Category: Budget

I So Hope that the Banksters Lose This One

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Puerto Rico is in debt, and, as befitting their colonial status, they have very few options to renegotiate their debt. This is a fact of life for colonial societies: Debt peonage to your imperial masters.

That being said, and audit of Puerto Rico’s debt seems to indicate that many of the debts were issued illegally, and so the contracts under which the debt was issued, and hence the debt itself, may be unenforceable:

An audit report published on Thursday suggests that debt-laden Puerto Rico may be able to void some of its borrowing because politicians exceeded constitutional debt limits and their own authority. 

 The report, shared with MarketWatch, states that some of Puerto Rico’s debt may have been issued illegally, allowing the government to potentially declare the bonds invalid and courts to then decide that creditors’ claims are unenforceable. The scope of the audit report, issued by the island’s Public Credit Comprehensive Audit Commission, covers the two most recent full-faith-and-credit debt issues of the commonwealth: Puerto Rico’s 2014 $3.5 billion general-obligation bond offering and a $900 million issuance in 2015 of Tax Refund Anticipation Notes to a syndicate of banks led by J.P Morgan.

Money for those debt payments is not in the commonwealth’s proposed budget, either. On Tuesday Puerto Rico’s governor, Alejandro García Padilla, sent a proposed 2016-17 budget to the island’s legislature that provides for only $209 million of the $ 1.4 billion of current debt-service cost. As García Padilla told reporters at a news conference: “This is simple: either we pay Wall Street or we pay Puerto Ricans. If the legislature decides we pay Wall Street more, well, each has his responsibility. I will continue defending Puerto Ricans. Money I send to Wall Street, I do not have to provide services here.”  

………

The Puerto Rican constitution contains a balanced-budget clause that explicitly prohibits borrowing to finance operating deficits, but its politicians borrowed to cover deficit financing in its 2014 General Obligation Bond Offering, according to the commission’s initial review. The March 2014 General Obligation Bond states that the proceeds would be used in part to cover deficits that had accumulated and that were expected to occur in the year of the offering. The documents include a chart showing deficits financed with borrowing during the past and that were expected to recur.

In addition, Puerto Rico did not inform bondholders that its constitution forbids it from using debt to finance deficits. That, the commission’s report says suggests “substantive” noncompliance with the letter of the constitution.

The U.S. Supreme Court has said in the Litchfield v. Ballou case and, more recently, in litigation related to Detroit’s bankruptcy that borrowing above a debt ceiling may allow the issuer to declare debt invalid and, therefore, unpayable. Detroit went to court to invalidate $1.45 billion in certificates of participation, debt issued by two shell companies called “service corporations.” The parties settled before the case went to trial, but, while refusing two initial proposed settlements, the judge stated that Detroit’s argument had “substantial merit” and that the suit would have had a “reasonable likelihood of success.”

I really hope that the people of Puerto Rico win, and the bond holders lose.

To Protect and Serve

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It’s confirmed.

The Baltimore PD is nothing at all like the TV series Homicide: Life on the Street.

First we learn that for many years, the company doing psyche evals for would be BPD cadettes was phoning it in, which explains a lot:

Baltimore’s spending panel has cut ties with two contractors.

 Baltimore’s spending panel voted unanimously Wednesday to take action against two companies accused of violating contracts with the city.

 The Board of Estimates, which is controlled by Mayor Stephanie Rawlings-Blake, voted to immediately end a contract with a psychology firm that conducted mental health screenings for many prospective Baltimore police officers. The screenings were far shorter than required.

 The $730,000 contact for Psychology Consultants Associated of Lutherville had been on suspension since last year, pending the results of a city investigation. The city’s inspector general reported this week that its investigation found that nearly three-quarters of officers and trainees said that their pre-employment screenings with the firm lasted 30 minutes or less.

 The contract required at least an hourlong interview for each job candidate.

 In a letter to the inspector general, Baltimore Police Commissioner Kevin Davis accused the firm of “cutting corners” and putting the public and the department “at risk.”

This might explain a lot, including the fact that Baltimore cops were caught looting during the Freddie Gray unrest:

Three Baltimore police officers were accused of theft in two separate investigations — including two charged after being caught on video looting a store during the unrest that followed the death of 25-year-old Freddie Gray.

According to the Baltimore Sun, correction officers Tamika Cobb and Kendra Richard were suspended without pay after footage showed them exiting a local convenience store holding Slim Jims and Tostitos chips on April 25.

That same day, riots broke out in the city after six hours of peaceful protests calling for charges to be filed against the officers who arrested Gray earlier that month. Six officers were later charged in connection wih Gray’s death.

Both Cobb and Richard were assigned to corrections facilities downtown, near the site of the unrest. They face charges of burglary and theft, and bail was set for each of them at $35,000.

Yes, I know that the 2nd story is from a year ago, but I came across both of them today, so I just had to comment.

They seemed to segue nicely one into the other, or as Zathras would say, “At least there is symmetry.”

So Not a Surprise

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It appears that the University of California was preferentially admitting out of state students because they wanted the higher out of state tuition:

The University of California has been admitting thousands of students from out of state with lower grades and test scores than state residents as a way to raise cash, a state audit released Tuesday reveals.

