268.45

10. Tie: Supreme Court Justices: $191,202.54

The Justices are Carolyn Berger, Henry D. Ridgely, Randy J. Holland and Jack B. Jacobs.

73. Jack A. Markell, Governor, State of Delaware: $170,999.92

 

What are your thoughts on this list?

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Governor Markell released his budget for FY2015 and it includes new taxes, including a 10 cent per gallon increase in the gas tax. He also wants to increase taxes on businesses and move money from the Transportation Trust Fund to help offset the deficit.

Where are we going with this?

Much of this increase in spending is unnecessary and there are ways to pay for the spending without new taxes. For example, Delaware could save $90 million a year in the infrastructure category if they simply change their prevailing wage methodology from the state’s prevailing wage survey to the US Bureau of Labor & Statistics (BLS) survey. This is because Delaware’s survey is much more union-friendly and has caused public works projects to see an explosion in spending. The BLS survey includes more businesses and while still union-friendly is much less so than the state’s.

Delaware has $29 million sitting in bank accounts, unspent money collected from the Regional Greenhouse Gas Initiative. This is money polluting businesses pay to the state in order to “offset” their emission of CO2. The idea was that money would be spent on low-income weatherization projects (like installing energy-efficient windows or dishwashers in homes), but in reality most of the money spent was on administrative costs, with very little going to these projects (which had their own problems).

Delaware also makes the cost of business difficult, with electric prices 25% higher than the national average, the state with the worst gross receipts and corporate income tax rate together, and a personal income tax rate which make Delaware uncompetitive with Florida or Texas for jobs; in place the state has to essentially pay companies like ILC and Kraft Foods to keep jobs here. What we need is a natural gas pipeline to lower energy costs, a repeal or at least reduction in the tax rates mentioned above, and more support for existing firms. Delaware was last in the nation in terms of job expansion by existing in-state firms.

Let us hope that the General Assembly decides to move Delaware in a pro job-growth direction and away from punishing the middle class and small businesses of Delaware with onerous taxes and fees which are only encouraging the state to spend more.

*Note:This article will be updated when further details about the FY2015 budget are revealed.

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Today we will focus on three articles from three different newspapers to explain where the economy is and what to make of news of our recent resurgence. The first article, Article One, is from the Delaware State News, “Chips are down, Dover Downs executives say” (http://bit.ly/15votif).  Delaware’s casinos have suffered heavy losses due to two main factors: high casino taxes at 43.5% (along with 11% for the horsemen at the racetrack and 7% to vendors) and, required by law, high payouts to slot-players.

“With $60 million in debt, declining share prices and consistently lower quarterly revenues, the casino can no longer produce enough income to weather state taxes, Dover Downs Gaming & Entertainment Inc. President and CEO Denis McGlynn said.

Mr. McGlynn said the casino has had 150 layoffs over the past four years, frozen pension plans, pushed more medical benefit costs onto employees and lost its ability to pay dividends to shareholders.

“We’re left with nowhere else to cut,” Mr. McGlynn said. “You get in a death spiral where you can’t recover.”

In 2012, $118.9 million in gaming revenue went to the state, leaving Dover Downs with $74.4 million.

However, after net expenses for payroll and payout to stakeholders, Mr. McGlynn said the casino garnered only $4.8 million for capital improvements.”

Delaware’s economy will suffer if the casinos reduce services or shut down completely. Harrington Raceway in particular, which is smaller than Delaware Park and Dover Downs, is particularly vulnerable. Competition from other states has hurt business, but the main reason the casinos are struggling is directly due to government meddling. The problem is, the state spends so much money they cannot afford for the short-term to allow for tax cuts, and so Markell’s office has been on record stating they do not intend to touch the tax rate right now. Assuming nothing is done before June 30, that means if the casinos are being forthcoming about their losses, they may be forced to lay off more workers, reduce tables or slot machines, or cut hours, or do other things to reduce costs.

OK, so if employees get laid off, they can qualify for unemployment insurance from the state until they find work, right?

Not so simple. This brings us to Article Two, from the News Journal, “1-week waiting period, higher taxes proposed in jobless benefits reform” (http://delonline.us/ZomTxO)

The state of Delaware took on a a lot of debt to give checks to unemployed workers in the state over the past few years, running up a deficit of about $70 million by borrowing money from the Federal government, which now needs to be paid. Seeing as how the Feds and many states are either broke, going insolvent, or running deficits (Delaware does, even if they insist by law they must balance the budget), Delaware is going to need to get the money from somewhere. Turns out it will be businesses and the unemployed who will pay. A bill will be circulated this week to increase taxes on businesses, and to ask the unemployed to wait 1 week before collecting benefits. The intent is to pay the bill before 2015, when higher Federal taxes would kick in to make up the pay. Although Delaware’s official unemployment is 7.2%, a study of DE’s employed in Delaware Today showed that 15% of workers are public sector, and another 15% work in health and social services, heavily reliant on public funds. There are now only 26,000 manufacturing jobs reported in the state.

