Illinois: Putting the “Fun” in Dysfunctional

An article in USA Today asserts that states have lost billions as a consequence of earmarks they’ve been unable to spend:

The federal government treats an unspent earmark like an undated check that could be cashed at any time. It affects the federal budget only if it’s cashed. Nevertheless, because lawmakers inserted some of the earmarks into particular sections of transportation bills, many of the orphan earmarks also count against a state’s share of federal highway funds and have taken billions of dollars away from state transportation departments across the nation.

During the past 20 years, orphan earmarks reduced the amount of money that states would have received in federal highway funding by about $7.5 billion, USA TODAY found. That’s $7.5 billion that states could have used to replace obsolete bridges, repair aging roads and bring jobs to rural areas.

Illinois’s “lost” money: $350.4 million.

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Judge Okays Emanuel On Ballot

Cook County Judge Mark Ballard ordered that Rahm Emanuel’s name appear on the ballot for the Chicago mayoral primary, clearing the second hurdle for Emanuel’s candidacy:

Rahm Emanuel won another round Tuesday in his battle to stay on the ballot for Chicago mayor, but those trying to knock him off vowed further appeals that could take weeks.

Early voting begins Jan. 31, and it’s unclear whether the legal process will be finished by then. Veteran elections attorney Burt Odelson said he will file an appeal Wednesday of Cook County Judge Mark J. Ballard’s decision. If Odelson loses at the Illinois Appellate Court, he said, he will take the case to the state Supreme Court.

“We couldn’t have worse luck,” Odelson said. “All election lawyers go through that. You lose below and you win above, or you win below and you lose above.”

Odelson said he will ask appellate judges to hear the case on an expedited basis so that they could rule within about two weeks.

The case is bound to be appealed. It’s cheaper and easier to block Emanuel in the courts than it is at the ballot box.

The next step is the Illinois Appellate Court. After that the Illinois Supreme Court. My guess is that this case will continue to be escalated until there’s nowhere left to go.

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Illinois’s Mess II

Much of the discussion of Illinois’s fiscal problems in response to my post yesterday dwelled on increasing Illinois’s personal income tax. Illinois can’t solve its problems by increasing its income tax. It can’t solve its problems by increasing revenues period. The numbers just don’t support it.

Illinois has a total budget of $26 billion and a shortfall of $13 billion. In other words to meets its obligations the state would need to double revenue. Here’s the breakdown of Illinois’s state tax revenue:

Sales tax 38%
Business taxes 18%
Fees 14%
Income tax 10%
Other 20%

Presumably, it’s obvious that you can’t double revenue even by doubling income taxes let alone by increasing them by 25 or 30%. Not mathematically possible. Can we double revenue at all? Very doubtful. Doubling the state’s revenue would mean that Illinois would have the highest ratio of taxes to personal income in the nation. The other states with very high ratios (Alaska and Vermont) are distinct cases with conditions that Illinois just doesn’t enjoy. If Illinois doubles its tax rates it won’t realize twice as much money—anybody who can will either leave the state or manage their income in such a way as to avoid the tax.

There’s a desperate problem on the expense side, too. Half of Illinois’s budget is devoted to healthcare and pensions. Not only are these two items the largest budget items, they’re also growing the fastest, expected to increase by 10% year-over-year for the foreseeable future. It can’t constitutionally reduce pensions. Suggesting that Illinois amend its constitution to allow it to cut pensions is dreaming: both houses of the Illinois legislature are dominated by Democrats and public employees are among their core constituencies.

If you need a reason for my continual harping on cutting healthcare costs, that’s a sufficient one.

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Illinois’s Mess

The state of Illinois is reaching a crisis point:

Illinois lawmakers will try this week to accomplish in a few days what they have been unable to do in the past two years — resolve the state’s worst financial crisis.

The legislative session that began today as the House convened will take aim at a budget deficit of at least $13 billion, including a backlog of more than $6 billion in unpaid bills and almost $4 billion in missed payments to underfunded state pensions.

The fiscal mess is largely of the lawmakers’ own making, and failure to address the shortages threatens public schools, local governments and other public services, said Dan Hynes, the state’s outgoing comptroller.

“We’ve reached a very critical and concerning point,” Hynes said in an interview in his Chicago office, with packing boxes stacked in the corner. “What’s missing right now is a general understanding by the public of where we are, of how bad it is, and what the fallout would be if we don’t deal with it properly.”

Illinois’s legislators have preferred to use one-time fixes, borrowing from future revenue, and gimmicks over substantive reform. The problem with borrowing from future revenue is that eventually the future arrives and when you get there, you’ve got less revenue to work with than you otherwise might have. In Illinois the future is now.

