The need for further local and state fiscal controls

The Indiana General Assembly election results are very encouraging. Economic issues, I believe, will be central for the 2011 legislative session. I do believe there needs to be a discussion from the General Assembly regarding a couple of central fiscal issues to local government.

With the approval of property tax caps to the Indiana Constitution, the GA must address the up-and-down cycles of business that naturally happens. The general economy will always have its cycles of expansion and retraction. Associated with economic cycles come the tax revenue increases and decreases. Many local government services were dependent on local property taxes. That issue is now changing. Many of these services are dependent on revenues from the state. The increase of sales tax was the offset to property tax caps. Sales tax revenue will follow the economic cycles. The GA must look to smooth out the disbursement of revenues to local governments.

This should include greater expansion and controls on the use of local “Rainy Day” funds. The use of these temporary savings accounts should have greater definition regarding the amount (percentage or dollar) that can actually be accumulated and then also how and when these funds should actually be used.

I ask local legislators to begin an in-depth discussion and evaluation of this issue.

East Allen County Schools meeting (and what went wrong)

Last night the East Allen County (EACS) school board voted to pursue the option of letting voters increase their property taxes to maintain a status quo school system. That is what the mainstream media is reporting. There were many other events that took place that need to be told. I do want to say that I think some school realignment should take place. But that should take place with current facilities, not building new ones.

First, the board has instituted a time limit for members of the public to address the board. Three minutes. That’s it. When you hit the limit, they cut you off immediately. They did this to me last month. I was granted somebody else’s time when he chose not to speak. Last night they cut off the mayor of New Haven. A certain amount of respect for another elected official would have been in order, especially when the mayor granted a request from the board president to speak before the New Haven city council last month regarding the board’s options. The board president was not given limited speaking time by the mayor.

In a presentation by the bus director, multiple times referred to bus changes that would take place with closed schools – when they close, not if they close.

Another presentation centered on the proposed Capital Projects fund. Of significance was the carryover amount in the line item for future projects in excess of $4 million. That should include an amount of approximately $1 million the board raised from property taxes about 5 years ago to remodel at Highland Terrace. But that plan has since been abandoned. I have raised this issue nearly every year that that money should be returned to the taxpayers. Also within the CPF report was the option that EACS could use bonds to make up the difference to upgrade schools if insufficient funds came in through property taxes. In other words, in the opportunity to consolidate schools would be the time to really upgrade facilities. I think the board should physically review every upgrade in the plan which included, for example, new drinking fountains in one building. Are they really needed?? Now is the time for austerity.

Another point that I have repeatedly mentioned is the property that EACS owns in Leo-Cedarville. It should be sold! It is unnecessary for future facilities. It was brought up by another speaker last night.

At the start of each year (term), board members and staff must fill out potential conflict of interest forms. Board member Bill Hartman is the lead administrator of Blackhawk Christian School. I have no problem with him as an administrator. I have no problem with his Christian declaration. I do believe that his day job requires him to recruit new students to keep the school financially viable. How many of those students have come out of the EACS district?? A student that leaves EACS for Blackhawk takes the public funds away from the district. Is that meeting his fiduciary responsibility to the school district?

The board voted to allow the property taxpayers of the district to increase general operating funds. This should not be used just to balance the financial accounts as Chris Baker from the New Haven Chamber of Commerce said before the board. I think it fair to let the public decide to increase their taxes for the schools. I do, however, think there should be specific restrictions put on that increase: 1. All employee groups must agree not to pursue that money for salary increases. 2. Prior to implementation, use of the money MUST be identified. Again, as Mr. Baker said, I think the money should be used for advanced programs in the district.

There are many other points that probably need to be made, but I will finish with this one. After the bus director’s presentation, board member Terry Jo Lightfoot implied that the reason the southeast part of the school district faces consolidation is because so many students attend local parochial schools. She implied that closures are the fault of parochial students.

The board needs to change its approach to public input.

