Friday, October 28, 2011

Elaborating On Greed

Malinvestments

Cutting Down Trees With Sticks

A good lesson in free market economics was my professor’s story about a hundred workers chopping down a tree with sticks. Along comes someone with a knife, and then the question now becomes whether keeping the workers employed is more important than introducing a sharp metal object that would empower one man to do the job of a hundred.

The Governor’s budget proposal attempts to swing a hundred sticks without much in the way of lumber production. That is the point after all. The Governor believes government "continues to be a safe haven" for employment, while the Treasurer refers to the ASG payroll as his "top priority". It's a failure of leadership to not introduce a knife to this budget.

The semi-autonomous agencies have followed in lockstep. The only restraint on their personnel costs has been the ASG’s inability to meets its subsidy obligations. Their only sense and purpose of profit is continual bureaucratic expansion.

Meanwhile, tax revenue is expected to decline. Overall tax collection looks to be $800k less than FY11. FY10 income tax collection is a whole $2 million more than what they expect to collect next fiscal year, largely attributed to the federal funds that followed into the territory following the tsunami. The Governor 2% wage tax increase can only account for a projected $600k increase from FY11 to 12, and that’s if the ASG is lucky.

The economy went from bad to worse since FY10, and that’s just the point. The worse the local economy gets, the worse tax collection becomes – no matter how much you raise rates. And economists argue that raising those rates would only discourage the economy even more.

Then, if we distribute next year’s projected number of locally funded ASG workers through Mrs. Langford’s breakdown of the current workforce and average salaries, it will take all $46.5 million in projected tax revenue to cover their payroll. In exchange, other needs such as repairs for elementary schools, expansion of the prison facility, simple road repairs, hospital referrals, etc. go unfunded.

That is the fallacy of maximum employment as an economical goal. Think of the worker with the knife who displaces the hundred using sticks. Employment in the short-term may be hampered, but his production now allows more lumber for the displaced workers to make homes, furniture, paper and all sorts of products made out of wood.

We cannot hide or deny the current economics that portend a national trend towards austerity. We need to consider reforms already out there to get ahead of game locally. Like tying the local workforce to 5% less than what’s projected to be collected or shifting emphasis of revenue collection from taxation (currently 70%) to fees and charges for service (11%).

The Heritage Foundation found that the most prosperous countries are the most economically free. Their “Index of Economic Freedom” evaluates how much of a country’s government spending is a percentage of its GDP. In their view, “excessive government spending runs a great risk of crowding out private consumption, thereby thwarting the choices of individuals”.

Hong Kong’s (ranked #1) government spending is only 18% of its GDP while American Samoa (whose GDP was $537 million in 2007 according to the BEA) is looking to spend close to 90% with the Governor's budget proposal.

We can see which country is benefiting more using a knife rather than sticks.

In The Spirit Of Transparency

The real sign of a maturing democracy is not in a society’s buildings, roads, infrastructure, industry or even its technology. It’s in the ability of its participants to be graceful in the acceptance of criticism and in their courage to stand up for their principles, whether liberal, conservative, libertarian or any other philosophy.
The more fuss the better, because another sign of a strong democracy is the belief that citizens have the capacity to judge for themselves what arguments stand on the merits and those that do not.
In this respect, I give a hesitant “thumbs up” to the Governor for signaling an openness to debate on his budget proposal. Hopefully, he means what he says.
If he really seeks transparency during this debate, then he can post his budget proposal online. The US Congress, under Republican leadership, makes it mandatory for all legislation to be viewed online by the public in a 72 hour window.
He would serve the interests of all American Samoans by giving everybody the opportunity to chime in with their own two cents.
On top of accountability and determining what our priorities should be, a budget debate is also about what system we mainly expect to achieve our recovery, whether the private sector or government.
Many economists have likened the economy to an engine. What engine (the private sector or government) is more likely to produce a higher speed of recovery the more we put money and resources into it?
That is the line the Governor’s tax increases draw in the sand. Do we want to send more of our limited resources into the engine of government or do we entrust our entrepreneurs and consumers with more of their own money to drive the recovery home?
It’s a debate always worth having when the budget of our government is being proposed. Posting the budget online will further advance that cause in a “spirit of transparency” by the Governor.

The Great Leader Who Could Have Been

The most sincere compliment conservatives can offer President Obama is this: he is a great guy, but his policies stink. That’s really unfortunate because the president is indeed a great guy. He is smart, articulate and charming, and as the nation’s first black president, a majority of Americans have had high hopes for this historic presidency.
But his pioneering of the political frontier was not accompanied with an equally inspirational message. President Obama recently took a look back to Reagan after the “thumping” he and his party received in the 2010 midterm elections. For Obama, Reagan’s comeback after his own “thumping” after the 1982 elections was more about strategy and tactics rather than the essence of the former president’s message.
Nothing could be further from the truth. While Reagan was indeed a great communicator, it was his message of freedom that animated his spirit of governance and served as inspiration for millions of Americans and peoples around the world. President Reagan defined tyranny at home and aboard in every speech, and offered reason and hope for every man to achieve freedom for themselves and their posterity.
Obama lacks a similar inspirational message. Americans are so abhorrent to the tenets of big government liberalism that the president can’t get passed the mask he has to masquerade in. Instead, his speeches are limited to class warfare and name-calling, evoking envy as liberals often do when they fail to make their case to the American people.
If Obama were to define the great liberal project of our time, he would have to get into the details of individual and industry mandates, price caps, minimum benefit levels, and this mandatory regulation and the other to make the whole system work. When an American asks the question “why”, what other answer could the president give than “It’s for your own good”.
Not the stuff great presidents are made. Not the kind of message Americans are looking for.

Stuck In Second Class

Cable TV Critique Needs Some Perspective

Greed in the 21st Century

And The Show Goes On...

The Liberal Let Down-A Depressive Disappointment

Budget numbers don't add up

Government Shutdown

What politics should be all about

ASG need for limited Government

Home Economics

The Future Belongs to Us

Shrinking Pie Equals Bad Politics

Without Foundation?"

With Eyes Wide Open

A Spending Problem, Not A Revenue Problem

In These Difficult Times…

Budget Busters

It’s Not About The Money

The Flaws of Progressive Taxation

Just A Little More Criticism

Avoiding Taxation

Tax Justifications

Failure Of Governance

Protecting Our Culture

Our Culture is not the Problem

Irreconcilable Contradictions