OK, so working in Delaware is a toss-up, but not bad. At least housing is affordable, right? Well yes and no; Delaware has more affordable housing for residents, but the current resurgence in home prices may be a false alarm. Moving to Article Three Heidi Moore, a U.S. finance editor at The Guardian newspaper in the U.K., believes the current housing “comeback” is really a sham predicated on just seeing housing prices go up. (http://yhoo.it/14oD24G) and (http://bit.ly/1aykQZQ)

Basically what has happened is that the Federal Reserve is holding interest rates to record lows by printing money to subsidize purchases on things like cars, homes, student loans, and personal loans, all of which have seen an increase in volume moved over the last 3 years (this includes the fact that the government has bought many of these items with taxpayer money), that does not mean people have more money necessarily. What it means in housing, for example, is that “house-flippers” (those who buy homes, fix ’em up, and sell ’em quickly for profit) are driving up the cost as their bids become more and more ridiculous. Who is buying homes? The banks, using fresh money hot off the printing presses (literally) to buy homes to make even more money off future sales, and also who are collecting on foreclosed homes.

The point is, when the media tells you home prices are surging, the implication is that housing has recovered and people are finally looking forward to buying a nice home or property. In reality, the same sharks who made money off the last housing bubble are the ones who are making money off this one, set to burst at any time.

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Later, we’ll address health care law and what you need to know. Stay tuned.

 

 

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2013 is already upon us, and three days in things are headed downhill. Congress just passed a bill to respond to the so-called “fiscal cliff” by increasing EVERYONE’S taxes at least a little bit, and a lot if you have a high income (note: if your money comes from investments and assets, such as Warren Buffett, your taxes will be unchanged). More battles will come up on the debt ceiling, automatic defense cuts, and future budget deals (if any come), and no doubt the partisanship will continue.

Delaware has its own problems to deal with: unfunded pension liabilities, out of control Medicaid spending, bad deals with Fisker and Bloom Energy, education performances moving sideways and not up, and taxes such as the gross receipts taxes which harm business growth. These are just a sample of the issues facing the state. While CRI would like to resolve every major issue within the state, that is not very likely.

Therefore CRI will spend 2013 focusing on three elements: improving education standards, discouraging corporate subsidies, and preventing the state from passing any legislation which pushes single-payer healthcare by abolishing private healthcare insurance.

Education reform will be CRI’s top priority in 2013. There is general consensus that the education system as currently structured is not serving the students well, particularly those in areas like Wilmington and Dover, where parents usually do not have the  financial means to send their children off to private schools, and who cannot be guaranteed a slot in the charter schools due to bureaucratic processes. CRI is calling for legislative actions to allow the money to “follow the student”, where parents have options such as Education Savings Accounts (ESA) that give parents the financial opportunity to choose where they want to educate their child. We hope to inform and engage the public and the legislators into some serious action this year that will give students a big victory for their future.

Our second goal is to reduce, if not eliminate, subsidies for preferred businesses and special interest friends of the government. Bloom Energy and Fisker Automotive are two prime examples of the government handing over “subsidies” for “investment” in these companies, meaning hundreds of millions in tax dollars to give to these companies, money we will in reality never receive payback for. There is no industry in Delaware receiving taxpayer money that can be said to be worth the corporate welfare. Our aim is to educate the public and legislators, and push Delaware to either reduce/eliminate current government subsidies to preferred parties, or else to agree to prohibit future government subsidies via “corporate welfare”.

Our third goal will be to discourage the Legislature from passing any bill which bans private health insurance in favor of “single payer” government. While CRI acknowledges the issues in containing healthcare costs, such as Tort reform, allowing insurance to be purchased across state lines, and using means-tested methods to determine who qualifies for Medicare or Medicaid as opposed to just handing it out to anyone who asks, there is no way the government can raise all the taxes needed to pay for this without destroying job opportunities or sending them out of state. Plus, the government will not be able to manage the insurance aspects of healthcare policy without setting up a massive, inefficient bureaucracy, just like they do with everything else.

What do you think? Are there any goals CRI should work for that are no mentioned above?

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from the Caesar Rodney Institute:

 

Lawsuit against the Bloom Energy Deal to be Heard Next Week

Wilmington- The lawsuit against the Bloom Energy deal approved by Governor Jack Markell and five members of the Public Service Commission will be heard at the US District Court on Wednesday, November 14, at 2 PM. The hearing will be in Courtroom 6C on 844 North King Street in front of Judge Christopher J. Burke. The hearing is open to the public, and all are encouraged to attend.

The plaintiffs are John Nichols and Fuel Cell Energy of Connecticut. Mr. Nichols is a citizen who believes his rights as a taxpayer and local resident are being violated as a result of a government-backed deal to provide over $600 million in taxpayer stimulus. Fuel Cell Energy believes they were unable to sell their products in Delaware because Bloom Energy had already been chosen to take the deal offered by the government.

The plaintiffs are being represented by Cause of Action, a non-profit which works to protect the public and taxpayer interests in favor of government accountability and transparency. The Caesar Rodney Institute provided expert testimony in Mr. Nichols’ hearing at the Coastal Zone Industrial Control Board on June 13 of this year. CRI’s testimony and research data on the Bloom Energy deal will be considered as part of the lawsuit.

Please contact:

Barrett Kidner

Chairman and CEO

(302) 734-4935

bek@caesarrodney.org

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