Sandy Springs, GA: Privatization of Government Services

A few days ago I posted a new Reason video on the city of Sandy Springs, GA. I have been following Sandy Springs since about 2008. If you don’t know the story, Sandy Springs was newly incorporated in 2005, and the committee chose to outsource the majority of services to private enterprises. If you know little about it, the video is here:



Long story, short: I posted the video on one of my County Commissioners FaceBook wall. Popular response was ok, mostly for the idea. One person, spoke out strongly against it, with a cautionary story about the potential problems implicit in outsourcing. A link which I hope will work to the whole thread is here: http://www.facebook.com/marksharpe/posts/208112665880192

The same individual posted an article that spoke of the theoretical flaws in ‘privatization’. See it here: http://www.huppi.com/kangaroo/Privatization.htm

So, if you have watched the video, and read the above article, here is my response.

Chris,
Interesting article. I do have a couple of problems with some of the arguments, however. They just don't seem to hold up. For example, the author tries to show that government and business are
substitutes for one another. That makes no sense: From the consumer perspective, if business offers

Video: Niall Ferguson-Fiscal Crises and Imperial Collapses: Historical Perspective

By far, this is one of the best videos I have seen regarding our current sovereign debt crisis. In May, 2010, the Peterson Institute for International Economics sponsored a lecture by Niall Ferguson, of Harvard Business School and the London School of Economics on the history of sovereign debt crises entitled: Fiscal Crises and Imperial Collapses: Historical Perspective on Current

Ripping Off the Taxpayer. Who Do YOU Blame; DC or Wall Street?

Here is a short video (4:26) that should really get your blood boiling:





The important question here--or at least the one that truly distinguishes an individuals mindset--is 'Who do you hold most responsible?' The criminals in Washington DC or those on Wall Street? In this case I don't think that anyone can help but choose either one or the other. One perspective I choose to use is 'who is--or is not--doing their job?'
The job of Wall Street is to 'maximize shareholder value', or to put another way, make money for those who own stock in the company (Goldman Sachs, in this case) without violating any laws.
The job of the FDIC--and the politicians in Washington who hire them--is to protect taxpayer money and get the economy working again.
In this case, Goldman Sachs did their job. The taxpayer got taken to the cleaners. Again.
Just as anyone else who can spend other people's money, the politicians care more about the appearance of 'doing something' than protecting our hard earned money.
So to sum up, the politicians created the problem, and then go to Wall Street and throw more of our money away so they can look good.
I would be interested in your thoughts...

The forgotten tax cheats

Today Obama identified another group that according to his twisted logic, has for too long not paid their 'fair share' of taxes. This time it is businesses. Just because we have about the highest business tax rate in the world (with Federal, State and Local, approximately 39%) does not count. Just because we tax businesses on foreign profits--which few to no other countries do--means nothing. They have been slackers. Just because they provide the vast majority of jobs and wealth in this country doesn't count a bit. Obama is now making sure that they will either pay what he determines is a fair tax rate, or they can leave. What do you think they will do? No company would choose Ireland, for example which only has a 10% business tax rate, over the US, right?
This is not the first time Obama has chosen to use class warfare to dupe the idiotic American public, think of his 'tax cut for 95% of Americans'. Well since less than 50% of Americans actually pay any taxes, that is a neat trick. A tax cut for those who don't pay Federal taxes is what again, exactly? And I won't even mention the 60 cents a pack the millions of smokers have to pay to fund his SCHIP program. Or the billions in new energy taxes his cap and trade scheme will collect from every single American that uses any source of energy.
And of course, all the 'rich' who make over $250,000 a year is the other group of tax cheats. They haven't been pulling their weight, either, right? I am waiting for just how much Obama thinks is a fair share of the money they work for every day. No matter how many years they scrimped and saved, how many years they went without, the high school dropout, drug dealer, welfare queen, homeless person down the street is now just as equal to the fruits of their labor. This is Obama's promise: 'a vote for me is a vote for the fruits of other peoples' sweat.'
But hasn't Obama forgotten the 50% of Americans who don't pay any federal income taxes at all? Why aren't they contributing? They use the vast majority of government services, but pay nothing? Seems to me that if it is free--as it is to them--they won't value it very much. Seems to me they have not been paying their 'fair share' for quite some time. Why exactly is it again that they should benefit from my hard work? Shouldn't they reap the benefits of their own efforts? Stealing the benefits of my sweat from me, to give to them, just makes them not try harder, and makes me no want to put forth the effort to achieve. And besides, shouldn't they have to pay something for all those goodies they get, like free health care (medicaid, SCHIP) free money (earned income tax credit) and the thousands of other ways Obama spends taxpayers money--my money--on them to buy their vote for him?

