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Policy

This image provided by the California High Speed Rail Authority shows an artist's rendering of a high-speed train station. (Photo: AP/California High Speed Rail Authority)

This image provided by the California High Speed Rail Authority shows an artist’s rendering of a high-speed train station. (Photo: AP/California High Speed Rail Authority)

When politicians create programs and announce projects, they routinely lie about the real costs. Their primary goal is to get initial approval for various boondoggles and they figure it will be too late to reverse path once it becomes apparent that something will cost for more than the initial low-ball estimates. Obamacare is a classic (and discouraging) example.

These “cost overruns” are very bad news for taxpayers, of course, but the system works very well for insiders. Bureaucrats get more money. Interest groups get more money. Government contractors get more money. Government consultants get more money. And some of that money gets funneled back to politicians in the form of campaign contributions, so they get more money as well.

This scam is particularly prevalent whenever politicians decide to build infrastructure. And there are lots of local examples in the Washington area.

But it’s definitely not limited to Washington. There are ridiculous examples of cost overruns elsewhere in the world.

And it goes without saying that places controlled by statists often produce the most absurd examples of wasteful boondoggles. Indeed, is there anyone in the world surprised to see this headline from a story in the Los Angeles Times?

Here are some of the details from the report.

A confidential Federal Railroad Administration risk analysis, obtained by The Times, projects that building bridges, viaducts, trenches and track from Merced to Shafter, just north of Bakersfield, could cost $9.5 billion to $10 billion, compared with the original budget of $6.4 billion. …The California High-Speed Rail Authority originally anticipated completing the Central Valley track by this year, but the federal risk analysis estimates that that won’t happen until 2024, placing the project seven years behind schedule.

Over budget and overdue? Gee, who could have predicted that would happen with a government infrastructure project (other than every single person with an IQ above room temperature).

What happens next is unclear. The federal bureaucracy that disburses grants presumably wants to keep the gravy train on the tracks (pun intended), though hopefully Congress will tell California there won’t be any more federal handouts.

The Federal Railroad Administration is tracking the project because it has extended $3.5 billion in two grants to help build the Central Valley segment. …Rep. Jeff Denham (R-Turlock), chairman of the House rail subcommittee, said Friday… “Despite past issues with funding this boondoggle, we were repeatedly assured in an August field hearing that construction costs were under control,” he said in a statement. “They continue to reaffirm my belief that this is a huge waste of taxpayer dollars.” …About 80% of all bullet train systems incur massive overruns in their construction, according to Bent Flyvbjerg, an infrastructure risk expert at the University of Oxford who has studied such rail projects all over the world.

Unsurprisingly, the various interest groups that are feasting on this boondoggle want it to continue, whether the money comes from federal taxpayers or state taxpayers.

The California system is being built by an independent authority that has never built anything and depends on a large network of consultants and contractors for advice. …Proponents of the project, including many veteran transportation experts, have said that California’s massive economy can handle higher costs for the project — even more than $100 billion — by increasing sales taxes.

For what it’s worth, I don’t particularly care if California voters want to squander their own money and hasten the state’s economic decline.

But I’m very much against the idea that my income should be forcibly redistributed to support this foolish bit of pork. And this is why I’m very nervous about Donald Trump’s infatuation with infrastructure. Though since he hasn’t provided many details, so we don’t know whether he wants a business-as-usual expansion of pork or a much-needed expansion of private-sector involvement. But I’m not optimistic.

When politicians create programs and announce projects,

Policy

national-debt-capitol-hill

US national debt piles up next to the Capitol Building in Washington, D.C., where no one has the political courage to rise to the challenge of staving off the coming crisis.

Which state gets the biggest share of its budget from the federal government?

Nope, not even close. As a matter of fact, those two jurisdictions are among the 10-least dependent states.

And if you’re guessing that the answer is New York, New Jersey, Maryland, Connecticut, or some other “blue state,” that would be wrong as well.

