North Carolina's Fiscal Gordian Knot

North Carolina has a fiscal Gordian knot to tackle.  Now, that we have a republican governor and republican dominated legislature, whom we consider adults, unlike the teenagers who ran up these huge debts, maybe we can confront this budget monster head on.  Here is an op-ed by John Hood, the president of the John Locke Foundation, outlining the steps that need to be taken.  By the way, this was published by the Democratic Party’s mouthpiece the Charlotte Observer.   

Newly elected Republican Gov. Pat McCrory and the newly reelected Republican legislature may have an ambitious agenda for dramatically cutting taxes or adding new programs. But there is a fiscal constraint on any such agenda: Past governors and legislatures didn’t pay for what they spent.

Like almost all states, North Carolina has a constitutional requirement that its budget be balanced. But the rule applies only to current expenses in the General Fund operating budget. It doesn’t constrain the issuance of debt for capital expense. It doesn’t account for depreciation. And it doesn’t apply to promises made during a fiscal year to pay employees in later years.

Essentially, the state’s fiscal rules operate on a cash basis. They don’t preclude the state from accruing liabilities to be paid from future revenues not yet collected or even projected at current tax rates.

So how large is the pile of unpaid bills McCrory and the legislature have inherited? My lowball estimate is $72 billion. Let’s break it down.

The unfunded liability gaining the most political attention right now is the $2.5 billion the state owes Washington for unemployment-insurance payments in excess of UI payroll-tax collections. But that’s one of our smaller debts. If you add up bonds and other obligations, the state’s formal debt stood at about $8.5 billion last year, most of it in the form of special obligations (not authorized by referendum).

So far, we’re at $11 billion. Next, add $30 billion. That’s the current estimate of how much the health plan for teachers and state employees is in the hole for promised future spending on retiree health benefits.

Next, add another $30 billion. That’s one estimate of the unfunded liability in North Carolina’s pension fund for teachers and state employees that would be revealed if the system used more-realistic projections of future investment gains. Next, we need to account for the future cost of deferred maintenance in government infrastructure. In transportation alone, the figure starts at $1 billion (remember, this is to repair existing roads and bridges, not add new capacity).

It would be bad enough if the preceding $72 billion in unpaid bills was the end of the story. But it isn’t. Remember that all North Carolina taxpayers are also federal and county taxpayers, and many reside in municipalities. These other governments have built IOU piles of their own.

These federal and local debts at least constrain how much more indebtedness or taxation can be imposed on North Carolinians by the state. In some cases, they may also impinge directly on future state budgets – as the cash-strapped federal government pushes additional unfunded liabilities down and some cash-strapped localities get their liabilities pulled up into the state budget.

The truth is that some public liabilities will never be financed. Federal entitlements will be cut. So will North Carolina’s retiree health benefits. But the state can’t repudiate all past promises to pay. So the new leaders of the state have two fiscal responsibilities. The first is to begin to accumulate cash to satisfy existing debts and unfunded liabilities. The second is to offset any new state programs or tax cuts with budget cuts (remember, any apparent General Fund surplus doesn’t account for the unfunded liabilities).

Past politicians didn’t even try to do these jobs. It’s time for grownups to step up.

Mr. Hood, you can expect any attempt at fiscal reform by republicans will be greeted with a Charlotte Observer temper tantrum.

Source: http://www.charlotteobserver.com/2012/12/18/3734231/gov-mccrory-will-be-greeted-with.html#storylink=cpy

Charlotte Observer Dances with Glee Over Tara Servatius Resignation

The print Nazis at the Charlotte Observer are dancing with glee. The only thing missing is a stage, glitter, and a musical number. What is the big celebration? Tara Servatius, a former talk show radio host at WBT, resigned from the John Locke Foundation after posting a questionable photo of Barack Hussein Obama. Peter St. Onge at the Disturber published the following:

Tara Servatius has long seemed to revel in low-level discourse, so we suspect it wasn't conscience that prompted her to resign from the conservative John Locke Foundation this week after posting a truly detestable photo of President Barack Obama in chains and high heels with a bucket of fried chicken.

Now that’s laughable. The Charlotte Observer has the audacity to lecture others on low-level discourse. The editors at this leftist rag continuously advance their socialist agenda by publishing scurrilous cartoons denigrating their conservative opponents on a weekly basis. They have edited news articles from other publications and at times outright lied. But somehow they are above the fray. Or are they? Read the following, and tell me that Mr. St. Onge isn’t wallowing in the mud:

As for Servatius, once one of Charlotte's most dogged reporters: The former WBT talk radio host/Meck Deck blogger is running out of platforms to belch from. The beauty of the First Amendment is that she can rev up a new blog anytime she wants, maybe even for an employer willing to laugh at her next Obama joke. The rest of us can applaud the John Locke Foundation - whether we agree with its politics or not - for affirming that even in this open, raucous exchange of voices we treasure, there are still places we don't want to go.

Peter St. Onge

Well, Mr. St. Onge your belches are just as offensive. What’s even more repugnant is your platform is considered mainstream journalism. It’s too bad someone of repute doesn’t edit your bilge.

Source:

http://obsdailyviews.blogspot.com/2012/03/in-this-no-limits-era-welcome-limit.html

http://news.bostonherald.com/news/national/south/view.bg?articleid=1061119516&format=&page=2&listingType=natsouth#articleFull

John Maynard Keynes was a Crackpot, Self-Promoting Propagandist

Was John Maynard Keynes a crackpot, self-promoting propagandist? The president of the John Locke Foundation seems to think so:

RALEIGH – President Obama is reportedly about to recommend yet another round of government stimulus and “job creation” gimmicks. He means well, I suppose, but seems hopelessly lost in the fantasies of John Maynard Keynes and other crackpot economists.

“Crackpot?” did you say? How can Keynes, the founder of 20th century macroeconomics, be considered a crackpot?

Easy. He advocated the economic equivalent of the following principles:

• Water runs uphill.

• Plants don’t need light to engage in photosynthesis.

• Gravity makes objects fall away from each other.

Only a crackpot scientist would try to make you believe these things. Similarly Keynes tried to make people believe that transferring money from one pocket to another made you wealthier, that destroying productive capacity of the economy made it healthier, and that lowering price of labor and other goods would not result in a higher demand for those goods.

Keynes was a clever propagandist. But his principles have not survived the test of time. As Harvard economist Robert Barro argued in yesterday’s Wall Street Journal, the notion that governments can stimulate the economy through multiplier effects – magically turning a dollar of revenue into two or more dollars of output – is not only nonsensical but empirically false. There is “zero evidence,” Barro wrote, “that deficit-financed transfers raise GDP and employment – not to mention evidence for a multiplier of two.”

To read the rest of the article click the following link:

Source: http://www.carolinajournal.com/jhdailyjournal/index.html