As you can see from the above, I have begun posting essentially raw thoughts. The collectivists are doing so many things to destroy America so fast, that I can't spend the time to wordsmith.

Income Inequality: How To Lie With Statistics

I know it doesn't come as a surprise to anyone, but a new article by Alan Reynolds, Cato Senior Fellow, shows just how simple it is to "prove" income inequality has been growing in recent years. (You can read the full article here) Obama routinely uses this canard to dupe his worshipers, er, I mean followers. As Barry is reputed to have an above average IQ (130), one would doubt that he, too, has been taken in. Maybe he is too busy trying to dig up the paperwork a Federal Judge in Pennsylvania has ordered him to produce which proves he applied to have his American Citizenship restored? I know that would distract me if I had spent years seeking a position which has citizenship as a legal prerequisite.
Anyway, back to 'income inequality'.
Every collectivist progressive loves to tout how 'due to the Bush Tax Cuts, the top 1 percent got filthier rich and the poor just got poorer.' They often cite studies from this or that progressive organization such as the Brookings Institute or the Pew Charitable Trust. As Dr Reynold's article is rather short, there is no need to recreate it here, but suffices to say that it is a simple as choosing what year the comparison begins or ends with. Another simple method is to use before tax numbers to justify increasing taxes. Finally, what components of a group's income are included as income for the various brackets compared is used. The differences can be dramatic.
What Reynolds demonstrates is that the only real way to compare is via actual tax rates, per group over the same time-frame using the same data-set--in other words, comparing apples to apples. Here is a concise breakdown using a single Congressional Budget Office set of data (Dr Reynolds does not actually put this in a table, so I did) This table actually included one of the two years (1979 and 2002) that are routinely used to demonstrate income equality:

Percent Income Paid as Taxes by Bracket

Year/Bracket	Top 1%	Middle 20%	Bottom 20%
1979	21.8	7.5	--
1989	19.9	--	(-1.6)
2000	--	5.0	(-4.6)
2005	19.4	3.0	(-6.5)

That is right, folks. Those minus signs are payments to the bottom 20% through things like the Earned Income Tax Credit and other giveaways. Of other people's money. If you were constrained by money in choosing your child's college, for example, now you know where that money went. And yes, everyone has received a tax break. But by far those in the bottom quintile have 'benefited' much more (1.4, vs 4.5 vs at least 4.9).
Although I probably shouldn't stray too far from the point, one perspective that I can't get away from is: In light of the above, just how is Obama planning to give a 'tax cut' to 95% of working Americans?

Mortgage Meltdown Notes

This is a collection of links and references documenting the current mortgage crisis.

Background & General Coverage

Good general coverage is by the Competitive Enterprise Institutes OpenMarket.org.
A very good explanation about how the whole subprime process--with enough detail to actually explain it. 'Betting on Financial Armageddon' This also gives us another entry in the 'Blame Line' below.
Criticism of the Paulson Fannie & Freddie bailout at A "Failed Business Model"

The Fix 

Wall Street Journal-Here was a good plan to fix the long term Frannie and Freddie nightmare 'End the Mortgage Duopoly'
A simple and elegant fix which addresses the real culprit, the mark-to-market accounting rules: 'Here’s A Plan to Avoid a New RTC'

The Blame Line

Campaign Contributions by Fannie & Freddie as reported by 'open secrets' 'Update: Fannie Mae and Freddie Mac Invest in Lawmakers'
Congress members invested in Fannie & Freddie 'Fannie Mae, Freddie Mac Takeover Costs Congressmen Who Were Invested'

