Debt Grows at Astonishing Rate Even in Texas; A Roadmap to Better; "It's Your Money"; Infinite Amortization Periods

"It's Your Money"

Susan Combs, Texas Comptroller of Public Accounts says “Texas, It’s Your Money”.

At the Comptroller’s office, we’ve long championed the importance of transparency — giving the Texans we serve the information they need to make informed decisions and hold their government officials accountable.

That’s why our office launched the Texas, It’s Your Money series of reports, which spotlights issues that hit Texans in their wallets: local taxes, government debt, education debt and public pension obligations. We’re committed to keeping the state’s books open, accessible and understandable for our citizens.

A Roadmap to Better

With that introduction lets dig deeper into one of the reports "A Roadmap to Better"
click on any chart for sharper image

Sales Taxes and Property Taxes

Since 1993, special purpose districts that levy sales tax have increased by more than 1,900 percent, which means that more entities are taxing you. In that same time period, the number of special purpose districts that levy property tax has grown by more than 45 percent, with the creation of more than 500 new districts of this type.



While local sales taxes increased by almost 170 percent from 1993 to 2011, property taxes grew by 188 percent from 1992 to 2010. Compare that to slightly more than 120 percent growth in combined population and inflation during those years.

Local Obligations

Our local governments more than doubled their debt load in the last decade, amassing more than $7,500 in debt for every man, woman and child in the state. Between 2001 and 2011, the outstanding debt of Texas local governments rose more than twice as fast as inflation and population growth rates combined.

Total Local Outstanding Debt



Local Debt - Where We Fall Short

New debt often is approved by a small percentage of voters, who must make vital decisions about new debt with little information about its implications. And a large share of local debt — totaling $12.7 billion since 2005 — is issued through “certificates of obligation,” generally, without any voter approval.

Combined State and Local Debt



How Texas Can Do Better

You have a right to a full and complete disclosure of public debt. All government
entities should reveal all debt obligations on a public website, including the debt’s original stated purpose, the total amount of debt authorized, the issued and unissued amounts of authorized debt, spent and unspent amounts of issued debt and the per capita debt burden on taxpayers. Any ballot for new debt should be accompanied by a similar
accounting.

You have a right to approve debt issued in your name. Texas should significantly narrow public governments’ authority to issue debt without voter approval, and revise the petition process to make it easier for taxpayers to compel a public vote on proposed debt.

Education Debt

In fiscal 2011, our public school debt was $63.6 billion, or $13,530 for every Texas student in a school district carrying debt. And while state college and university debt is lower, at $12.5 billion, that debt rose nearly eight times faster than enrollment in the last decade.



College Debt vs Enrollment



The bulk of Texas’ education debt supports the construction or renovation of school facilities. Yet Texas has no centralized source for information on current public school facilities, such as total square footage, square footage per student and total cost. To obtain such information, every district must be contacted individually. Construction costs also are not reported to any single entity, making it almost impossible to identify unreasonable costs on individual projects.

In addition—as with other debt—new debt often is approved by a small percentage of voters. It also is difficult for taxpayers to learn the full dimensions of debt in their area.

How Texas Can Do Better

You have a right to full and complete information on education debt. Every Texas school district should disclose on its website the cost and details of all construction and renovation projects, including actual square footage, total cost per student, total cost per square foot and square footage per student. Each district should also post an online inventory of all existing facilities, detailing available square footage, total student capacity and current student enrollment for each campus.

All ballots for new education debt should reveal all current and proposed debt obligations, including the amount of outstanding debt, existing debt service, amount of  new debt and the average length of proposed debt obligations.

Pension Obligations

Too little public information on public pension finances is readily available. Many plans do not report their actual investment returns to the state’s Pension Review Board.

Several of the state’s largest pension plans also have “infinite amortization periods,” meaning that they can never eliminate their unfunded liabilities as currently structured.

Texas public pension plans cover 2.3 million active and retired members. As with most other investments globally, Texas public pension program earnings fell during the recent recession. Although plan assets have rebounded since 2010, overall they are still below pre-recession levels.

