TSA Is Larger, More Expensive Than First Planned And Not As Effective

See TSA Creator: The Whole Thing is a Fiasco. Screeners Should Be Privatized, Agency Dismantled at "Carpe Diem."

"HUMAN EVENTS -- "A decade after the TSA was created following the September 11 attacks, the author of the legislation that established the massive agency grades its performance at “D-.”

“The whole program has been hijacked by bureaucrats,” said Rep. John Mica (R. -Fla.), chairman of the House Transportation Committee. “It mushroomed into an army,” Mica said. “It’s gone from a couple-billion-dollar enterprise to close to $9 billion." As for keeping the American public safe, Mica says, “They’ve failed to actually detect any threat in 10 years.”

“Everything they have done has been reactive. They take shoes off because of shoe-bomber Richard Reid, passengers are patted down because of the diaper bomber, and you can’t pack liquids because the British uncovered a plot using liquids,” Mica said. “It’s an agency that is always one step out of step,” Mica said.

It cost $1 billion just to train workers, which now number more than 62,000, and “they actually trained more workers than they have on the job,” Mica said.

“The whole thing is a complete fiasco," Mica said. "Screeners should be privatized and the agency dismantled."

HT: Tim Dodson"

One Reason Obama Wants Another State Bailout

Great post by Tad DeHaven of Cato.

"I recently discussed why the additional federal subsidies for state and local government that President Obama is proposing as part of his “job plan” are a bad idea. A new study from two Harvard economists suggests that the president’s affinity for these subsidies might have something to do with the fact that the aid would be particularly helpful to states with more left-leaning legislators and strong public sector unions.

The study from Daniel J. Nadler and Sounman Hong (see here) found that states with stronger public sector unions and a higher proportion of left-leaning state legislators face higher borrowing costs:

We find that, all things being equal, states with weaker unions, weaker collective bargaining rights, and fewer left-leaning state legislators pay less in borrowing costs at similar levels of debt and similar levels of unexpected budget deficits than do states with stronger unions and more left-leaning legislators. More practically, these findings suggest that the strength of public sector unions has become among the most important factors in bond market perceptions of a state’s risk of financial collapse.

Why do these states face higher borrowing costs? Nadler and Hong explain:

These “political” factors might signify to the bond market whether a state government has the willingness and capacity to initiate needed fiscal adjustments and austerity measures during the state fiscal crises that followed the financial crisis, and thus might provide some information to market participants about the likeliness that a given state government will choose to default on its debt instead of making politically difficult or undesirable budget cuts. Similarly, public sector labor environment variables, such as union strength, might signify to market participants the degree of organized political opposition state lawmakers would have to overcome to implement such austerity measures.

In a corresponding Wall Street Journal op-ed, Nadler and Paul E. Peterson, director of Harvard’s Program on Education Policy and Governance, do a nice job of explaining why the separation of responsibility between the federal government and the states has been crucial to the country’s economic rise:

Federal rescue of states is a dramatic departure from past practice. State bankruptcies date back to the 1840s when, amid a financial crisis, Pennsylvania, Michigan, Illinois and five other states discovered they had invested too heavily in infrastructure. The last state bankruptcy was in Arkansas during the 1930s. But overall the instances were few; in each case the federal government refused to come up with a fix.

Bankrupt states paid the price, but for the country as a whole, a system of fiscally sovereign states has proven incredibly beneficial to the nation’s economic well-being. Every state is responsible for its own police, fire, schools, transport and much more, and most of the time they do reasonably well. If they manage their affairs so as to attract business, commerce and talented workers, states prosper. If states make a mess of things, citizens and businesses vote with their feet, marching off to a part of the country that works better.

It is this exceptional federalist system that helped drive the rapid growth of the American economy throughout the first two centuries of the country’s history. Because state and local governments competed with one another for venture capital, entrepreneurial talent and skilled workers, governments generally had to be attentive to the needs of both citizens and commerce.

Unfortunately, the 20th century’s trend for the federal government to subsidize and manage more and more state and local affairs has worsened in the last 10 years as the chart in my blog post shows. If our bloated federal government is ever to be reined in, a return to fiscal federalism is a must. And if the states are to get their financial houses in order, state policymakers can’t be allowed to believe that a federal policy of “too big to fail” applies to them

It rose from $372 billion 10 years ago to $625 billion today.

Administration Ignored Warnings on Long-Term Care Plan

Great post by Megan McArdle.

"Speaking of ill-considered financial decisions made by politicians intent on their policy priorities, new emails revealed by the AP show that the administration was warned that parts of ObamaCare were a financial disaster--but plowed ahead anyway.

For those who don't marinate daily in the minutiae of health care policy, a recap: when ObamaCare was working its way through the Congressional sausage factory, they wanted absolutely every penny of revenue that they could get, in order to maximize the amount of deficit reduction they could claim. The call thus went out to the committees to dust off all of their old revenue raisers and present them for possible inclusion in the bill.