Goldman Sachs chairman and chief executive Lloyd Blankfein said one of the problems was that many financial institutions and investors "outsourced" their risk management."Rather than undertake their own analysis, they relied on the rating agencies to do the essential work of risk analysis for them. This was true at the inception and over the period of the investment, during which time they did not heed other indicators of financial deterioration," he told the panel. 1/13/2010 Congressional Testimony. Top US bankers admit missteps in financial crisis

SEC:

"Up until 2003, all investment banks were allowed only 12 to 1 leverage. Then in 2004, the SEC basically gave five banks (and only five banks) the ability to lever up 30 or even 40 to 1. Bet you can guess the five banks. Bear, Lehman, Merrill, Morgan and Goldman. Three down."
SEC regulation has actually created a Cartel in the Credit Rating agencies, which has established significant barriers to entry--just another way government regulation is responsible for this crisis. Part of Basel II according to Randy (Basel II)

The three cartel agencies; Fitch, S&P and Moody's that have done the CDO ratings "Amid the chaos of the escalating subprime mortgage crisis, the three major credit-rating agencies - Fitch, Moody's and Standard & Poor's - have been voices of calm. They've downgraded only a sliver of the debt backed by such mortgages, and they say they expect the mess to stay safely confined to the subprime sector."
"Investors criticized S&P, Fitch Ratings and Moody's Investors Service, saying their ratings on bonds backed by U.S. mortgages to people with limited credit didn't reflect the lax lending standards that caused their backward-looking default rates to be inapplicable to risk level of the loans being made.^"
One thing that contributed to the credit crisis was the sucking up of massive amounts of liquidity by international central banks to borrow huge amounts for stimulus plans. (sjb)
Nobel laureate Joseph Stiglitz, economics professor at Columbia University in New York observed: “I view the ratings agencies as one of the key culprits. They were the party that performed that alchemy that converted the securities from F-rated to A-rated. The banks could not have done what they did without the complicity of the ratings agencies.”

HUD, Fannie & Freddie and the CRA:

Investors Business Daily traces some of the links between HUD, Fannie & Freddie and the Community Redevelopment Act in 'The Real Culprits In This Meltdown'
Great article by the liberal rag--The Village Voice--regarding the Federal Government's policy involvement in the current liquidity crisis. 'Andrew Cuomo and Fannie and Freddie' Aug 2008
A chronological list of HUD secretaries is here.

GAAP Accounting Rules

Wall Street Journal on the impact of new (last November) government mandated accounting rules. 'Maybe the Banks Are Just Counting Wrong'

Just my own opinion:
(2/15/2010) Remember how mortgages used to be when you were growing up? You got your loan from a local bank or Savings & Loan (this was one of the reasons S&L's were created--banks too restrictive on loans to regular people) and they usually kept it in house and serviced it. That also means that the bank representative who sold you the mortgage has his/her reputation on the line. Likewise, the bank would suffer the consequences if you defaulted.
All that ended with Fannie. Later Freddie--which had been around since the 30's--updated its business plan to get in on the action. Now mortgage brokers and mortgage banks would make the loan, but then sell it to Fannie or Freddie (F&F). The originator would never see that loan--or be liable for the risks, if any--again. All of this was a part of a wonderful government plan to expand homeownership. Talk about unintended consequences!

Global Warming Goes To Washington

(This is a historical piece from February 2007)

I have done a bit of investigation into the Global Warming issue. I studied Physics as an undergrad, and since have avidly followed new scientific discoveries and issues. As I only have a Bachelors degree I should never be confused with a 'real' scientist, but I am sufficiently familiar with the methodology and nomenclature of scientific issues to usually make sense of the arguments and concepts. When the issue of Global Warming first presented itself several years ago, I thought that it was simply another interesting scientific debate. When the 'Blame-it-on-America' doomsayers started crowing it a couple of years ago, I just shook my head in disgust. When the typical political panderers in Washington picked it up, I still though it was nothing to be overly concerned about. But when our President mentioned it in his State Of The Union Address, and new Speaker of the House embraced it last month, that REALLY scared me. It is one thing when competing scientific hypotheses are being debated and potential theories which may address the resultant issues are proposed; but it is an entirely different case when we are debating implementing radical solutions to purely hypothetical problems. It scares me to think that we could have the government trying to fix' it via law-with unanticipated consequences galore.