America needs a leader

Recently on Facebook, I lamented about the need for a GOP presidential candidate for 2012 that offers more encouragement for individual liberty and entrepreneurship. I received several comments back that current domestic economic climate began under the previous president. Some of that is true. Medicare Part D is probably the biggest disappointment. But now, we see the rundown of the United States and the promotion of the third world. Most recently, the admission of the head of NASA that his primary role - as directed by the president - is to make the muslim world feel good about themselves. Forget about putting man in space outside of earth orbit, requiring increases in scientists, etc.

Following is an excerpt from President Reagan's first State of the Union speech in 1982. He makes no apologies for US economic supremacy. Young people may feel it is silly to invoke Reagan. I feel he belongs in the tier of Washington and Lincoln. When reading many of his speeches, they are inspiring.

To view the State of the Union in perspective, we must not ignore the rest of the world. There isn’t time tonight for a lengthy treatment of social or of foreign policy, I should say a subject I intend to address in detail in the near future. A few words, however, are in order on the progress we’ve made over the past year re-establishing respect for our nation around the globe and some of the challenges and goals that we will approach in the year ahead.

At Ottawa and Cancun, I met with leaders of the major industrial powers and developing nations. Now some of those I met with were a little surprised I didn’t apologize for America’s wealth. Instead I spoke of the strength of the free marketplace system and how that system could help them realize their aspirations for economic development and political freedom.(my emphasis) I believe lasting friendships were made and the foundation was laid for future cooperation.

Compare the texts of the first SOTU speeches from Reagan and Obama and you will see 2 totally different philosophies. When you examine the application, you see the difference in the outcomes played out in our economies.

Reagan in 2012!!

How Much Government | Parade.com

How Much Government | Parade.com

With government - at all levels - realizing less revenues there has been a response by government to reduce spending incrementally across the board. I have tried to start sounding the topic of eliminating some government programs altogether. Many programs are unfunded mandates requiring local government to carry the policy without the funding tied to it.

The link to the article discusses this very topic, using a different rubric for program evaluation. I'm glad somebody is finally starting to listen to me!

The ultimate result must be that government is trying to do too much with not enough. We are finally see the results of that mindset internationally. Archaic requirements must be challenged for the needs of society today.

Today is Tax Day! Ow, that hurt

April 15^th is U.S. tax day. Supposedly the day all Americans pay their taxes. This is such a false assumption.

As reported on the Tax Foundation.org website, April 9^th is the day that theoretically Americans have stopped working for the government and they can now earn their own money. Half of America has never been working for the federal government. They pay no federal income taxes. Unfortunately, many people think if their refund this year is larger than last year’s must mean that they have paid less taxes.

Americans really need to grasp how much they actually pay in taxes, at all levels. This includes income, sales, property, auto tags, and on and on and on. We don’t realize how much we really pay. Add in to the mix that businesses never pay taxes. All of those obligations are passed on to the consumer through product prices.

I think that government needs to learn a lesson who pays the bills. We need to reduce our withholding to a minimum and pay taxes due next year. Some states are not refunding overpayments to residents because they don’t have the cash available.

It is time that we taxpayers took more control over government revenues, specifically how we pay our taxes to the government!

In support of my ideas

I keep trying to tell people how far ahead of the conservative thinking that I am.

I recently wrote here that the best controls on health care costs would put the consumer in charge of his/her own decision-making.

Now I see that well-respected economist Thomas Sowell has written an article in full support of my ideas. He articulates exactly what I was leading into. I'm glad to see that he reads my blog also.

Loosen the bureaucratic collar

My last post raised the issue of reducing bureaucratic regulations as a means to reduce expenses to business and local government.

Here is one example of regulations that could be addressed. Various vehicle fuels are required to meet requirements for regions of the country and seasons of the year. These variations increase costs in development, storage, and transfer which are all obviously passed on to the consumer. The consumer includes me at the gas station, the trucking industry that transports products around the country, and even local government when the schools have to put fuel in the buses.

The following map gives an example of fuel (boutique blends) differences around the country.

Can you give some examples also?

A new suggestion to save some money

At all levels of government, belt-tightening is taking place. Here in Indiana, property taxes will soon be frozen as a percentage based on property values. Because of that, local government will be facing lower revenues to provide current services. Sales, business, and income tax revenues are also much lower for the current fiscal year.