Instead, if you check out this map from the Tax Foundation, the answer is Mississippi, followed by Louisiana, Tennessee, Montana, and Kentucky. All of which are red states!


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So does this mean that politicians in red states are hypocrites who like big government so long as someone else is paying?

That’s one way of interpreting the data, and I’m sure it’s partially true. But for a more complete answer, let’s look at the Tax Foundation’s explanation of its methodology. Here’s part of what Morgan Scarboro wrote.

State governments…receive a significant amount of assistance from the federal government in the form of federal grants-in-aid. Aid is given to states for Medicaid, transportation, education, and other means-tested entitlement programs administered by the states. …states…that rely heavily on federal assistance…tend to have modest tax collections and a relatively large low-income population.

In other words, red states may have plenty of bad politicians, but what the data is really saying – at least in part – is that places with a lot of poor people automatically get big handouts from the federal government because of programs such as Medicaid and food stamps.  So if you compared this map with a map of poverty rates, there would be a noticeable overlap.

Moreover, it’s also important to remember that the map is showing the relationship between state revenue and federal transfers. So if a state has a very high tax burden (take a wild guess), then federal aid will represent a smaller share of the total amount of money. By contrast, a very libertarian-oriented state with a very low tax burden might look like a moocher state simply because its tax collections are small relative to formulaic transfers from Uncle Sam.

Indeed, this is a reason why the state with best tax policy, South Dakota, looks like one of the top-10 moocher states in the map.

This is why it would be nice if the Tax Foundation expanded its methodology to see what states receive a disproportionate level of handouts when other factors are equalized. For instance, what happens is you look at federal aid adjusted for population (which USA Today did in 2011). Or maybe even adjusted for the poverty rate as well (an approached used for the Moocher Index).

P.S. For what it’s worth, California has the nation’s most self-reliant people, as measured by voluntary food stamp usage.

P.P.S. And it’s definitely worth noting that the federal government deserves the overwhelming share of the blame for rising levels of dependency in the United States.

Which states rely most on federal aid

Politics

President-elect Donald J. Trump and Steve Harvey, left, shake hands after their meeting at Trump Tower in New York, U.S., January 13, 2017. The Supreme Court, right, is seen in Washington on Feb. 13, 2016. (Photo: Reuters/AP)

President-elect Donald J. Trump and Steve Harvey, left, shake hands after their meeting at Trump Tower in New York, U.S., January 13, 2017. The Supreme Court, right, is seen in Washington on Feb. 13, 2016. (Photo: Reuters/AP)

President-elect Donald J. Trump has narrowed down his short list of potential nominees to replace Justice Antonin Scalia on the U.S. Supreme Court. The shortlist mostly includes federal appeals court judges who also made the larger list of potential Supreme Court picks he released during the campaign.

The then-Republican nominee for president promised to nominate a constitutionalist in the mold of the “late great” Justice Scalia and, judging by the list, it will please conservatives to know it appears he intends to do just that. Most of the names on President-elect Trump’s shortlist have already been through a confirmation process, making opposition to them despite their conservative views difficult for Democrats to navigate politically.

Here’s a look at all of the seven appeals court judges on the list.

Michigan Supreme Court Justice Joan Larsen became an assistant attorney general in the Justice Department’s Office of Legal Counsel in 2002. Larsen, 48, received her law degree from Northwestern University and clerked for the “late great” Justice Antonin Scalia before being named to the state’s high court by Republican Gov. Rick Snyder.

Judge William H. Pryor Jr., was appointed to the U.S. Court of Appeals for the 11th Circuit in Alabama by President George W. Bush and has served since 2004. For saying “nine octogenarian lawyers who happen to sit on the Supreme Court” shouldn’t decide on the death penalty, his nomination turned into a fight. Pryor, 54, was only confirmed in a 53-45 vote due to the “Gang of 14” bipartisan Senate compromise in May 2005. It ended a Democratic filibuster of several Bush judicial nominations and put an end to debate over whether Republicans should invoke the  “nuclear option,” which Democrats ended up doing under Harry Reid. He became Alabama’s attorney general in 1997 after his predecessor, Jeff Sessions, was elected to the U.S. Senate. Pryor, who received his law degree from Tulane University, was elected state attorney general in 1998 and was re-elected in 2002. In 2013, he was confirmed to a term on the United States Sentencing Commission..