Remember Global Cooling back in the 1970's? I do. Remember how it was going to require spreading coal dust on the polar ice caps and other extreme--and very, very expensive--solutions just to keep an Ice Age away? Thankfully, we never did any of them. Now, 30 years later, we have Global Warming. I guess all the pundits back then were wrong. Imagine if we had been arrogant enough to take the drastic measures that were recommended at the time? We would now be further destroying our environment and our economy trying to 'fix' our attempts to stop Global Cooling! Do you think they could be wrong again this time with Global Warming? I would say the odds are better than 50/50.

A more realistic view of the current Global Warming argument revolves around the root causes of this particular instance of warming. As you may or may not know, the world temperature is always either going up over time or going down over time. These cycles are spread out over tens, hundreds, sometimes thousands of years. In an entire lifetime, one would hardly notice the changes in the average global temperature. There is no 'right' temperature; no steady-state. The only real distinction for this particular warming trend, is to answer the question of whether it is part of the natural cycle, or has it been caused or exacerbated by changes in the CO2 level as a direct result of recent human activities. Right now, there is an ongoing debate in the scientific community if this period of warming is any different than the hundreds of other warming periods in the earth's geological and climatological history. This question has not yet been answered definitively, and the scientific community is in no way even near consensus.

Even if, however, this question was resolved in favor of the argument for man-made global warming, there are still very serious questions about two aspects of any proposed solutions:

First, do we know enough to implement methods to control the warming without doing potentially catastrophic harm to the earth? The earth is a massively complex interrelated system. It is both delicate and resilient. The system is so complex however, that even in this age of super-computers we cannot build an accurate model, both from a lack of knowledge and a lack of computing power. Could the methods we use to control warming actually cause a massive cooling such as was predicted in the 197's? The general scientific consensus is that, no, we do not yet know enough one way or the other. In other words, we do not yet know enough to make a rational decision; all we can do is guess. The computer models we have and the ones that had to be manipulated to achieve the results in support of any man-made global warming are not accurate enough to predict what is going to happen, much less what will happen from any intervention. It would be nearly criminally irresponsible to start trying to manipulate the delicate climatological balance when we cannot even generate a reliable model of what the impacts would be. We take a--not nominal--chance of upsetting the natural balance and turning the Earth into something like Venus. I personally would not like that, how about you?

Second, since we do not know what will be required to reduce warming without upsetting this delicate balance, we also do not know enough to judge effectively the economic versus environmental tradeoffs that would be required. For example, if the consequences of doing nothing are environmentally near zero, would we want to pay an economic cost of a global depression? We cannot judge the worth of a solution without first having at least some idea of the costs, benefits, and risks. Again, we just don't know enough, and good decisions cannot be made with incomplete, doctored, or faulty data; even if one lives in D.C.!

So far as the Kyoto Agreement is concerned, the best estimates I have seen predict a potential reduction of the global average temperature by 0.04 degrees will have little to no real effect, and will likely cost some trillions of dollars. That minuscule predicted reduction is assuming the signatory countries actually fully implement the required economic modifications. To date, the vast majority have not: Britain, for instance, was targeted to decrease  CO2 emissions by 12%. To date Britain actually increased emissions by 9%. In only the first couple of years, the economic costs have already become much more onerous than anyone initially anticipated. A large group of Canadian climatologists are already petitioning the Canadian government to revoke its agreement to Kyoto.

If this warming trend is not natural and was totally caused by man-made CO2 output increases, or our CO2 production has simply made it worse, we need to look seriously at the issue. Once we know the causes, we can then focus on how to fix it. As is so often being preached, the environmental balance is delicate. It is not something we should attempt to manipulate without knowing exactly what we are doing, and without a good idea of the consequences, both climatologically and economically. Then we can accurately evaluate the tradeoff's required. We need to wait until at the very minimum a preponderance of the experts concur on both the cause(s) and the solution(s) before acting. When we know what we are doing, then we should act resolutely.

Man-made global warming is not a proven fact, and it is far too early to make laws based on guesses which can too easily have unintended and possibly catastrophic consequences. The majority of scientists in applicable fields agree on this much, at least. Global Warming is a serious issue, still deeply entrenched in debate. Doing too much too soon can easily be worse than too little too late.