So to avoid the pain, some local governments are considering new forms of local income taxes to offset revenue deficits. Other localities are severely reducing services, such as fire protection or trash pickup.

I would like to suggest a third alternative that could relieve some pressure to local governments and possibly help private businesses reduce expenses and possibly redirect those expenses to hiring new employees. My suggestion would be that all levels of government look to reduce regulatory burdens.

Even though I do not identify any specific regulations to eliminate, I do believe – if asked – businesses could easily identify which are most burdensome or costly. There are many federal and state regulations that are imposed on local governments without sufficient revenues to fulfill those policies. Some could be reduced or removed to provide relief.

This is the time and place for somebody out there to start talking. What regulations cause you the most problems that could save everybody some money??

That was then, this is now

Twenty-eight years minus one day, another President gave his first State of the Union speech. Similarly, the United States was in an economic recession. At that time, unemployment was over 10%, inflation and consumer interest rates were above 15% each. In his speech, President Reagan outlined his plan to bring the country out of that recession.

The cumulative national debt had just exceeded one trillion dollars. More than 200 years were needed to accumulate that level. (We have now crossed $12 trillion and see no end in sight for its continued growth.)

Reagan listed 3 keys to reducing budget deficits. First, encourage economic growth. Second, Lower interest rates and third, control federal spending. He was very adamant about NOT raising taxes as an attempt to lower the deficit. He felt that would encourage federal spending (and the Democrats in charge of Congress did not lower spending) and would discourage private investment.

He also referred to recent meetings with foreign leaders. He said how they were surprised that he (Reagan) did NOT apologize for American wealth and its strength of the free marketplace.

These policies DID turn around the national economy then.

Now, 28 years later, another President stood before Congress with a similar economic situation. Fortunately, we do not experience the devastating interest rates we did then. Unfortunately, he is taking just the opposite approach. Considering that Reagan's plan worked - and it did - Obama's plan will probably will not succeed. Our international standing will fall, as it already has started.

I believe Obama may very well be a one term president.

Congress has to spend money to make money

In a brilliant move by Congress, billions of tax dollars were spent on the "Cash for Clunkers" program. It has now been calculated that it comes out to approximately $24,000 per car purchased!!! What a deal! We spend $24,000 to reimburse car dealers $4,000 for a new car and trash many very usable used cars.

And with this kind of math, the current government wants to take over our health care now. I can't wait to see how much they want to save us here. (Well, actually, I can wait - in fact, I don't even want it to happen!)

The government is upside down

Is it just me or does anybody else notice how topsy turvy the Obama administration is?


First, I see that the Justice Dept. will not pursue the prosecution of illegal marijuana use. We can debate the criminality of such behavior. Is it wise to tell the public that even though "we the government know that marijuana use is illegal according to the law, we are letting you know that we will not prosecute you." Would that not possibly encourage more illegal behavior?


Second, the government has also quietly said they will not pursue pornographers. There is an obvious linkage between pornography and sexual crimes.

What are we telling the criminals?? You go ahead and do what you do and don't fear the government.


Thirdly, the government IS going after highly paid executives in the banking industry and those businesses that have taken bailout money from the government. The "pay czar" is limiting the income of those individuals. Why could not the government see this coming? Companies get government assistance, start to make a profit again and then reward their employees accordingly. There were no ties initially linking pay and performance when the money was distributed. Now they change the rules AFTER the fact. The debate can go on about whether these companies performed the expectations the government originally had for them. Some may very well may not performing as hoped. But there were no expectations put in writing. (That we know of, since the government is not being very open about the details of how the money has been spent.) The government is possibly going after other businesses in the same fields as the original recipients.


I have hard a time accepting the fact that the government can say how much an individual can earn from a private business. This type of government interference is directly contrary to free enterprise. Earn as much as you can for the work you do. This witch hunting the government is involved in is just plain un-American.


In essence, the current administration is saying that criminal behavior is okay, but legal activity that the government deems wrong will be controlled. This is all wrong!