Will Work to Pay Debt

The following image shows precisely what the current Ponzi scheme looks like.



The number of workers is shrinking dramatically compared to the number of retirees collecting Social Security or disability checks. Meanwhile state and local taxing bodies want still more debt and forever increasing taxes to keep the Ponzi scheme going longer.

This state of insanity is frequently described as being "Progressive".

Instead, I support the common sense proposals of Susan Combs, Texas Comptroller of Public Accounts.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

UK Headed for Triple Dip Recession? Impact on EU Exit Vote

There is much talk of a triple dip recession in the UK. It depends on how you define it. If you call a recession two consecutive quarters of decline in GDP, with any quarter of positive growth ending the recession, then answer is yes.

Here is a chart from the Telegraph article UK heads for triple dip as GDP contracts 0.3pc to consider.



Double Dip?

The blue rectangles are mine. I see two recessions not three.

With 9 quarters in between recessions, one might ask "Is this even a double-dip setup?" I suggest yes, but there is no clear agreed-upon definition of how many quarters can be between recessions to call it a double-dip.

From the Telegraph ...

The official figures were the fourth quarter of negative growth in the last five and mean that the UK flatlined for last year as a whole – posting zero growth.

The economy is smaller than it was in September 2011 and still 3.3pc below its pre-crisis peak.

Making matters worse, there was scant evidence in the data that the economy is rebalancing from consumption to manufacturing. Output by Britain’s factories fell by 1.5pc in the quarter and by 1.8pc for the year as a whole – the first annual decline since 2009.

Howard Archer, economist at IHS Global Insight, described the situation as “dire” and added: “We believe the economy is essentially flat at the moment. We suspect that GDP will not return to the level seen in the first quarter of 2008 until the first half of 2015 – a gap of seven years.”

Dire Situation

The article notes that 4th quarter GDP was impacted by an unusually long maintenance period for North Sea crude production. However, even if one subtracts that effect, GDP was still negative.

The chance UK GDP will not return to the 2008 level until 2015 is indeed a dire setup.

Impact on EU Exit Vote

This economic mess puts a lot of pressure on Prime Minister David Cameron by the Labour Party , for Cameron to abandon austerity measures.

Bear in mind that Cameron has promised to hold a referendum on a UK exit only if he wins reelection,  and even then only after he renegotiates the EU treaty. Simply put, Cameron has not promised a damn thing. It's nothing but an election ploy, that will likely backfire.

Moreover, if the economy remains sour as I expect, Cameron is likely to lose the next election and the UK's chance to quickly and easily get out of the EU (which the UK should do in my opinion), will go right down the drain.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Much More Beneath the Surface of the Italian Bank Scandal; How Big Are the Derivative Losses?

Yesterday I commented on how Italy's 3rd largest bank hid derivative losses,how it might affect the upcoming Italian elections, and why ECB president Mario Draghi should be under fire as well.

For details, please see Italian PM Under Fire; Italy's 3rd Largest Bank Hid Derivative Losses: ECB Says "Matter for the Italian Authorities" (To Sweep Under the Rug).

As is typically the case, there is more going on than mainstream media reports. I bounced my article off reader Andrea who is from Italy but now lives in France. Andrea writes ....

The article you reported is very well done and describes almost all the facts of the situation.

What is not reported is that Giuseppe Mussari, the recently resigned head of ABI (Italian Bank Association) was the CEO of Banca Monte dei Paschi di Siena at the time of the derivative losses. He resigned following the scandal, but this casts a very negative shadow on the overall banking system. It also makes open a discussion about the widespread belief (repeated as a mantra by the whole political class) that the Italian banks were wiser than foreign counterparts, not involved in toxic things and therefore not needing huge bailouts or supports like anywhere else in the world.

This scandal blasted like a bomb in the campaign. Monti is most likely the one who will be hurt. However, It's unclear who can take advantage. The center-left was at the government only 2 years (2006-2007), so it is quite hard to find evidence to give the blame just to them.