In the last three years, nearly 16,000 nonresident undergraduates — about 29 percent of those admitted — have won spots at the coveted public university with grade-point averages and scores below the median of admitted Californians, according to the 116-page audit. The report criticizes university practices it says undermine state residents’ access to UC in favor of nonresidents, who pay about three times the basic tuition and fees of in-state students: $38,108 versus $13,400.

The state’s Master Plan for Higher Education says UC should admit only nonresidents who are at least as qualified as the “upper half of residents who are eligible for admission,” according to the report from State Auditor Elaine Howle.

But in 2011, UC changed that threshold so that nonresidents only had to “compare favorably” with residents, the audit notes.

This is what you get when you chronically underfund public higher education.

Adventures in Bureaucracy

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In Santa Clara, California, the sheriff, sick and tired of delays and costs of upgrading her jail’s camera system, set up a system with about $750 of equipment purchased from Costco:

Told it would take two more years and up to $20 million to install more security cameras in Santa Clara County’s troubled jails, Sheriff Laurie Smith decided Wednesday to whip out her Costco card and buy a few herself.

The cost for 12 cameras to test: $761.24 — which Smith put on her personal American Express.

The sheriff’s shopping spree came as three of her correctional officers appeared in court Wednesday on charges of beating a mentally ill inmate to death in August — an incident that wasn’t captured by the jail’s existing cameras and exposed troubling surveillance gaps. Smith headed to the store after she learned that the county’s plan to buy cameras through official channels could drag on for two years. She denied it was a publicity stunt.

“It’s imperative we act swiftly,” Smith said Wednesday after returning from her trip to the Costco on Coleman Avenue. “There cannot be a delay because of bureaucracy. That’s unacceptable. Anything we can do to bring additional transparency, we want to do right away.”

A county work crew was set to install them by Thursday morning in maximum-security housing pod 4A, on the fourth floor of Main Jail South.

If the Lorex high-definition 1080-pixel system is as effective as advertised at capturing details like the faces of guards and inmates, the sheriff plans to buy more to bridge the gap until the county installs a better system in 2018. She said she consulted with county building department officials before going shopping and expects to be reimbursed.

Just reimbursed?

They should crown her Queen of Santa Clara as well.

Bummer of a Birthmark, Rahm!

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The Illinois Supreme Court just ruled that Rahm’s attempt to balance the city books by welshing on its pension obligations are unconstitutional:

Beleaguered Chicago taxpayers face short-term gain but long-term excruciating pain now that the Illinois Supreme Court has shot down down Mayor Rahm Emanuel’s plan to save two of four city employee pension funds.

 “These modifications to pension benefits unquestionably diminish the value of the retirement annuities the members…were promised when they joined the pension system. Accordingly, based on the plain language of the Act, these annuity-reducing provisions contravene the pension protection clause’s absolute prohibition against diminishment of pension benefits and exceed the General Assembly’s authority,” the ruling states.

 “A public employee’s membership in a pension system is an enforceable contractual relationship and the employee has a constitutionally-protected right to the benefits of that contractual relationship…Those constitutional protections attach at the time an individual begins employment and becomes a member of the public pension system. Thus, under its plain and unambiguous language, the clause prohibits the General Assembly from unilaterally reducing or eliminating the pension benefits.”

 In the short run, Chicago will be off the hook to find $250 million in additional revenue over five years to honor its commitment to stabilize the Municipal Employees and Laborers Pension Funds.

But over time, Chicago taxpayers will be forced to bear a far heavier, backbreaking burden because employees and retirees won’t be meeting them halfway.

Here’s a though: How about rescinding the sweetheart deals and tax abatements with your friends, and make the rich folks pay their fair share of taxes.

And while you are at it, how about resigning in disgrace for covering up a murder for political gain?

A Tory With a Conscience, and Other Myths

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Iain Duncan Smith, the British Work and Pensions Secretary,  has resigned over cuts to disability payments to the UK’s most vulnerable:

Iain Duncan Smith has resigned as work and pensions secretary, denouncing £4bn of planned cuts to disability benefits as “indefensible”.

He complains of pressure to “salami slice” welfare, saying the latest cuts were a “compromise too far” in a Budget that benefits higher earning taxpayers.

David Cameron said he was “puzzled and disappointed” at the resignation.

Earlier, the government had indicated it would look again at some of the proposed disability benefits changes.

‘Enormous regret’

BBC political editor Laura Kuenssberg said: “There had been bad blood off and on between Chancellor George Osborne and Iain Duncan Smith over some of the more controversial welfare reforms, but nobody expected this move only 48 hours since the Budget.”

She added that she understood Mr Cameron had personally tried to persuade Mr Duncan Smith to stay on and called the resignation “a bombshell at a very sensitive time”
………
Mr Duncan Smith, who was the Conservative Party leader and Leader of the Opposition from 2001 to 2003, wrote in his resignation letter that the changes to disability benefits were “defensible in narrow terms, given the continuing deficit”.

But he said they should have formed part of “a wider process” of finding the best way to focus resources on those most in need.

“I am unable to watch passively whilst certain policies are enacted in order to meet the fiscal self-imposed restraints that I believe are more and more perceived as distinctly political rather than in the national economic interest,” Mr Duncan Smith said.

“Too often my team and I have been pressured in the immediate run up to a Budget or fiscal event to deliver yet more reductions to the working-age benefit bill.