The truth of stimulus spending

A couple of weeks ago there was an interesting article in The Wall Street Journal (Oct 1) about government spending that supposedly spurs the economy. While the article was detailed and a bit over my head, the last paragraph did an excellent job at summary.

The bottom line is this: The available empirical evidence does
not support the idea that spending multipliers typically exceed one, and thus
spending stimulus programs will likely raise GDP by less than the increase in
government spending. Defense-spending multipliers exceeding one likely apply
only at very high unemployment rates, and nondefense multipliers are probably
smaller. However, there is empirical support for the proposition that tax rate
reductions will increase real GDP.

What it comes down to is that government spending does not stimulate the economy. Maybe the American populace may begin to understand this. I know the spenders in DC never will. It will need to take a complete change of the Washington guard before this may be accomplished.

which is better - a national sales tax or VAT??

This is an interesting news bit.

Former Chief of Staff to President Clinton, John Podesta, favors the use of a national value-added tax. A Value-Added Tax - VAT - is a tax that is applied to a product throughout its production. A car would have taxes added to it throughout the production process, such as the construction of sub-parts and parts to an engine, the transmission, frame, etc. would all be taxedd and then added to the price of the vehicle. Then the car would most likely also be charged a sales tax and possibly a luxury tax. The problem with VAT is that it becomes part of the cost of production, significantly raising the final retail price.

A VAT tax would not be so bad if all other taxes were eliminated. If they were, it would become somewhat similar to the concept of the Fair Tax. Thus only the consumer would be charged for the consumption of a manufactured item. Of course, the problem is that all of the taxes are hidden into the production costs and the consumer would never really know the actual cost of the product minus the added taxes.

In contrast, the FAIR Tax does eliminate ALL taxes - sales, income, property, etc. - and just charges a sales tax. The consumer has better information regarding the actual production cost of the product. The consumer pays taxes for only what he/she consumes. Purchasers of luxury items like motor homes, yachts, or SUV's would not be perceived as bad people owning expensive stuff. If you want to pay the sales tax on an item, so be it. Go to their web site for a better explanation. But it is a much better and fairer tax.

The problem with Mr. Podesta's suggestion is that the VAT would be in ADDITION to sales taxes. He advocates this to increase more federal government revenue. What this will obviously do is hurt the national economy by discouraging purchasing and result in reduced need of labor - higher unemployment.

He justifies his position saying that Clinton raised taxes on the rich in the 1990's and it resulted in large increases in revenues while also growing the national economy. That is FALSE! Clinton happened to be the beneficiary of circumstances, namely the explosion of the era of technology. Home computers, the internet, and the overvaluation of technology companies during this decade. Once some intenet-based companies died or were bought out by other companies, the economy came back to reality.

Don't buy into VAT. It will do as much to destroy the economy as cap and trade and health care reform.

Capitalism made simple..50 yrs ago!

My prescription to fix the economy

I'm just laying around the house totally under the weather today. To speed my recovery, I've been watching several of the Sunday morning talk shows. Every one of them has been obviously discussing the current U.S. economy and how to fix it. It has been fascinating how screwed up many of these people are.

So.....
I will give my prescription for fixing the economy (because everybody else is). And I hope my children listen the most closely.

1.Save
2. Pay cash

Sounds pretty complicated, huh? These two principles are not part of the current discussion. Of course, it is pretty difficult to do this while unemployed. But these should have been the dominant points of discussion during the good times. But these two points run contrary to current popular thought. Spend, spend, spend to keep the economy expanding. Put it on plastic to do it. WRONG!

I would even go so far as to say that churches should establish "rainy day" funds in their budgets to help people when in need. I don't mean to use it to protect the church budget during bad times, but rather help members when the need exists. Pay attention to any effective money management program - such as Dave Ramsey's Total Money Makeover - and the two principles above are at the center of those programs.

Ignore the talk of Washington's financial institutions' bailouts. Let them fail. That is the basis for the economic concept called "risk." They took the risk to loan money to people that did not have the resources to repay.

1.Save
2.Pay cash

Pretty simple. I guess that is why the Bible speaks so highly of them.