The Economy Ministry and Bank of Italy are blaming each other about the lack of supervision, for different reasons. The probable truth is that both lacked of supervision for their respective parts.

Most likely prosecutors will open an investigation (they are obliged by law to do so in Italy if they are informed of a possible crime) and this could lead to further discoveries.

I think that for Monti to appear in the Parliament to speak about this in the middle of the campaign and with his image of "friend of the finance world" could be a very painful and delicate exercise

So, to summarize, I think we are at the beginning of the story. In an Italy under a bombing of taxes, huge recession and lack of credit from the banks to the real economy, this will be hard to be swept under the rug. The message "the taxes you pay are used to help banks getting out of their toxic speculations" is very easy to deliver in such circumstances.

Best regards,

Andrea

Tangled Web of Giuseppe Mussari

Inquiring minds may be interested in the tangled web of places where Giuseppe Mussari had tentacles.

Could he and did he hide all of this from the Bank of Italy, then headed up by current ECB president Mario Draghi?

How Big Are the Derivative Losses?

While pondering what Dragi knew or didn't, let's turn our focus on actual losses. Reuters reports Monte Paschi Shares Plunge on Derivative Loss Fears

Shares in Banca Monte dei Paschi di Siena, Italy's third-biggest lender, fell more than 5 percent for the second day in a row on Wednesday on worries of mounting losses on some financial derivative positions which it took in 2008 and 2009.

The price had already dropped 5.7 percent on Tuesday after reports that it is expected to book a loss of at least 220 million euros ($292 million) on one particular derivatives deal related to its debt holdings done three years ago.

That deal, called Alexandria and designed by Japanese bank Nomura, is one of several troubled structured transactions the bank is reviewing to assess their impact on its accounts, Monte dei Paschi said on Tuesday.

At least one other derivative trade, a 2008 deal with Deutsche Bank, is also thought to be under scrutiny, analysts and banking sources say.

The loss on the deal with Nomura is the latest setback for Monte dei Paschi, which requested 3.9 billion euros in state aid to plug a capital hole stemming from its government bond portfolio and hedging bets gone wrong. The bank had already raised its state aid request by 500 million euros in November, citing a possible hit on its capital from past structured transactions still in its portfolio.

But some analysts are beginning to question whether that 500 million cushion will be enough to cover for any losses linked to the derivative contracts. Italian newspaper Il Fatto Quotidiano quoted an anonymous source on Tuesday as saying the loss on the Nomura trade alone could amount to 740 million euros.

"If losses above 500 million euros emerged, the group would struggle even more to fix its capital position," Comi said.

Nomura said on Tuesday the trade had been approved by the Italian bank's board and its then chairman Giuseppe Mussari, but Monte dei Paschi said the Alexandria deal had never been submitted to its board for approval. Mussari stepped down late on Tuesday as head of Italy's banking association, denying any wrongdoing.

This mess should hit Draghi and the ECB, but they will do everything possible to sweep it under the rug. Nonetheless, it is highly likely to impact the elections as Andrea notes.

If the losses are big enough, Banca Monte dei Paschi di Siena faces nationalization.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Yen Set for 11th Weekly Drop; Japan Records Largest Trade Deficit in History

After a couple of headfakes higher on the daily charts Yen Set for 11th Weekly Drop.

The yen headed for a record stretch of weekly losses against the dollar as data showing a decline in Japanese consumer prices added to the case for further monetary stimulus from the central bank.

The Bank of Japan announced open-ended easing and a 2 percent inflation target this week. The Japanese currency remained weaker after touching a 2 1/2-year low as Governor Masaaki Shirakawa said he will make “considerable efforts” to reach the price target. The Dollar Index rose before U.S. data forecast to show home sales increased.

Consumer Prices

Japanese consumer prices excluding fresh food fell 0.2 percent in December from a year earlier, the statistics bureau reported in Tokyo today, the seventh decline in eight months.