Judge Thomas Hardiman was appointed by Bush in 2007 to the U.S. Court of Appeals for the 3rd Circuit in Pennsylvania confirmed by a 95-0 vote in March 2007. Hardiman, 51, a graduate of Notre Dame, previously served as a federal district judge for the Western District of Pennsylvania. He was overwhelmingly confirmed by voice vote in October 2003 and also practiced law in Washington and Pittsburgh.

Judge Steven Colloton currently serves on the U.S. Court of Appeals for the 8th Circuit in Iowa. Colloton, 53, was appointed in 2003 by President Bush and overwhelmingly confirmed by the U.S. Senate in September 2003 by a vote of 94-1. He also served as a U.S. attorney for the Southern District of Iowa after graduating from Yale Law School and clerking for the late Supreme Court Chief Justice William Rehnquist.

Judge Neil Gorsuch, who serves on the U.S. Court of Appeals for the 10th Circuit in Colorado, was also appointed in 2006 by Bush. Gorsuch, 49, was confirmed by a voice vote in July. He was previously a deputy assistant attorney general at the Justice Department. The Harvard Law School graduate clerked for both current Supreme Court Justice Anthony Kennedy and former Justice Byron White.

Judge Diane Sykes of the U.S. Court of Appeals for the 7th Circuit in Wisconsin was also named by Bush. Sykes, who received her law degree from Marquette University, was confirmed by the U.S. Senate by a vote of 70-27 in March 2004. Sykes, 58, began serving as a justice on the Wisconsin Supreme Court in 1999 and after she was a trial court judge in both civil and criminal cases. She received her law degree from Marquette University.

Judge Raymond Gruender was appointed to the U.S. Court of Appeals for the 8th Circuit in Missouri by former President George W. Bush. Gruender, 53, previously served as a prosecutor and as the U.S. attorney for the Eastern District of Missouri. He received his law degree from Washington University in St. Louis. The Senate voted 97-1 to confirm him in May 2004.

With notable exceptions such as Justice Elena Kagan and retired Justice Sandra Day O’Connor, the vast majority of justices nominated in modern politics have been federal appeals court judges.

President-elect Donald J. Trump has narrowed down

Policy

A 1040 tax form appears on display, Tuesday, Jan. 10, 2017, in New York. (Photo: AP)

A 1040 tax form appears on display, Tuesday, Jan. 10, 2017, in New York.

I don’t like tax increases, but I like having additional evidence that higher tax rates change behavior. So when my leftist friends “win” by imposing tax hikes, I try to make lemonade out of lemons by pointing out “supply-side” effects.

I’m hoping that if leftists see how tax hikes are “successful” in discouraging things that they think are bad (such as consumers buying sugary soda or foreigners buying property), then maybe they’ll realize it’s not such a good idea to tax – and therefore discourage – things that everyone presumably agrees are desirable (such as work, saving, investment, and entrepreneurship).

Though I sometimes worry that they actually do understand that taxes impact pro-growth behavior and simply don’t care. But one thing that clearly is true is that they get very worried if tax increases threaten their political viability.

This is why Becket Adams, in a column for the Washington Examiner, is rather amused that Mayor Kenney of Philadelphia has been caught with his hand in the tax cookie jar.

Philadelphia Mayor Jim Kenney fought hard to pass a new tax on soda and other sugary drinks. He won, and the 1.5-cents-per-ounce tax is now in place, affecting both merchants and consumers, because that’s how taxes work. Businesses pay the levies, and they offset the cost by charging higher prices. That is as basic as it gets. The only person who doesn’t seem to understand this is Kenney, who is now accusing business owners of extortion. “They’re gouging their own customers,” the mayor said.