Since 2003 state spending has grown by 31% (PPT) while revenues have increased by 25%. The state is dependent for its revenues on three streams: incomes, real estate prices, and retail sales. Each of those streams is at or below the level it was in 2007 while state expenditures continue to grow.

In 2010 48% of Illinois’s budget was devoted to just two items: healthcare (33%) and pensions (15%). The state’s share of public education financing is already among the lowest in the Union. Illinois’s unique constitutional protection of public employee pensions insures that, barring amending the constitution or some form of relief from the federal government, those obligations will be paid.

Illinois can’t cut, it can’t borrow, it has nothing left to sell, and it has found itself unable to increase revenues. The wheel has hit the road.

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What Makes a Government “More Effective”?

Ruy Texeira argues for something near and dear to my heart, more effective government:

Make no mistake: a more effective government is the public’s priority, not a smaller government. In a survey I helped conduct for the Center for American Progress’s Doing What Works government reform project, we found that, by a decisive 62 to 36 margin, the public said their priority for improving the federal government was increasing its efficiency and effectiveness, not reducing its cost and size. Significantly, we found an identical result among the independents in our survey.

Unfortunately, Ruy’s post is focused on offering slogans rather than solutions:

One good start would be to highlight all the money that can be saved through various agency reforms: cutting the fat out of federal procurement; modernizing information technology; stopping improper payments; increasing tax compliance; and so on.

Yes, the familiar “waste, fraud, and abuse”. The utter insignificance of all of those issues in the context of the total federal budget aside (all other functions of government could be eliminated and the military budget could be cut to zero and, as long as Social Security, Medicare, Medicaid, and interest on the debt aren’t touched we’d still be running a sizeable deficit), it doesn’t address some important questions. What does it mean for government to become more effective? How can that be realized?

I have written repeatedly here that I am not one of those who believes that everything that government does is wrong but I don’t believe that everything that government does is right, either. I agree with the formula attributed to George Washington that “government is a dangerous servant and a fearful master” (it was probably written by Upton Sinclair).

Let me give an example. Free markets in the 19th century didn’t produce healthful food or safe and effective pharmaceuticals. Government actions were required for that. Should we construe that as suggesting that the 19th century is a perfect model for the 21st century and that a larger, more powerful FDA run along the same lines as it’s run now would be more effective? I don’t think so.

Here’s another. I think that building codes and zoning requirements, in concept, are benign. You may recall that a couple of years back I went through a year-long ordeal to get the additional on our house approved which included at least a dozen appointments and face-to-face meetings with various city functionaries. Why doesn’t the city require that plans be submitted in AutoCAD Drawing Interchange Format (or the equivalent) and that most of this activity be carried out electronically? It would change very little in what the people submitting plans for approval are doing—nobody uses a draftsman anymore, practically all such plans are computerized already. I don’t think there’s anything particularly sinister in what’s going on, I just think that the city is stuck with old operational models. That it takes more time from more city employees may be thought of by some as a beneficial outcome but I think that in reality it’s just a leftover.

I think that a government is more effective when its mission statement isn’t overwhelmed by its secondary effects. Even the most ardent supporter of President Obama’s economic policies must surely admit that their record has been mixed. However, the record for those who’ve produced these policies is not mixed: they’ve all done very well by their stints in government service, going on to positions that are not only more highly compensated than their jobs as advisors but in many cases more highly compensated than the jobs they became advisors.

There’s a question and its converse that are interesting. Is a larger government inherently less effective? Is a smaller government inherently more effective? I have an opinion and an intuition on these questions.

I think that all other things being equal larger government is inherently less efficient and less effective. The cost of a bureaucracy does not increase linearly with size—the cost grows on the order of n log n or faster. Similarly, a larger government is not necessarily more effective. Effectiveness isn’t a function of size or even what is done. It resides in how well matched what is done is in terms of what is needed. By that yardstick our government isn’t very effective at all.

Unfortunately, a smaller government is no guarantee of effectiveness. I’m sure that many people consider their state, county, or city governments worse than the federal government.

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The Vampire’s Ghost (1945)

“You are seeing something that doesn’t exist; you are looking at a legend&#148. That’s how the vampire of this very different little vampire picture from the 1940s, Webb Fallon, describes himself. I have wanted to see this picture for years and I finally have. It is currently available via streaming only on Netflix.