Prime Minister Shinzo Abe, who took office last month, has called for “bold monetary policy” to beat deflation and drive the yen lower. The BOJ on Jan. 22 doubled its inflation target to 2 percent and announced open-ended asset buying from 2014.

BOJ board members said Japan’s economy is weakening and the central bank will continue with “powerful” monetary easing, according to the minutes released today of the December meeting when it expanded its asset-purchase program by 10 trillion yen ($110 billion).

Shirakawa reiterated in remarks in Tokyo today that while the central bank is conducting aggressive easing, achieving the price-gain target isn’t easy.

Japan Records Largest Trade Deficit in History

The Financial Times reports Japan Records Largest Trade Deficit in History

Japan’s trade deficit nearly tripled in 2012 to Y6.93tn ($77bn), an unprecedented shortfall for the traditional export powerhouse that could colour debate about the so-called currency wars as Tokyo pursues policies that push down the value of the yen.

The sharp expansion of the deficit, from Y2.56tn in 2011, is a reminder of the increasingly complex challenges facing Japan’s economy and its new government, which has promised aggressive measures to end a two-decade malaise.

The monetary shift was crystallised on Tuesday when the BoJ set a target of 2 per cent inflation, but has alarmed some of Japan’s trading partners. Germany, the UK and China have warned that efforts to weaken the yen could lead to a spiral of competitive devaluations among major economies – a so-called currency war.

On Thursday Mr Abe said the government would continue to consider a possible revision to the Bank of Japan law to ensure the central bank keeps easing monetary policy.

“Given the need for continued bold monetary easing, I want to keep in mind” the potential legal revision, Mr Abe said in an interview with Kyodo News.

Thursday’s trade data highlighted just how sharply the country’s global trade position has deteriorated. In December, exports were down 5.8 per cent compared with the same month a year earlier, while imports rose 1.9 per cent.

Exports to China, where some consumers have been shunning Japanese products amid an international dispute over control of islands in the East China Sea, fell 15.8 per cent, but shipments to Europe and the US were also down.

Currency Wars

Without a doubt, currency wars have ramped up to a new high. It's hard to say when or where this stops, but those who thought Shinzo Abe was bluffing, need think again.

However, and as I have said repeatedly, a weaker yen will not do Japan any good.

There is every potential for the decline in the Yen to quickly get out of control, and I suspect it will. When it does, Abe may not be able to stop a devastating slide that is likely to harm consumers more than it helps Japanese manufacturers.

Be careful of what you wish.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Italian PM Under Fire; Italy's 3rd Largest Bank Hid Derivative Losses: ECB Says "Matter for the Italian Authorities" (To Sweep Under the Rug)

When Mario Draghi (now ECB President), had oversight of the Italian bank system as Bank of Italy Governor, the Italian bank Monte dei Paschi di Siena (Italy's third largest bank) hid information on the derivatives transactions between 2006 and 2009.

This information is just now out, and shares of the bank have plunged 22% in a few days. Mario Draghi ought to be under fire, but he says it's a "Matter for the Italian Authorities".

The Mish translation is "It's a Matter for the Italian Authorities, to Sweep Under the Rug".

With that backdrop, let's take a look at the other Super-Mario (Mario Monti) who is Under Fire Over bank Crisis.

Mario Monti, Italy’s prime minister, was forced to offer to recall parliament on Thursday amid questions about his government’s handling of the financial crisis at Monte dei Paschi di Siena and the role of the central bank.

Shares in Italy’s third-largest bank by assets, which has requested a second state bailout in four years, have fallen more than 22 per cent in the past few days since revelations five days ago of derivatives transactions that may force the 500-year-old bank to restate hundreds of millions of euros of losses.

Supervision of the struggling institution by the Bank of Italy while Mario Draghi, European Central Bank president, was governor has come under attack as an increasingly fierce political outcry erupts in the run-up to national elections next month.