“There has been too much emphasis on money-saving exercises and not enough awareness from the Treasury, in particular, that the government’s vision of a new welfare-to-work system could not be repeatedly salami-sliced.

“It is therefore with enormous regret that I have decided to resign.”

………

Over the weekend Iain Duncan Smith discovered the Chancellor planned to offer cuts in Capital Gains Tax and was very unhappy that those tax cuts were to be offered to the better off, while he had been forced to make more welfare cuts prematurely, in his view. When Number 10 and the Treasury then backtracked on the reforms to PIP today, he concluded that he could no longer remain in government.

Sources close to him are absolutely adamant that his decision was in no way related to his views on Europe.

Smith supports a Brexit from the EU, so there is some speculation that his exit was influenced by this difference.

Personally, I am inclined to think that there are crass political motivations, but I’m a cynic that way.

This is Brilliant Politics

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Rather unsurprisingly, Bobby Jindal has left the finances of the state of Louisiana in a mess.

His successor, Democrat John Bel Edwards realized that the state needs to raise taxes to fix the mess that he inherited.

He has come up with a new way to sell revenue measures, he’s holding the LSU Football program hostage:

Louisiana’s new Democratic Governor John Bel Edwards is pushing for new tax increases to help address the severe budget deficit left behind by former Governor Bobby Jindal. The problem: Voters in Louisiana are allergic to the very word tax.

Edwards took his case to the public in a televised address on Thursday night, warning that inaction on his proposed increases could jeopardize the holiest of all institutions: LSU football.

The state’s higher education commissioner warned this week that unless the legislature acts to provide funding for the public university system, it will have to suspend some classes for the spring semester and give students grades of “incomplete.” Because of NCAA rules, no athlete may compete for his or her team with an “incomplete” on their transcript, meaning that LSU’s football players will be ineligible come the fall semester.

 Nice to know someone who understands his electorate, and is willing to use this effectively.

If So, I Approve this Camel’s Nose………

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Matt Bruenig has a very interesting perspective on Bernie Sanders’ single payer program, specifically, he believes that it provide the fiscal basis for a massive expansion of social welfare programs:

Currently, total health expenditures in the US make up around 17% of GDP. The average for the OECD is 9.3%. Around half of our healthcare spending is public while the other half is private. Thus, very roughly speaking, to shift all of the current healthcare expenditures onto the public health insurance, you’d need initially to raise the tax level by 8.5 points of GDP (half of 17%).

 If you believe, as I do, that switching to a single-payer healthcare system would allow us to better curb healthcare inflation and thus to control costs much more effectively than we currently do, then that means that the 17% of GDP we currently pay towards healthcare could be pushed down over time. Let’s assume that, by keeping healthcare inflation in check through single-payer, we could eventually bring health expenditures down to around 10% of GDP (slightly above the OECD average).

 Under this scenario, we would initially raise the tax level by 8.5 points in order to cover the half of health expenditures that are currently paid out privately. Then, over time, we would cut healthcare expenditures by 7 points (from 17% to 10% of GDP). Assuming we didn’t lower the tax level over the expenditure-slimming period, we would be able to use those 7 points of savings towards other welfare programs (child care, child allowance, paid leave, etc.). And there is a lot of stuff you can get with 7 points of GDP.

He’s an optimist.

My guess is that these savings, will go to bombs and bullets, because  ……… America!!!!

We have still not accepted the wisdom of Eisenhower’s Chance for Peace speech, while we bankrupt ourselves through military procurement and military adventurism.

No, the FBI Won’t Investigate Questionable Pension Fund Deals

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It appears that pensioners have finally begun to realize private equity and its ilk are robbing their funds blind while underperforming the market, but I predict that their calls for an investigation of private equity and hedge fund  practices will go largely unanswered:

Diane Bucci and her fellow retired Rhode Island schoolteachers were angry about a deal last year to cut their promised retirement benefits. For 28 years, the elementary school teacher devoted between 7 and 9 percent of her paycheck to the state’s pension system. In return, the 72-year-old had been promised a consistent cost-of-living increase to make sure her retirement stipend kept pace with inflation. Now, though, state officials were trimming her check in the name of replenishing the depleted pension fund.

There was, however, a sliver of hope — or so it seemed: If the pension system could generate better investment returns and amass 80 percent of the money needed to pay current and future retirees, the annual cost-of-living increases would return.

“There was a lot of unrest and anger among teachers, but at that point we buckled down and focused on how we could get to solvency,” said Bucci, who is on the board of the 700-member Rhode Island Retired Teachers Association. “So even though we aren’t Wall Street experts, we just started to ask questions about how the pension fund was managed, and what it was invested in. That’s when we realized the fees we’ve been paying to the investment companies were the problem.”

Those levies — which hit $79 million last year — were the product of the state’s recent investment strategy. Following a controversial national trend, Rhode Island pension officials led by then-General Treasurer Gina Raimondo shifted roughly a quarter of the state’s pension portfolio into high-fee hedge funds, private equity firms and other so-called “alternative investments.”

The shift by Raimondo, a Democrat who is now governor, has generated big revenues for Wall Street firms, but only middling returns for a $7.6 billion pension fund on which more than 58,000 current and future retirees rely.