As I understand it, that's how we got the idiotic 1099 requirement, which raised a trivial amount of revenue by requiring every business in America to do massive new loads of paperwork. It also seems to be how we got the CLASS Act, a long-term care insurance program that I believe was the brain-child of Ted Kennedy. While the idea was beloved of nursing homes, it was hated by everyone else due to its rich potential for turning into yet another unkillable and unaffordable entitlement.

However, from the point of view of someone who is primarily concerned with the Congressional Budget Office's 10-year scoring window, it was great. In the first decade of its existence, the program collects a lot of premiums, but doesn't pay a lot of benefits, so it looks like a fiscal gold mine. It's only in later years, when the beneficiaries start demanding their long-term care, that the problems begin.

It seems like it might have been wiser to skip it. But if they had, ObamaCare wouldn't have had much deficit reduction; the last score of CLASS that I'm aware of put the net deficit reduction at $72 billion. CBO's final score of ObamaCare said it would reduce the deficit by $118 billion over the same period. Without CLASS, the deficit reduction would have been less than half the figure they eventually touted. Somehow, $46 billion of deficit reduction on a nearly $1 trillion bill doesn't sound too impressive, does it? More like a rounding error than a serious commitment to fiscal probity.

No wonder they were so deaf to the warnings from their own experts. Apparently, the administration was warned about this from the very beginning, but ignored it:

Obama's own bipartisan debt commission last year recommended major reforms or repeal of CLASS, as did another independent advisory group. Nursing homes and long-term care providers support the program, while private long-term care insurance companies oppose it. CLASS poses a dilemma for the new congressional supercommittee, since it initially reduces the federal deficit until payouts overwhelm premiums collected.

The emails show that the first warning about CLASS came in May 2009, from Richard Foster, head of long range economic forecasts for Medicare. "At first glance this proposal doesn't look workable," Foster wrote in an email to other HHS officials, some of whom were working with Congress to get CLASS into the health care law.

Foster said a rough outline of the program would have to enroll more than 230 million people - more than the U.S. workforce - to be financially feasible.

But work on CLASS continued, bolstered by a report for AARP that laid out scenarios for implementing the plan. The AARP study also raised financial concerns, although the seniors' lobby supports CLASS.

In July, Foster tried again. After reviewing the latest information from Kennedy's office, he wrote HHS officials: "Thirty-six years of (professional) experience lead me to believe that this program would collapse in short order and require significant federal subsidies to continue."

Too late. The Obama administration had decided to support CLASS. Documents and emails indicate that Foster was edged out of deliberations. Officials relied on a more favorable analysis from the Congressional Budget Office. In November, Foster went public with his concerns. Congress was well aware, the administration says.

By that time, Marton, the HHS aging policy official, was also raising questions internally. Emails he sent other administration officials relayed studies that raised concerns about such issues as premiums and the role of employers, while also recommending fixes.

Publicly, the administration maintained it would all work out. A December 2009 presentation for senior officials stressed the end result would be a financially robust program.

In private, administration insiders were still spelling out concerns. In January 2010, amid the final drive to pass the health care law through a divided Congress, officials circulated a 10-page list of "technical corrections." One item questioned whether the law gave HHS sufficient authority to redesign the program to keep it afloat, and recommended a "failsafe" clause spelling that out.

The administration seems to think that it can fix the program--but the only workable fix appears to be making the thing mandatory rather than optional, which is hardly what they said when they were passing it. And it's not even clear that making it mandatory would work, as my husband noted last spring.

The administration has taken something of a beating this week. Not because they're somehow uniquely evil--but because they presented themselves as something different, a technocratic elite above the grubby political posturing and ideological mistakes of earlier administrations. First Solyndra, now this, seem to show that they're very much like everyone else when they're caught up in the throes of ideological excitement--too much in a hurry to dig into promises that are, as journalists like to say, "Too Good to Check".

A $38.6 billion loan guarantee program creates fraction of jobs promised

See Green dog bites man by

"Here’s a shocker from the Washington Post:

A $38.6 billion loan guarantee program that the Obama administration promised would create or save 65,000 jobs has created just a few thousand jobs two years after it began, government records show.

The program — designed to jump-start the nation’s clean technology industry by giving energy companies access to low-cost, government-backed loans — has directly created 3,545 new, permanent jobs after giving out almost half the allocated amount, according to Energy Department tallies.

President Obama has made “green jobs” a showcase of his recovery plan, vowing to foster new jobs, new technologies and more competitive American industries. But the loan guarantee program came under scrutiny Wednesday from Republicans and Democrats at a House oversight committee hearing about the collapse of Solyndra, a solar-panel maker whose closure could leave taxpayers on the hook for as much as $527 million.

The GOP lawmakers accused the administration of rushing approval of a guarantee of the firm’s project and failing to adequately vet it. “My goodness. We should be reviewing every one of these loan guarantee” projects, said Rep. Marsha Blackburn (R-Tenn.).