Among the most vocal criticisms of the central bank, which traditionally has oversight of the Italian banking system, was Mr Draghi’s long-time rival Giulio Tremonti, the former finance minister who is again running for office on February 25 for the centre-right.

In a sign of the severity of the situation, Giorgio Napolitano, Italy’s head of state, made a rare entry into the financial arena. “If the situation is serious we are right to be concerned but I have full confidence in the operations of the Bank of Italy,” he told reporters.

In a statement released late on Wednesday, the central bank said Monte dei Paschi had “hidden” information on the derivatives transactions struck between 2006 and 2009, a period during which Mr Draghi was governor.

The Bank of Italy said the “true nature” of some of the deals emerged only recently, “following the discovery of documents kept hidden from the supervisory authority and brought to light by the new management of MPS.”

The ECB told the Financial Times that it was a matter for the Italian authorities and declined to comment.

Italy’s centre-right party, led by Silvio Berlusconi, has seized on the issue to attack its centre-left opponents, who have had long institutional ties with MPS. “Monte dei Paschi is close to collapse,” commented Angelino Alfano, secretary of the People of Liberty. “This is an example of how the left would govern the country.”

Il Giornale, a Milan daily owned by the Berlusconi family, ran banner headlines saying the more than €4bn paid by Italians in a widely hated property tax imposed by Mr Monti was in effect going to prop up a failed bank.

Analysts remain concerned that the derivative losses, which are expected to push the bank to a €2bn annual loss for 2012, may increase the risk of the bank being partially nationalised as it will force the state to take an equity stake because the bank will not be able to repay its bail out bonds.

Sweeping Efforts Underway

Note the curious statement by Giorgio Napolitano, Italy’s head of state (a largely ceremonial post): “If the situation is serious we are right to be concerned but I have full confidence in the operations of the Bank of Italy.”

IF the situation is serious? Is there a question here?

I think not. And I wonder what Mario Draghi actually knew. Efforts are probably underway to determine if Draghi actually said anything about this in writing.

Meanwhile, there is a good chance Italy's third largest bank may be nationalized, and an even larger chance this will affect national elections coming up in February.

However, Please don't worry. Apparently it's not serious.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Walmart Explores Offering Private Health Insurance for Small Businesses; In Praise of Walmart

Once again I am here to sing the praises of Walmart. Over the years I have done so on many occasions.

Many misguided souls take the other side. They blame Walmart for ruining mom and pop grocery stores, mom and pop hardware stores, etc.

Not me, I praise cheaper prices. Moreover, it's what consumers voted for with their hard-earned dollars.

If anyone wants to pay more for stuff, all they have to do is shop at a mom and pop hardware store, grocery store, or pharmacy. Most don't because they want a bargain.

Today, I have good news. Walmart-style competition may be on the way in the healthcare business.

The Orlando Business Journal writes Wal-Mart exploring private health insurance exchange for small biz.

Wal-Mart is exploring the idea of building a private health insurance exchange tailored to offer cheaper health insurance to small businesses, a vice president told Orlando Business Journal Jan. 11.

Marcus Osborne, vice president of health and wellness payer relations for Wal-Mart Stores Inc. (WMT), spoke to OBJ after his keynote speech at the Foundation of Associated Industries of Florida’s 2013 Health Care Affordability Summit. Osborne said Wal-Mart wants to work with insurers and managed care companies to find new, low-cost health insurance options tailored for small companies, which historically have limited options.

The idea is to offer those products through a health insurance exchange — or as Osborne said, simply a marketplace — that would leverage Wal-Mart’s buying and marketing power to make the exchanges widely available and used. “It would allow small employers to piggyback Wal-Mart,” Osborne said. “We haven’t got it all figured out, but it’s one of the things we’re looking at.”

“The biggest problem today small employers face from a health insurance perspective is they have no alternatives,” Osborne said. “If they find anything, they’ve got to take it. There’s something wrong with that.”

In Praise of Walmart

Obamacare is going to raise the cost of healthcare. Walmart will lower costs. I have been waiting for this since Summer of 2008.