When Bucci and the members of her organization began asking questions about those results, they learned of a federal review showing that roughly half of all private equity firms are charging hidden fees, and they saw a hedge fund industry whose returns have failed to keep pace with the stock market. When they dug deeper, they stumbled onto an even more disturbing revelation. What they found, they say, is evidence that some investors can obtain special rights that may let them secretly siphon money from the state pensioners’ retirement savings.

The retirees are now petitioning federal law enforcement officials to investigate whether the widely used provisions are violating laws designed to make sure all investors are treated fairly. In a letter sent last month to the Securities and Exchange Commission and the FBI, the retirees’ adviser — former SEC investigator Edward Siedle — pointed out that some of the firms managing Rhode Island pension money claim the right to offer different fee rates, inside information and cash-out rights to some investors but not to others.

Raimondo f%$#ed her pension fund, and she did so knowingly, both because they are “people like her” (Ivy league graduates) who are supposed to be “exceptional”, and because she knows that this behavior gets her a 7 figure payday at the end of the rainbow.

It’s corrupt tribalism, and it’s harming our country.

That Sound is the House of Saud Collapsing

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While the reports of internecine conflict amongst the House of Saud might presage a crackup, at the core of everything that is the descendants of Ibn Saud is money.

There is no state craft, no vision, no understanding of the fundamental reciprocity that makes one a leader.

Well, it appears that their attempts to bury alternative fossil fuel extraction techniques by dropping oil prices through the floor is in the process of bankrupting them.

It appears that we have found a benefit to fracking:

Saudi Arabia on Monday unveiled spending cuts in its 2016 budget, subsidy reforms and a call for privatisations to rein in a yawning deficit caused by the prolonged period of low oil prices.

 The Gulf kingdom has kept oil production at high levels in an attempt to force out higher-cost producers, such as shale, and retain its market share. But this year’s deficit ballooned to 367bn Saudi riyals ($97.9bn,) or 15 per cent of gross domestic product, as oil revenues fell 23 per cent to Sr444.5bn.

 Seeking to ward off future fiscal crises, the ministry of finance confirmed wide-ranging economic reforms, including plans to “privatise a range of sectors and economic activities”.

 Riyadh would revise energy, water and electricity prices “gradually over the next five years” to optimise efficiency while minimising “negative effects on low and mid-income citizens and the competitiveness of the business sector,” it added.

 The first reforms will be effective from Tuesday, including an increase in gasoline prices, a rise in electricity tariffs for the wealthiest consumers, a modest increase in water costs for all, and changes to all energy prices for industrial users.

;………

The kingdom’s austerity and reform programme, a reaction to the past decade of profligate spending, has raised alarm among parts of the country’s business community, who are already reeling from this year’s cuts that have triggered widespread delays in government payments.

Radical reforms to the social contract between Saudi citizens and the ruling al-Saud family also threaten discord at a time when Islamist extremist groups such as Isis have threatened the country.

………

“We see real GDP growth decelerating sharply in 2016, albeit remaining positive,” said Monica Malik, chief economist with Abu Dhabi Commercial Bank. “Non-oil GDP is forecast to moderate with the lower government spending feeding into the wider economy.”

The government’s austerity measures have been accompanied by extra spending items, such as the Saudi-led war in Yemen and Sr88bn in bonus payments for civil servants when King Salman ascended to the throne in January.

The 2016 budget envisions spending Sr840bn in 2016, compared to the Sr975bn that is forecast to have been spent this year and Sr1.14tn in 2014. Actual spending has outstripped projections by as much as a quarter for the past decade, but the government is trying to instil greater fiscal discipline.

It’s been clear for some time that the House of Saud will fall at some point in the not too distant future.  They are an anachronism whose continued existence is an artifact of the fossil fuel rich geography of the Arabian peninsula.

The only question is whether it falls like the House of Windsor, with a few colorful figureheads remaining as a historical oddity, or if it falls like the House of Romanov, with the family shot and buried in a ditch.

The recent budgetary issues point to sooner rather than later, and the fate of the Russian Royal Family, not the British one.

DoJ Shuts down One Method of Law Enforcement Extortion

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One of the most widely used asset forfeiture program in the United States has been shut down by the Department of Justice.

Unfortunately, the reason for closing it down is not widespread evidence of abuse and corruption in the program, but rather budget issues:

The Department of Justice announced this week that it’s suspending a controversial program that allows local police departments to keep a large portion of assets seized from citizens under federal law and funnel it into their own coffers.

The “equitable-sharing” program gives police the option of prosecuting asset forfeiture cases under federal instead of state law. Federal forfeiture policies are more permissive than many state policies, allowing police to keep up to 80 percent of assets they seize — even if the people they took from are never charged with a crime.

The DOJ is suspending payments under this program due to budget cuts included in the recent spending bill.

“While we had hoped to minimize any adverse impact on state, local, and tribal law enforcement partners, the Department is deferring for the time being any equitable sharing payments from the Program,” M. Kendall Day, chief of the asset forfeiture and money laundering section, wrote in a letter to state and local law enforcement agencies.

In addition to budget cuts last year, the program has lost $1.2 billion, according to Day’s letter. “The Department does not take this step lightly,” he wrote. “We explored every conceivable option that would have enabled us to preserve some form of meaningful equitable sharing. … Unfortunately, the combined effect of the two reductions totaling $1.2 billion made that impossible.”