Yes, consumers are being extorted and gouged, but the Mayor isn’t actually upset about that.

He’s irked because people are learning that it’s his fault.

Philadelphians are obviously outraged by the skyrocketing cost of things as simple as a soda, which has prompted some businesses to post signs explaining why the drinks are now do damned expensive. Kenney said that this effort by businesses to explain the rising cost is “wrong” and “misleading.” The mayor apparently thought the city council could impose a major new tax on businesses, and that customers somehow wouldn’t be affected.

In other words, it’s probably safe to say that Mayor Kenney has no regrets about the soda tax. He’s just not pleased that he can’t blame merchants for the price increase.

The International Monetary Fund (IMF), by contrast, may actually have learned a real lesson that higher taxes aren’t always a good idea. That bureaucracy is infamous for blindly supporting tax increases, but if we can believe this story from the Wall Street Journal, even those bureaucrats don’t think additional tax hikes in Greece would be a good idea.

IMF officials have said Greece’s economy is already overtaxed. New taxes that came into affect on Jan. 1 are squeezing household incomes further. Economists say even-higher income taxes—in the form of lower tax-free income allowances—could add to a mountain of unpaid taxes. Greeks currently owe the state €94 billion ($99 billion), equivalent to 54% of gross domestic product, and rising, in taxes that they can’t pay.

Here are some stories to illustrate the onerous tax system in Greece, starting with a retired couple that will probably lose their house because of a new property tax.

…the 87-year-old former economist and his 81-year-old wife are unable to repay the property tax imposed on their 70-year old house, a family inheritance. The annual tax is around ‎€33,000, but Mr. Kokkalis’s pension—already cut by half—is €28,000 a year. The couple borrowed money when the tax was imposed, initially as a temporary austerity measure in 2011. But they are already behind on nearly €200,000 of tax payments and can’t borrow more. Mr. Kokkalis says the state is calculating tax based on outdated property prices that have since collapsed, and that if he tried to sell the house now, nobody would be interested. “They impose taxes on an imaginary value,” Mr. Kokkalis says. “This is confiscation.”

I’ve already written about this punitive property tax. The good news is that property taxes generally are transparent, so people know how much they’re paying.

The bad news is that the tax in Greece is far too onerous.

And I’ve also noted that small businesses are being wiped out in Greece as well. The WSJ has a new example.

Tax increases under previous rounds of austerity have put a middle-class lifestyle beyond reach for many. “Our only goal now is survival,” says arts teacher Mimi Bonanou. Until recent years she also made a living as a practicing artist, selling her works in Greece and abroad. But increasingly heavy taxes that self-employed Greeks must pay at the start of each year, based on the state’s often-ambitious forecast of their incomes, have forced her to rely on teaching alone.

All things considered, Greece is a painful example that a country can’t tax its way to prosperity (though some politicians never learned that lesson).

Moreover, it’s nice to have further evidence that even the IMF recognizes that Greece is on the wrong side of the Laffer Curve.

And if a left-leaning bureaucracy is now willing to admit that excessive taxation can lead to less revenue, maybe eventually the Republicans on Capitol Hill will install people at the Joint Committee on Taxation who also understand this elementary insight.

The International Monetary Fund (IMF), a big

Politics

U.S.President-elect Donald Trump shakes hands with television personality Steve Harvey after their meeting at Trump Tower in New York, U.S., January 13, 2017. (Photo: Reuters)

U.S.President-elect Donald Trump shakes hands with television personality Steve Harvey after their meeting at Trump Tower in New York, U.S., January 13, 2017. (Photo: Reuters)

President-elect Donald J. Trump met with entertainer and talk show host Steve Harvey at Trump Tower on Friday to discuss efforts to help inner cities. The president-elect made a concerted effort to reach out to black voters during the campaign and, despite the media narrative, earned him the support of black civil rights leaders and voters.