Obama’s efforts to create green jobs are lagging behind expectations at a time of persistently high unemployment. Many economists say that because alternative-­energy projects are so expensive and slow to ramp up, they are not the most efficient way to stimulate the economy.

Sometimes, “many economists” are right. Here’s some wisdom from one economist:

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.

F.A. Hayek

The plan was to create (or save) 65,000 jobs. It apparently didn’t turn out that way."

We Still Spend A Small % Of Our Income On Gas

See Energy Fact of the Week: Real Energy Costs on the Rise for American Households? by Steven F. Hayward.

"The Los Angeles Times yesterday reported that American motorists may spend a record $491 billion for gasoline this year, reflecting the high price of gasoline. Meanwhile, the Department of Energy reported the dog-bites-man story that sales of refrigerators are down on account of the poor economy—something they might have grasped if they’d read last week’s Energy Fact of the Week. Since new refrigerators are generally more energy efficient than the fridges they replace, this implies a slowdown in the long-term trend of improving household energy efficiency.

The gasoline sales projection is an estimate from proprietary sources by an analyst with the Oil Price Information Service. And one relevant question is: what does that $491 billion figure mean in terms of its share of household income, and what has the long-term trend been over time? The Department of Energy’s data series on gasoline expenditures is surprisingly out of date; the most recent data release is from 2001. However, it is possible to see the long-term trends from data reported in the Census Bureau’s Consumer Expenditure Survey, which reports annual data from 1984 through 2009.

Figure 1 below shows that consumer expenditures for gasoline and motor oil as a percentage of average after-tax income fell steadily from about 5 percent at the beginning of the survey in 1984 to a low of 2.6 percent in 1999 (when gasoline prices dipped below $1 a gallon in many places in the United States). However, the slow rise in oil prices has pushed the figure back up to 4.4 percent in 2008—its highest level since 1985. After dipping in 2009, the 2010 and 2011 figure is likely to spike back up again when the full year’s data is reported."

"

The cause of the financial crisis in the United States was from an unprecedented number of weak and risky loans

See Not So Prime After All: Countrywide Claimed to be Predominantly a Prime Lender by Edward Pinto of AEI.

"This 2007 testimony by a senior executive at Countrywide Financial Corporation before the U.S. Senate Banking Committee just came to my attention (H/T Tom LaMalfa):

Countrywide is predominantly a prime lender that offers the widest array of products available in the market place. While the subprime market represents over 20 percent of the overall U.S. mortgage market, it constitutes only 7 percent of Countrywide’s loan volume.

The toxic trio—Countrywide, Fannie Mae (which claimed that just 0.2% of its single-family mortgage credit book of business consisted of subprime mortgage loans under its definition), and Freddie Mac (which also claimed just 0.2% of its single-family mortgage credit book of business consisted of subprime mortgage loans under its definition)—demonstrates a level of grade inflation that would make an Ivy League professor blush. The “A” or prime loan was redefined so that it was no longer what it historically had been—a high quality, low risk loan.

This was no accident. HUD observed in a 2000 rule making:

Because the GSEs have a funding advantage over other market participants, they have the ability to underprice their competitors and increase their market share. This advantage, as has been the case in the prime market, could allow the GSEs to eventually play a significant role in the subprime market. As the GSEs become more comfortable with subprime lending, the line between what today is considered a subprime loan versus a prime loan will likely deteriorate, making expansion by the GSEs look more like an increase in the prime market. Since … one could define a prime loan as one that the GSEs will purchase, the difference between the prime and subprime markets will become less clear. This melding of markets could occur even if many of the underlying characteristics of subprime borrowers and the market’s (i.e., non-GSE participants) evaluation of the risks posed by these borrowers remain unchanged.

"The cause of the financial crisis in the United States was the collapse of housing and mortgage markets resulting from an accumulation of an unprecedented number of weak and risky loans, most of which were called prime. When the financial crisis hit in full force in 2008, approximately 26.7 million or 49 percent of the nation’s 55 million outstanding single-family first mortgage loans had high risk characteristics, making them far more likely to default."

POVERTY HALVED-when the government didn’t try to help the poor

See The Headline That Never Was by Charles Murray of AEI.

"Yesterday, the revelation that poverty had reached 15.1 percent in 2010 (poverty figures refer to the year prior to their release) got a lot of attention, but, seen in context, it wasn’t really a big deal. The official poverty percentage hit its low in 1972 at 11.1 percent and since then has moved within a narrow range, hitting a high of 15.2 percent in 1982.

Compared those wiggles in the graph of poverty with this headline: “POVERTY HALVED. Drops 20 Percentage Points in Just Twelve Years.” That’s what happened from 1949 to 1961. We didn’t know it at the time, but the numbers have been calculated retrospectively, using the 1950 census to determine the poverty rate in 1949—it was 41 percent. In President Kennedy’s first year in office, 1961, it was 21 percent. And what was going on in between? Oh, yes. Those boring, complacent Eisenhower years, when the government didn’t try to help the poor. Unlike now."