Asset forfeiture has become an increasingly contentious practice in recent years. It lets police seize and keep cash and property from people who are never convicted — and in many cases, never charged — with wrongdoing. Recent reports have found that the use of the practice has exploded in recent years, prompting concern that, in some cases, police are motivated more by profits and less by justiceAsset forfeiture has become an increasingly contentious practice in recent years. It lets police seize and keep cash and property from people who are never convicted — and in many cases, never charged — with wrongdoing. Recent reports have found that the use of the practice has exploded in recent years, prompting concern that, in some cases, police are motivated more by profits and less by justice.

Of course, the usual suspects’ heads are exploding with people like the National Sheriff’s Association invoking the specter of narco gangs and terrorists.

The truth here is that these people could still seize property in much the same way that they do now.  The only difference is that they can no longer keep quite as much as they used to.

What this means is that cops will have to find other money sources to buy their: (Buzzfeed listicle ahead)

  • Gatorade
  • Zambonies
  • Segway scooters
  • “Disney Training” (Not The Onion)
  • First class flights and car rentals
  • Parties
  • Tequila, Kegs, and a Margarita Machines (Again, not The Onion)
  • Tanning Salons (OK, this one resulted in corruption charges)
  • Casino Junkets
  • Hawaii Vacations 
  • Bribing other cops (Convicted, but reversed on appeal)
  • A Dodge Viper supercar (Because they want to play Grand Theft Auto for real, I guess)
  • A “Party House”
  • Marijuana and Prostitutes (Again, charges pending)

Germany Finally Does Something Useful for Greece

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It appears that Germany had combed through the data that it has managed to obtain from various tax havens, and has turned over to Greece the names of over 10,000 tax cheats:

Germany has handed Athens the names of more than 10,000 of its citizens suspected of dodging taxes with holdings in Swiss banks.

The inventory, which details bank accounts worth €3.6bn – almost twice the last instalment of aid Athens secured from creditors earlier this week – was given to the Greek finance ministry in an effort to help the country raise tax revenues.

They could have done this at the beginning of the whole crisis, and done a lot more to help both the Greek people and the Euro Zone.

The Germans wanted their pound of flesh, though, so it’s taken 3 years for them to turn over this data.

Schadenfreude Alert

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The Kaiser Family Foundation has just released a study on public health costs, and they found that both state spending has mushroomed in states that have refused to adopt Medicaid expansion:

Beginning in FY 2014, policy changes introduced by the Affordable Care Act (ACA) have been driving Medicaid enrollment and spending growth. This report provides an overview of Medicaid enrollment and spending growth with a focus on state Fiscal Year (FY) 2015 and state Fiscal Year 2016. Findings are based on interviews and data provided by state Medicaid directors as part of the 15th annual survey of Medicaid directors in all 50 states and the District of Columbia conducted by the Kaiser Commission on Medicaid and the Uninsured (KCMU) and Health Management Associates (HMA). Information collected in the survey on policy actions taken during FY 2015 and FY 2016 can be found in the companion report. Key findings related to Medicaid enrollment and spending growth are described below.

Medicaid enrollment and spending increased substantially in FY 2015, the first full year of implementation of the major ACA coverage expansions. Across all 50 states and DC, Medicaid enrollment increased on average by 13.8 percent in FY 2015, largely due to the ACA coverage expansions. Driven by growth in enrollment, total Medicaid spending increased by 13.9 percent on average in FY 2015. (ES – 1)  Beyond enrollment, states reported that the other drivers of increases in spending were provider rate increases and the higher cost of health care, including prescription drugs. Improvements in the economy were a downward pressure on enrollment which affected spending, but downward pressure in enrollment and spending as a result of the improving economy were outweighed by the ACA coverage policy changes.

………

In FY 2015, Medicaid enrollment and total Medicaid spending growth in expansion states far exceeded growth in non-expansion states. Expansion states reported Medicaid enrollment and total spending growth nearly three times the rate of non-expansion states. (Figure 2) A total of 29 states were implementing the ACA Medicaid expansion in FY 2015, up from 26 states in the previous year (FY 2015 additions include: New Hampshire, Pennsylvania and Indiana).

Across the 29 expansion states in FY 2015, enrollment increased on average by 18.0 percent and total spending increased by 17.7 percent; both enrollment and spending growth were driven by increases in enrollment among adults qualifying under the new expansion group. Of the 29 states expanding Medicaid in FY 2015, more than half (17 states) noted that enrollment initially increased faster than expected. Over two-thirds of expansion states reported that per member per month costs for the expansion population were at or below projections.1 Across the 22 states not implementing the Medicaid expansion in FY 2015,2 enrollment and total spending growth was 5.1 percent and 6.1 percent (respectively), much slower growth compared to the expansion states. Increased enrollment among previously eligible parents and children was the primary reason cited for enrollment growth in non-expansion states. (ES – 2)

This could not happen to a more deserving bunch of narcissistic nihilists.

H/t Talking Points Memo.

John Boehner Just Issued a Big F%$# You to the Teabaggers

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I guess that it’s one way to have some fun as he is heading out the door:

House Speaker John Boehner said Sunday that there will be “no” government shutdown over Planned Parenthood funding, and signaled plans to pass the Senate stop-gap funding bill with help from Democrats.

