Policitians Proclaim Homogeneity of Irrelevance

Yesterday I attended the SF Pride parade.  I've never witnessed this happening before, but it's well worth going especially if you live in the area.

Two impressions - first, that the acceptance, tolerance and live-let-live bias in San Francisco is a pretty remarkable thing regardless of your position(s) in the human diversity spectra.  When everything from hedonism to courage (the small VFW contingent - what it must have meant for them to come out?!) can peacefully coexist, there is some reason for celebration.

Second, seemingly EVERY local politician had a spot in the parade, with their entourage of handlers/supporters/beneficiaries.   By and large, the current crop of politicians and cronies have no real claim on the social climate that is San Francisco, but they're all for sitting in convertibles getting their faces in front of x00,000 free advertising impressions to assist the next re-election grab.  How does this kind of grandstanding contribute to the celebration of the day?  Maybe some day, parade organizers will ban politicians... oh wait, how would they get all the necessary permits?

The State Budget Deficit Derby Finalists

Many States cannot legally resort to bankruptcy to clear the decks on their busted budgets. With taxpaying voters justifiably recalcitrant to hand over more dough to governments at any level, budget impasses will only get more interesting as shortfall pressure builds. When resources are scarce, what do competing interests do? Smile and shake hands? NOT!

So let's consider the positions and actions of the heavy combatants in coming budget debacles. Who do you think will win? Who has the strongest hand? Who will voters/taxpayers support?

Public Employees
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Public employee one-way ratcheted pay and pension benefits are the proverbial parasite killing the host. the employee unions will argue that their compensation is contractual and cannot be diminished. They will do whatever necessary to fight layoffs and hour reductions. In Stockton, the police officers' union sponsored a graphic (blood on the streets) billboard campaign warning residents that any reductions in staffing will regrettably make in impossible to guarantee their safety. Gee, I didn't know we had a guarantee now? Do we? How'd we miss it? Colorado has taken a bold and courageous stand against budget shakedowns by the public sector, going after CURRENT pay and pension benefits.  This is a very powerful interest group with a big voting block and strong lobbying.


Schools
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Schools take a big share of most budgets. Schools have been dealt a number of cutbacks already including layoffs. Schoolers have been reluctant to compete head-on with other public employee interest groups. Where possible (universities) they've resorted to compounded fee increases. There will be a resistance point for that... just haven't seen it expressed fully yet.  Will the school interest group be willing to detonate real bombs?  Like closing neighborhood schools (already FULL) and sending those kids even FULLER schools farther away?


Bondholders
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Running last (at least for now) behind schools and public employees for claim on state money are state bondholders.  Even in debt-soaked California, state bond interest is still in single digits... something like 7% of the budget.  But even that money is a juicy target. Why not just stiff the bondholders?  Don't think so. Bondholders have connections. And even more importantly, states need bonds even in normal or good years to deal with highly seasonal and variable income streams from taxes. Unless taxation can be changed to provide steady revenue (there's a good battle that will bring EVERYONE in) states absolutely cannot do without bonds.  Plus, the cost of state bonds is directly related to the perceived ability and commitment of the state to pay the interest. What sane state would risk injuring its #1 finance tool and making it cost much more?


At this point, I'm betting on bondholders to win the budget deficit derby. They will be paid their interest on time, regardless of the political fires raging all around. Who will come in second? The powerful public employees unions and lobbies, or schools? Can either interest group come out of this without major structural changes? Let's see what happens when tapped-out public pension funds start appropriating money out of state general funds... should be a fascinating debate.  In the meantime, as state bond interest goes up, those tax-free bonds might start looking pretty good compared to essentially zero-percent Treasuries and money market funds...

The Great Addiction: Greed and Debt

Here is an excellent overview of the genesis and state of our greed>debt addiction, which isn't the same thing as capitalism. Well worth reading and thinking about.

http://www.zerohedge.com/article/guest-post-two-decades-greed-unraveling


The $.64 question is, will we have continuing deflation (possibly severe) or will the central banks' tireless print-more-money efforts take us straight to high inflation? Being wrong on this bet could cost savers/investors a tremendous amount of their net worth and purchasing power.

Zerohedge - an interesting and worthwhile blog

If you are concerned about the state of Rule of Law, Market Transparency (is there any still?), Sovereign Debt and Bankruptcy, Bubbles, etc. you should check out www.zerohedge.com. Maybe not popular or mainstream theses and editorial but well worth consideration along with the swirl of other information and misininformation we are treated to on a daily basis. The authors challenge how most of us usually think. That's a good thing.

ALL CAPS

Oil spew is good for a lot of headlines.

Underneath the headlines was an interesting bit discussing an apparently ill-advised yet government-approved BP plan over objections of the rig operators to withdraw drilling fluids BEFORE CAPPING THE WELL and taking it out of service. The fingerpointing spotlighted that this shortcut, out-of-normal-order approach may well have been the proximate cause of the gas escape and explosion that started this whole goat rodeo.

Wait a minute... they said they WERE ABOUT TO CAP THE WELL and take it out of service before the accident. Why would BP want to cap a well that obviously produces a whole lotta oil? If anyone knows the reason, I'd love to see it in print.

Timely - A 911 Victim Tax!

Just after commenting on this potential new wave of fiscal engineering opportunity, this appears in the news:

http://cbs2chicago.com/investigations/crash.tax.fire.2.1615889.html

This is a new one on me ... the man in question was involved in a vehicular accident, not his fault, a third party called 911, fire/paramedic responded, and billed the man $200 for emergency services he did not need nor request.

BRAVO! That's some real budget buttering thinkering outside the box!

The New Fiscal Strategic Mandate - Victim Taxes!

As a newly arrived resident in San Francisco, there's plenty to discover. Much of it interesting and great. As to municipal government, well, it's government, and what I'm discovering isn't terribly encouraging. But some of it might get you thinking...

This week brought a true policy aha. Lately there has been a wave of tagging in the neighborhood I live in. You'd think an occasional police beat in the late night and early morning hours would be a decent deterrent, well, no evidence of that so far. Something much more inventive from government instead! It turns out that property owners are required by ordinance to clean up graffiti/tagging within 30 days or PAY A FINE to the City!

Doesn't this just get your creative juices gushing?! Think of the possibilities this portends - governments have at their disposal a virtually untapped new source of funds to confiscate - VICTIM TAXES! Need to report a crime? Why not a large reporting fee? Police come out to your broken-into car to tell you too bad? How about a hefty "annoyance" ticket for displaying a vandalized vehicle? Muni bus or train 30 minutes late? Watch out for the loitering fee! Property down in value? Sure, get it reassessed now - for a large fee! Or, just wait until the housing market comes back around to match your appraisal.

VICTIM TAXES! The road to a balanced budget, the wave of the future. You read it here first.