Thursday, June 7, 2012

My View

Random ruminations from your resident curmudgeon...

As I mentioned last week, it appeared that Governor Scott Walker of Wisconsin would survive the recall election launched by the public sector unions and liberal groups both in and out of the state. Not only did Walker survive the recall, but he trounced his Democratic challenger. One of the reforms that Governor Walker instituted a year ago was the elimination of the mandatory union dues check off, meaning that any person that was hired as a government employee did not have union dues automatically deducted from their paycheck, giving them no choice as to whether or not to join and fund the public sector union. Public sector unions adamantly opposed this reform in Wisconsin, as the do across the country. Why? After the reform was passed and public sector employees were given a choice, over 33% dropped their union dues. This approximates to 45,000 government employees in Wisconsin.. Interestingly enough, in the recall election, exit polls indicated that 30% of the remaining union members supported Governor Walker. The point of this is not to bash unions- my dad was a union man all his working life- but to point out that both our states and our nation are in a fiscal mess, and working out of this mess is going to require innovative and sometimes painful solutions in which everyone shares some of the burden.Oh yeah, how has Wisconsin fared since Governor Walker instituted these reforms a year ago? A $3.6 billion dollar state deficit has been eliminated, unemployment has fallen from 7.7% to 6.8%, and last year, the state created 23,000 new jobs. So tell me again why the unions wanted to recall Governor Walker?

My first job out of college was at an origami plant, but it folded.

You may recall that during his campaign for President, then candidate Barack Obama was discussing energy policy and made the casual remark that he would "bankrupt" the coal companies since they did not fit in with his world view of clean energy. Not much has been made of that comment, as focus has been on other areas of our economy that Obama has decimated, but we all should pay attention to this. Why? As recently as last year, coal fired plants accounted for 44.6% of all electric power generation in the U.S. This year, it will be 36%. Now you may say "good riddance", we didn't need those dirty coal fired plants anyway. Never mind that most had been retrofitted with modern pollution controls and the older plants that were not upgraded were de-commissioned. But here is what is going to happen. According to PJM Interconnection, the company that operates the electric grid in 13 states from the mid-Atlantic to the mid-west, the price for 2015 capacity (most utility companies/grids buy capacity several years in advance) is $136 per megawatt. The per megawatt cost of electricity in 2012? $16 per megawatt. And this is happening with utilities all over the country. Utilities are already seeing higher contract prices for electricity because of the phase out of coal fired plants and their replacement by natural gas fired plants, which are more expensive to construct and operate. And you know who is going to pay for that increased cost? That's right- you and me. Prepare to reach a little deeper into your wallet to maintain your standard of living.

A word of advice: NEVER ask anyone to cut you some slack just before you bungee jump.

As our population ages and more baby boomers move toward retirement age, our entitlement system continues to slip further into bankruptcy. Case in point: Medicare spending is growing faster than any other part of the federal budget and is a major contributor to our long term deficits. By 2050, Medicare spending will be greater than Social Security, Medicaid, Obamacare, and other non-interest expenditures in the federal budget. Signed into law by President Johnson in 1965, Medicare now provides health insurance coverage to 48 million Americans. In 1965, there were 4.6 workers for every Medicare recipient; today there are 3.3. By 2030, there will be 2.3 workers contributing to the program. Couple that fact with increasing life spans and more people entering the program every year, and you can see the problem with adequately funding the program. Currently, 88% of the cost of Medicare coverage is paid through payroll taxes, which is set at a rate of 2.9%. If taxes alone are used to cover the current deficit (not projected future deficits), that rate will have to rise to 5.33% according to a study from the Heritage Foundation. The condition of Medicare is going to get worse quickly, as Obamacare immediately cuts $421 million from the program to pay for other provisions of the socialized health care plan. One can see that real reforms are going to have to implemented- and quickly- to keep this program on which many seniors rely for health care coverage from becoming totally insolvent. We cannot afford any longer to ignore this looming financial disaster.

If people really learned from their mistakes, we would be surrounded by geniuses.

And that, my friends, is my view.

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