“I expect my Democratic colleagues want to keep the government open as much as I do,” Boehner, R-Ohio, said on CBS’ “Face the Nation.”

The interview was Boehner’s first since announcing his resignation Friday.

The announcement came as Republican leaders spar over how to handle a series of budget extension proposals to keep the federal government operating past Sept. 30, the end of the fiscal year. Moderates within the House GOP caucus had been pushing for any plan that will avoid a shutdown while more conservative members had vowed to strip funding from Planned Parenthood programs at any cost.

If Boehner was still trying to remain speaker, he would not have done this.

Never underestimate the the power of someone who has given his last f%$#.

The New Brewster Buffalo

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A test pilot with a wide range of fighter experience engaged in mock dogfights with an F-16, and the result was Not pretty:

A test pilot has some very, very bad news about the F-35 Joint Strike Fighter. The pricey new stealth jet can’t turn or climb fast enough to hit an enemy plane during a dogfight or to dodge the enemy’s own gunfire, the pilot reported following a day of mock air battles back in January.

 “The F-35 was at a distinct energy disadvantage,” the unnamed pilot wrote in a scathing five-page brief that War Is Boring has obtained. The brief is unclassified but is labeled “for official use only.”

 The test pilot’s report is the latest evidence of fundamental problems with the design of the F-35 — which, at a total program cost of more than a trillion dollars, is history’s most expensive weapon.

 The U.S. Air Force, Navy and Marine Corps — not to mention the air forces and navies of more than a dozen U.S. allies — are counting on the Lockheed Martin-made JSF to replace many if not most of their current fighter jets.

 And that means that, within a few decades, American and allied aviators will fly into battle in an inferior fighter — one that could get them killed … and cost the United States control of the air.

 The fateful test took place on Jan. 14, 2015, apparently within the Sea Test Range over the Pacific Ocean near Edwards Air Force Base in California. The single-seat F-35A with the designation “AF-02” — one of the older JSFs in the Air Force — took off alongside a two-seat F-16D Block 40, one of the types of planes the F-35 is supposed to replace.

 The two jets would be playing the roles of opposing fighters in a pretend air battle, which the Air Force organized specifically to test out the F-35’s prowess as a close-range dogfighter in an air-to-air tangle involving high “angles of attack,” or AoA, and “aggressive stick/pedal inputs.”

 In other words, the F-35 pilot would fly his jet hard, turning and maneuvering in order to “shoot down” the F-16, whose pilot would be doing his own best to evade and kill the F-35.

 ………

 The F-35 was flying “clean,” with no weapons in its bomb bay or under its wings and fuselage. The F-16, by contrast, was hauling two bulky underwing drop tanks, putting the older jet at an aerodynamic disadvantage.

 But the JSF’s advantage didn’t actually help in the end. The stealth fighter proved too sluggish to reliably defeat the F-16, even with the F-16 lugging extra fuel tanks. “Even with the limited F-16 target configuration, the F-35A remained at a distinct energy disadvantage for every engagement,” the pilot reported.

 “Insufficient pitch rate.” “Energy deficit to the bandit would increase over time.” “The flying qualities in the blended region (20–26 degrees AoA) were not intuitive or favorable.”

 The F-35 jockey tried to target the F-16 with the stealth jet’s 25-millimeter cannon, but the smaller F-16 easily dodged. “Instead of catching the bandit off-guard by rapidly pull aft to achieve lead, the nose rate was slow, allowing him to easily time his jink prior to a gun solution,” the JSF pilot complained.

 ………

 And when the pilot of the F-16 turned the tables on the F-35, maneuvering to put the stealth plane in his own gunsight, the JSF jockey found he couldn’t maneuver out of the way, owing to a “lack of nose rate.”

 ………

And to add insult to injury, the JSF flier discovered he couldn’t even comfortably move his head inside the radar-evading jet’s cramped cockpit. “The helmet was too large for the space inside the canopy to adequately see behind the aircraft.” That allowed the F-16 to sneak up on him.

In the end, the F-35 — the only new fighter jet that America and most of its allies are developing — is demonstrably inferior in a dogfight with the F-16, which the U.S. Air Force first acquired in the late 1970s.

 The test pilot explained that he has also flown 1980s-vintage F-15E fighter-bombers and found the F-35 to be “substantially inferior” to the older plane when it comes to managing energy in a close battle.

This is what happens when you allow the USMC’s supposed need for a STO/VL airframe to dominate all other considerations with regard to basic airframe, which is the reason for poor rear vision, and hence the need for the humungous high tech helmet, with visor mounted display, which prevents adequate view to the rear.

I would note that the real problem here is not that our pilots might have inferior equipment, in WWII the F4F Wildcat achieved a 6:1 kill ratio, and the lamentable F2A Brewster Buffalo achieved a 26:1 kill ratio in Finnish service.

Achieving air superiority comes down to training and tactics, so even with an inferior platform, particularly when backed up by superior numbers and logistics.

If the US goes into combat with the F-35 it will not be a disaster.

The real disaster is that we are spending over a Trillion dollars on something that provides no advantages over existing aircraft.

We could buy homes for more than 4 million families, or provide health insurance for 10 million families for a decade, or fix around one third of our deferred infrastructure needs.

The opportunities that have been missed while we are spending money on a white elephant are the real disaster here.