“We’ve got to team up and see if we can bring about some positive change in the inner cities. That’s my only agenda. He agreed and he wants to do something,” Mr. Harvey told reporters in the lobby after the meeting. “They have a plan for the inner cities but they need some help and so that’s why they called me. So we’ll see what I can do.”

We’ve got to team up and see if we can bring about some positive change in the inner cities. That’s my only agenda. He agreed and he wants to do something.”

Ben Carson, who was nominated and expected to be confirmed as the next Secretary of the U.S. Department of Housing and Urban Development (HUD), was also at the meeting and will play a large role in a larger an effort by the incoming Trump Administration to better economic and educational opportunities in U.S. inner cities. People’s Pundit Daily has learned President-elect Trump will waste no time trying to fulfill his promises after being sworn in to office on Jan. 20, 2017.

President-elect Donald J. Trump met with entertainer

Politics

President-elect Donald Trump (L) and Vice President-elect Mike Pence (R) pose with General James Mattis (C) at the clubhouse of Trump International Golf Club, November 19, 2016 in Bedminster Township, New Jersey. (Photo: AP)

President-elect Donald Trump (L) and Vice President-elect Mike Pence (R) pose with General James Mattis (C) at the clubhouse of Trump International Golf Club, November 19, 2016 in Bedminster Township, New Jersey. (Photo: AP)

The House of Representatives on Friday voted to approve a waiver for Gen. James Mattis to serve as Secretary of Defense for President-elect Donald J. Trump. General James ‘Mad Dog’ Mattis, 66, as he is known, is a modern-day George Patton and a perfect attitudinal fit for the non-politically correct businessman from New York.

The Afghanistan and Iraq War veteran commanded needed a waiver due to Pentagon rules prohibiting who have served on active duty within the prior seven years from serving in civilian.

Following the first confirmation hearing on Thursday, the Senate committee voted in favor of the waiver and he is expected to easily be confirmed. Gen. Mattis

#Mattisisms for Your Reading Pleasure

“Be polite, be professional, but have a plan to kill everybody you meet.” — Iraq, 2003

“No war is over until the enemy says it’s over. We may think it over, we may declare it over, but in fact, the enemy gets a vote.” — Defense News

“I’m going to plead with you, do not cross us. Because if you do, the survivors will write about what we do here for 10,000 years.” — San Diego Union-Tribune

The House of Representatives on Friday voted

Economy

consumer-spending-consumer-sentiment-reuters

(Photo: Reuters)

The Survey of Consumers, a closely-watched gauge of consumer sentiment from the University of Michigan, came in at 98.1 in January, showing little change. The initial reading immediately after President-elect Donald J. Trump won the presidential election was a surge in confidence, a sentiment that continues several weeks after.

The preliminary result did miss expectations, as economists were looking for the reading to increase to 98.5.

“Consumer confidence remained unchanged at the cyclical peak levels recorded in December,” said Surveys of Consumers chief economist, Richard Curtin. “The Current Conditions Index rose 0.6 points to reach its highest level since 2004, and the Expectations Index fell 0.6 points which was lower than only the 2015 peak during the past dozen years.”

Preliminary Consumer Sentiment Results for January 2017

Jan Dec Jan M-M Y-Y
2017 2016 2016 Change Change
Index of Consumer Sentiment 98.1 98.2 92.0 -0.1% +6.6%
Current Economic Conditions 112.5 111.9 106.4 +0.5% +5.7%
Index of Consumer Expectations 88.9 89.5 82.7 -0.7% +7.5%
Next data release: January 27, 2017 for Final January data at 10am ET

The Survey of Consumers, a closely-watched gauge

Economy

retail-sales-shopper-reuters

A retail sales shopper in the U.S. (Photo: Reuters)

The Commerce Department reported Friday retail sales posted a solid increase of 0.6% last month, but still missed expectations for a rise of 0.7%. Retail sales were up 4.1% from a year ago in December 2015 and gained 3.3% during 2016. That’s up from 2.3% in 2015.