The story and the screenplay (in part) for The Vampire’s Ghost were written by Leigh Brackett. Leigh Brackett reputedly finished the screenplay for the Bogart and Bacall classic, The Big Sleep, when the nominal writer, novelist William Faulkner, fell into a bottle. She later wrote the screenplays for the John Wayne-Howard Hawks collaborations Rio Bravo, Hatari, El Dorado, and Rio Lobo and finished her career by writing at least the draft of the screenplay for The Empire Strike Back. If you’ve ever wondered at the similarities among those John Wayne-Howard Hawks pictures, it’s no accident.

The Vampire’s Ghost is a vampire picture made by lowly Republic Studios before the genre had degenerated into a dreary (if gory sameness. It is a moody, languorous vampire movie without bats, capes, castles, counts with Eastern European accents, blood, or even a great deal of action, in some ways reminiscent in tone to Cat People (the original) or I Walked With a Zombie. This material might have turned to gold under the hand of an artist like Jacques Tourneur. Alas, that’s not the case.

English Shakespearean actor John Abbott’s Webb Fallon is urbane, lonely, world-weary, even rather charming. Abbott (at one point blacklisted, apparently by mistake) portrays this very different vampire with precision and restraint. He, the concept, and the screenplay are the highlights of the picture.

The Vampire’s Ghost takes place in Africa, at least in the Africa of Poverty Row soundstages and backlots. Unless you are very tolerant of stereotypical representations of Africans, it is unwatchable.

Low points:

  • The weak acting of the ingenue leads
  • Uneven direction
  • Very low-budget costumes, sets, effects
  • The appalling pidgins used by the poor actors playing Africans

High points:

  • John Abbott’s solid acting
  • Intriguing idea
  • Adele Mara. This former Xavier Cugat singer and dancer was really quite pretty as a dancer in Fallon’s bar. Her dance routine early in the picture, while tame by today’s standards, was undoubtedly hot stuff in 1945. She died in May of last year, BTW.

I’m glad to have seen it at least although I probably won’t bother watching it again. This picture is mostly a curiosity, a nostalgia piece.

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Should We Legalize Drugs?

My colleague at OTB, Steven Taylor, has a post there, quoting some British sources, on the virtues of drug legalization that has garnered a significant amount of comment. Frankly, it has me confused. I confess that I don’t understand what’s being discussed. Essentially, I have three questions.

First, what is meant by “legalize drugs”? Do they mean legalize pot? I think there’s a pretty good argument in favor of that, a somewhat weaker argument in favor of making all Schedule 3 drugs available over the counter, and an extremely poor argument in favor of making all drugs available over the counter. What are the proponents arguing for?

Second, what is meant by “prohibition didn’t work”? The mythology of Prohibition is that alcohol use and abuse increased as a consequence of Prohibition. The reality is that Prohibition reduced alcohol use and abuse in the United States dramatically and at the time of repeal alcohol use was 70% of what it had been before Prohibition. This stuff is all well-documented. Check Last Call, for example. Do they mean that it wasn’t cost-effective? I think there’s a better argument to be made there.

Here are my views. I think that we should legalize marijuana and leave other drug prohibitions as they are. I also think that proponents of legalization are overstating the benefits of legalization and understating its costs. Organized crime won’t cease to exist if we legalize drugs. We’ll see exactly what happened after the repeal of Prohibition: some of those involved in illegal activities will go legit, cf. Seagram’s, and the rest will transfer their attention to different contraband and other illegal activities. Drugs that remain illegal, prostitution, human trafficking, weapons, counterfeit currency, counterfeit merchandise. The list is substantial.

What is actually being proposed?

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I’ll Bite

Paul Krugman returns to his nostalgic yearning for the economic solutions of 75 years ago:

Seriously, what we’re looking at over the next few years, even with pretty good growth, are unemployment rates that not long ago would have been considered catastrophic — because they are. Behind those dry statistics lies a vast landscape of suffering and broken dreams. And the arithmetic says that the suffering will continue as far as the eye can see.

So what can be done to accelerate this all-too-slow process of healing? A rational political system would long since have created a 21st-century version of the Works Progress Administration — we’d be putting the unemployed to work doing what needs to be done, repairing and improving our fraying infrastructure. In the political system we have, however, Senator-elect Kelly Ayotte, delivering the Republican weekly address on New Year’s Day, declared that “Job one is to stop wasteful Washington spending.”

Okay, I’ll bite. What would a “21st-century version of the Works Progress Administration” look like? One that would actually reduce unemployment, I mean. So few people are involved today in infrastructure building (unless he means something different by infrastructure than roads, bridges, dams, etc.) that while support for concrete and blacktop infrastructure might have secondary benefits, it will have very little direct impact on unemployment.