Óχι* Euro?

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So Greece has now officially defaulted on its IMF loan:

Greece has officially missed its payment to the IMF.

Though this is not technically considered a “default” — the IMF now considers Greece “in arrears” — Greece has now officially not paid the 1.6 billion euros (or about $1.8 billion) it owed the IMF by Tuesday.

IMF managing director Christine Lagarde, however, said in June that she would consider Greece in default if it did not pay.

 This is the largest missed payment ever owed to the IMF.

Greece is now no longer in a bailout program for the first time since 2010.

 In a statement, the IMF confirmed that Greece missed the payment due on Tuesday and added that Greece requested an extension of its repayment, which the IMF’s executive board will consider “in due course.”

 Greek banks and the Athens stock exchange remain closed through this week ahead of a July 5 referendum to vote on the latest bailout proposal from Greece’s creditors.

This is a big deal, but I do not think that the Greek government was left with a choice.

It has become increasingly clear that the goal of the Troika has been regime change ever since Syriza won the last election, primarily because they are a bunch of moralistic† idiots, who do not realize that the alternative to Syriza is not a return to the center-left and center-right parties, but rather the rise of the fascist Golden Dawn party”.

This is why Greek PM Alexis Tsipras felt compelled to call a referendum.

The demands of the Troika have always been about a number of things, none of which have anything to do with the well being of the Greek people:

  • Protecting their own domestic banks from thrie exposureto Greek Debt.
  • Reinforcing German hegemony of the Euro Zone. (Berlin only on this one)
  • Making a public example of Greece as a warning to others.
  • Preventing other “leftist” (social democrat by the standards of the 1960s) parties, particularly Die Linke (The Left) in Germany, from coming to power.
  • Discrediting the modern social safety net.

It should be noted that I do not see any way to a happy ending here:

………

But a former deputy governor of Cyprus’s central bank, Spyros Stavrinakis, has warned that reopening the banks will be hard.

Stavrinakis lived through the 2013 Cyprus crisis, in which capital controls were imposed for almost two years.

He says:

Once you impose capital controls, you immediately send a message that there is something wrong with the banking sector.

It is very difficult to phase down and unwind capital controls, once they are imposed, Stavrinakis adds.

………

Most things in the European Union are designed to actively obfuscate reality. These are called deposit insurance schemes but that is a legal lie. In the United States the FDIC is Federal (its right in the name). The EU imposes a requirement that each country “insure” their deposits but it provides no financing for this. The last data I saw (which I can only verify from 3 years ago) is that the Greek deposit insurance fund has a paltry 3 billion dollars in it. In short there is no current backstop for Greek depositors. This is why they are talking about implementing a European wide deposit insurance union but that isn’t supposed to come until next year at the earliest and who knows if that will really happen and to what extent it will be universal among current Eurozone members. relevant links below.

………

Three-and-a-half billion euros. That is roughly how much cash Greece’s banks need to get through the week if each adult takes out the €60 ($67) they are allowed each day. It isn’t much for Greeks to live on, but it may be more than the banks have.

Also, in the realm of the absurd, there is a  crowdfunding project for the Greek Bailout Fund on  Indiegogo, with about €¾ million raised, out of the €1.6 billion needed raised so far.

The German insistence on Versailles Treaty economics, when juxtaposed with the Greek tradition financial profligacy and corruption, has produced a truly toxic mix, which will probably break up the Euro Zone, if not the whole European Union.

*Greek for no.
†The word for “debt” in German is “Schuld”. This is also the word for “guilt” or “blame”, which explains why the Germans are so fond of Sado-Monitarism. The Germans see this as a morality play, and the last time that Germans tried to enforce a morality on the rest of Europe, it was pretty unfortunate.

The Military Industrial Complex Is Spending Our Military into Oblivion

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At the rate that this is going, we will be The Blaster: Flush With Cash, Running on Empty

One of the never ending claims made by proponents of the military technical revolution is that emerging complex weapons technologies create more combat power per unit of labor — that we are substituting capital for labor and technology-intensive capital goods are the key America’s competitive advantage, given America’s high cost labor. This claim is bullshit pumped out by a sound-byte addicted Military – Industrial – Congressional Complex.
For readers who think my rhetoric excessive, consider please the following series of graphics. That the revolution in military affairs (RMA) continues with increasing intensity despite such evidence to the contrary, and without substantive critical debate, says a lot about the dominant values in Versailles on the Potomac.
If the claim made by the RMA evangelicals were true, then a percentage reduction in the size of combat forces would be accompanied by a greater percentage savings in defense budgets. But as this table shows, huge reductions in force size (ranging from 56% to 69%) from the spending peak of the Vietnam War (1968) to the spending peak of the so-called Global War on Terror or GWOT (2010) have been accompanied by a 34% increase in the defense budget, after removing the effects of inflation (using DoD deflators which are biased to reduce the size of this disconnect).

Yet, as the next figure shows, compared to Vietnam, the GWOT is a tiny war, when compared in terms of troops deployed or operational tempos (e.g., total attack sorties).
………

The bottom line should be clear to even the most casual observer: The claim that the ongoing military-technical revolution reduces costs by substituting capital for labor is fact-free claptrap. Moreover the hype about this military-technical revolution, which has became ever more hysterical since the mid-to-late 1980s, has been accompanied by a dramatic worsening of the mismatch been promises and reality.