Excluding the volatile auto component, gasoline, food services and building materials–also referred to as core retails sales–and the increase was just 0.2% after being flat in the month of November. Economists expected a 0.5% gain on the gauge that most closely corresponds with the consumer spending component of gross domestic product (GDP).

Receipts at clothing stores were flat during what should be a busy holiday season and receipts at restaurants and bars fell 0.8%. Department store giants like Macy’s and Kohl’s both reported declines in holiday sales last week. They, along with the entire sector, have struggled to beat back the competition from online shopping stores, such as Amazon.

The Commerce Department reported Friday retail sales

News

producer-price-index-ppi

The Producer Price Index (PPI) reported by the Labor Department Bureau of Labor Statistics.

The Labor Department reported Friday the Producer Price Index (PPI) finds prices at the wholesale level increased 0.3% in December, matching expectations.

Prices for final demand less foods, energy, and trade services inched up 0.1% after gaining 0.2% the month before. In 2016, the index for final demand less foods, energy, and trade services increased 1.7% after a 0.3% gain in 2015.

Prices excluding the volatile food and energy components rose 0.2%. Wall St expected a rise of 0.1%.

The Labor Department reported Friday the Producer

Economy

jp-morgan-building

J.P. Morgan Chase & Co. headquarters in New York City. (Photo: Reuters)

JPMorgan Chase & Co. (NYSE:JPM) posted fourth-quarter (4Q) profit gains of 24% as post-election trading boosted earnings per share. The nation’s biggest bank by assets was expected to report a profit per share of $1.44 on revenue of $23.94 billion, but instead posted a profit of $6.73 billion, or $1.71 a share.

That compares with a profit of $5.43 billion, or $1.32 a share, in the same period of 2015. For the year, JP Morgan earned $24.7 billion, marking an all-time record for the bank and exceeding the previous earnings recordset in 2015.

“Our results this quarter were a strong end to another record year, reflecting our intense client focus and solid performance across our businesses,” Jamie Dimon, Chairman and Chief Executive Officer (CEO) said in a statement. “In the Consumer business, we had double digit growth in deposits and core loan balances, our credit card sales volume was a record, and for the year we had over $1 trillion of merchant processing volume.”

Noninterest revenue was flat at $12.3 billion and noninterest expenses for the bank was $13.8 billion, down 3% and compared to the $14 billion estimate. The decrease in expenses was largely fueled by lower legal expenses. The quarterly earnings report revealed they now have 26.5 million active mobile customers, up 16% from the previous quarter.

“The U.S. economy may be building momentum,” Mr. Dimon added. “Looking ahead there is opportunity for good, rational and thoughtful policy decisions to be implemented, which would spur growth, create jobs for Americans across the income spectrum and help communities, and we are well positioned to play our part.”

JPMorgan-Chase-Co-4Q-2016

The provision for credit losses was reported to be $864 million, easily outperforming the $1.39 billion median forecast and down from $1.25 billion a year earlier. Revenue increased 2% to $24.3 billion, topping the $24.2 billion estimate.

As of 10:01 AM EST, shares of JPMorgan were up 1.86%, or 1.6 points to 87.84, and have surged 23% since President-elect Donald J. Trump defeated Democrat Hillary Clinton in November.

Bank of America Corp (NYSE:BAC) and Wells Fargo & Co. (NYSE:WFC) both posted earnings with JPMorgan Chase & Co. on Friday, while Morgan Stanley (NYSE:MS) will release earnings on Tuesday, followed by Goldman Sachs Group Inc. and Citigroup Inc. (NYSE:C) on Wednesday.

Bank of America posted fourth-quarter profits that topped forecasts as revenue from fixed-income trading increased and expenses dropped. Wells Fargo & Co. posted fourth-quarter (4Q) profits and revenues of $0.96 per share and $21.6 billion, both missing the analysts’ expectations.

Meanwhile, auto sales gained 2.4% in December after falling 0.2% in November. Receipts at service stations rose 2.0%, largely the result of increasing gasoline prices.

JPMorgan Chase & Co. (NYSE:JPM) posted fourth-quarter

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