Over the last 40 years we have made a transition from direct production to indirect production in this country. Far, far fewer people working in manufacturing, fewer laborers, miners, farmers. Lots more people working in fast food, retail, business services. I think a re-balancing would be desireable and beneficial but it’s going to take decades.

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Boo-Freaking-Hoo

If there is a weaker argument against the federal government’s making moves however feeble in the direction of fiscal sanity than that such a transition would cause economic hardship to businesses in the Washington, DC area I don’t know what it is:

The Washington region rose above all other metropolitan areas in 2010 when it came to economic progress. Bolstered by federal hiring and a boost in procurement, the region recorded the nation’s highest net number of jobs gained during a 12-month period as the year came to a close.

But economists are concerned that the momentum may now be threatened as the region’s major industry — the federal government — prepares to face the budget ax. Many in Congress have expressed an interest in slowing federal spending in order to bring the $1 trillion or so deficit in line.

Welcome to the era of government austerity.

What’s next? Pleas to go easy on organized crime because fighting it would reduce the market for pinky rings and armor-plated limos? Sheesh.

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Predictions for 2011

In my predictions post last year I wrote that I found it difficult to muster up much enthusiasm for a predictions post. This year I feel that way and then some.

For one thing I think that this year is pretty likely to be a replay of last year. Re-runs are rarely as entertaining as the first run and when you didn’t much care for the first run… For another there are all sorts of areas in which I don’t find myself with nearly as clear a view as I did in prior years. Take Iran, for example.

In prior years I’ve had substantial confidence that Iran wouldn’t test a nuclear weapon and that neither the U. S. nor Israel would attack Iran, at least not openly. I was also darned confident that the color revolution that optimists saw so brightly on the horizon would never materialize. Iran’s mullahs are serious, they aren’t democrats, they have plenty of resources at their disposal, and they don’t much care what level of force they need to employ to maintain their power and their vision of Iran’s future.

One of the many things that WikiLeaks has rendered beyond debate is that practically everybody other than peace activists in the West believes that Iran’s nuclear development program is a nuclear weapons development program. Our government believes it; the Russians believe it; the European governments believe it; the Gulf governments believe it. I have long thought that the preponderance of the evidence supported the idea that the Iranians were developing nuclear weapons or, at the very least, wanted everybody (including their own people) to believe that they were.

Will Iran demonstrate a nuclear weapon this year? I really don’t know. What will the U. S., Israel do in response? Again, I really don’t know.

  • Kim Jong-Il will die this year and be succeeded by his son, Kim Jong-Un. This is so widely believed it’s barely a prediction at all.
  • At the end of 2011 unemployment in the U. S. will be no less than 9%. I think that the BEA will be able to jigger the numbers sufficiently to keep the official figure below 10%.
  • GDP growth for the year will be at or below 3%. Growth will be sufficiently concentrated that it will feel worse.
  • There will be no anti-austerity riots by public employees in the United States like those in Greece. The real question is whether there will be anti-public employees riots.
  • The Tea Party Movement will prove to be a genuine populist movement rather than just another name for regular Republicans. They’ll be just as unhappy with business as usual on the part of Republicans as they were with overreach by Congressional Democrats.
  • PPACA will not be repealed or declared unconstitutional by the Supreme Court.
  • At least one state will either default, be bailed out by the federal government, or be allowed to declare bankruptcy. It may well be Illinois.
  • Rahm Emanuel will be allowed to run in the primary for Chicago mayor.
  • The Social Network will win the Academy Award as Best Picture.
  • Jeff Bridges, Hailee Steinfeld, Natalie Portman, Colin Firth, and Geoffrey Rush will all be nominated for Academy Awards. It’s likely that three of them will win (all five can’t because they’re in conflict)
  • American forces will leave Iraq on schedule.
  • At least 90,000 American soldiers will be in Afghanistan at the end of 2011.
  • Julian Assange will not be convicted of sex charges in Sweden or of espionage in the United States.
  • President Obama’s approval rating as measured by the RCP average will not go over 50%.
  • The Coen Brothers will not announce that they’re beginning production of a new version of the Rodgers and Hammerstein musical, Oklahoma.
  • House prices as measured by the Case-Shiller index of twenty leading markets will decline at least an additional 10%. 20% is the floor.

Update

There were some additional predictions I’d intended to make so I’ll add them here:

  • There will still be prisoners at Guantanamo at the end of 2011. Like the Bush Administration before it the Obama Administration doesn’t know what else to do with them and it’s unwilling to take the heat for making the wrong decision.
  • The EU’s actions will be successful in deferring the sovereign debt crisis among its member nations through 2011. The problems haven’t been solved—the can has just been kicked down the road.
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