Perhaps the apotheosis of the cost and labor saving dimensions of the military-technical revolution has been the evangelical rhetoric surrounding the use of “labour saving” unmanned airplanes — drones — in the GWOT. I urge readers in denial about my bottom line to carefully study How America Broke Its Drone Force by David Axe in the Daily Beast (attached below for your reading convenience). Axe describes how the high cost of labor-intensive drone operations has broken the back of the drone force to such a point that it had to cut back operating tempos in the face of the increasing intensity of the offensive campaign waged by ISIS.

Bear in mind, the pathetic misery in the drone force described by Axe coincides with Era IV of the boom bust cycle in the preceding chart of Defense Spending.

In 1985 or so, some wag noted that with current trends, that the entire budget of the US Air Force, including personnel, would cover the purchase of just one aircraft by 2050.

At the rate we are going, we won’t have a military, just shiny hardware with no one to operate it.

For Once, the Law Applies to the Little Guy

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The Illinois Supreme Court has ruled that the pension gutting law past last year is unconstitutional. I am further amused because it looks like Rahm Emanuel’s equivalent law in Chicago is also covered by the ruling:

The Illinois Supreme Court on Friday unanimously ruled unconstitutional a landmark state pension law that aimed to scale back government worker benefits to erase a massive $105 billion retirement system debt, sending lawmakers and the new governor back to the negotiating table to try to solve the pressing financial issue.

The ruling also reverberated at City Hall, imperiling a similar law Mayor Rahm Emanuel pushed through to shore up two of the four city worker retirement funds and making it more difficult for him to find fixes for police, fire and teacher pension funds that are short billions of dollars.

At issue was a December 2013 state law signed by then-Democratic Gov. Pat Quinn that stopped automatic, compounded yearly cost-of-living increases for retirees, extended retirement ages for current state workers and limited the amount of salary used to calculate pension benefits.

Employee unions sued, arguing that the state constitution holds that pension benefits amount to a contractual agreement and once they’re bestowed, they cannot be “diminished or impaired.” A circuit court judge in Springfield agreed with that assessment in November. State government appealed that decision to the Illinois Supreme Court, arguing that economic necessity forced curbing retirement benefits.

On Friday the justices rejected that argument, saying the law clearly violated what’s known as the pension protection clause in the 1970 Illinois Constitution.

“Our economy is and has always been subject to fluctuations, sometimes very extreme fluctuations,” Republican Justice Lloyd Karmeier wrote on behalf of all seven justices. “The law was clear that the promised benefits would therefore have to be paid and that the responsibility for providing the state’s share of the necessary funding fell squarely on the legislature’s shoulders.

During the financial crisis, Wall Street made arguments that their obscene pay was contractually guaranteed, and as such, could not be regulated.

At the very same time, they were cutting wages and benefits of auto workers at GM and Chrysler.

I am amused.

Additionally, I am amused because this means that teabagger governor Bruce Rauner is going to be forced to raise taxes.

Heh.

Megan McArdle Gets Everything Wrong

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I have, on numerous occasions, noted how the musing of Megan “Math is Hard” McArdle have at best a passing relationship to the facts.

In yet another example, let me point you to a detailed and thoroughly amusing Fisking of her latest drivel on Social Security:

With even mainstream Democrats coming to embrace the idea of expanding Social Security to help address our looming retirement crisis, it couldn’t be long before the pushback emerged from conservatives and Republicans.

Bloomberg’s libertarian economics columnist Megan McArdle was quick out of the box, with a column published Tuesday titled, “The Left Gets it Wrong About Social Security.” You should read it, because it’s rare to find so much sophistry, misunderstanding and misinformation about Social Security packed into one article. You can count McArdle’s disdain for retired people, seldom expressed so openly, as a dividend.

Read the rest.

It methodically takes apart her assumptions, and shows how they have nothing to do with reality.

Go read the rest of Michael Hiltzik’s article in the LA Times.

The Worst Democrat North of the Manson Nixon Line Wins Reelection

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I am referring, of course, to Rahm Emanuel, who won a double digit victory over challenger Jesus “Chuy” Garcia:

Mayor Rahm Emanuel soundly defeated challenger Jesus “Chuy” Garcia on Tuesday, capturing a second term in Chicago’s first-ever runoff election and striking a note of humility by thanking voters for “a second term and a second chance.”

The win followed six weeks of a hard-fought, nationally watched second round in which Garcia tried to cast the contest as the latest proxy battle between establishment Democrats and the party’s progressive wing. Emanuel’s overwhelming financial advantage ultimately helped save the mayor as he fought for his political life.

………

With 98 percent of the city’s precincts reporting, Emanuel had 55.7 percent of the unofficial vote to 44.3 percent for Garcia.

It was closer than I expected, but money, and the self defeating bigotry of a significant portion of the Chicago African American community was too big a hill to climb.

I may be a political Little Orphan Annie here, but I do think that Rahm’s mantle has been pierced, and so when the creative accounting that has been obscuring the true state of Chicago’s finances, much of which appear to be in the form of sweetheart deals for his Bankster buddies for complex (and high fee) derivatives of the sort that f%$#ed Greece, collapses, the knives should come out.

At least, I hope that this is what will happen.

I’m bummed.