Flashback June 22, 2008: Trade Wars, Health Care, and Wal-Mart

This post is about trade wars, tariffs, health care, and Wal-Mart. I will tie these themes together starting with a look at Wal-Mart and health care.

I have many disagreements with Jim Jubak, but he hits the nail on the head with Let Wal-Mart fix US health care.

I know who can fix our broken health care system -- and who can't:

• Not presumptive Republican nominee John McCain. He proposes a tax credit of $5,000 per family to encourage us to buy private health insurance.
• Not Democratic presidential candidate Hillary Clinton. She proposes universal health insurance supported by tax credits.
• Not Democratic presidential candidate Barack Obama. He proposes a mix of public and private health insurance with government subsidies to those who don't qualify for government insurance plans such as Medicaid.

I say, let Wal-Mart Stores (WMT) do it. Hold your guffaws. Stifle your impulse to scoff. Control those sputters of rage.

Wal-Mart has done more to expand coverage and lower costs in the past year than any government program to come out of Washington in the past 10 years. And I'd bet the new programs that this company -- known for stiffing its own part-time workers on health care benefits -- has announced in the past year will do more to expand coverage and cut costs than anything likely to come out of a McCain, Clinton or Obama first term.

Letting Wal-Mart run the health care system would fix many of those problems. It's a company that understands how low prices can build market share and thus increase profits. Furthermore, it's a company with a culture of cutting costs that has shown no compunction in pushing suppliers to the wall over price. The Wal-Mart motto ought to be, "Make it cheaper, or we'll find someone who can." I'd love to see that attitude brought to bear in health care.

Inquiring minds will want to read the rest of the article. It's surprisingly good.

Jubak makes a compelling case. He never said this explicitly but I will. "We do not need higher wages or higher prices. We need lower prices and a dollar that buys more".

Hopefully a good idea, long overdue, is about to happen. I repeat what I said in 2008: "We do not need higher wages or higher prices. We need lower prices and a dollar that buys more".

Walmart-style competition would do just that.

My primary fear is regulators will kill the idea based on trumped up charges of some sort (or bribes from healthcare providers who fear competition) before the idea takes hold.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Gallup Poll on Obama's Proposals to Address Gun Violence; Republicans and Democrats Agree on 7 of 9 Items; Is Now the Time?

Gallup has an interesting poll on Gun control. Republicans, Independents, and Democrats are in agreement far more than one might have thought.

Of course I am talking about the population in general, not the extremists on both sides of the aisle in Congress.

Poll questions were specifically worded by Gallup to follow President Obama's "Now is the Time" gun control agenda.

The results are in: Americans Back Obama's Proposals to Address Gun Violence.

Most Proposals Have Bipartisan Support

Although Democrats show more support than Republicans for each proposal, majorities of both partisan groups favor seven of the nine proposals. That includes nearly universal support among Republicans and Democrats for requiring criminal background checks for all gun sales. A majority of Republicans also favor a ban on armor-piercing bullets and increasing penalties for straw purchasers, as well as the various school security, police funding, and mental health funding proposals tested.

The two proposals favored by majorities of Democrats, but not Republicans, relate to enacting bans on the sale of guns or ammunition.

Support for Proposals by Political Affiliation



click on table for sharper image

Discussion

My personal check list is sure to disappoint some Republicans, some Democrats, some Independents, and some Libertarians. So be it.

1. Requiring criminal background checks for all guns is a seemingly reasonable thing to do. Overall, 92% of the people favor such an action. Checks will not stop a desperate criminal, but it may stop others. Nonetheless, I have reservations as explained below.
2. The proposal to increase mental health programs for youth will not be affordable. What would likely start out as a modest program will end up costing tens if not hundreds of billions of dollars down the road once bureaucrats get behind it. Ask taxpayers if they support increasing taxes to pay for the programs and I bet the answer is different. The same applies to other funding questions.
3. Similarly, we do not need funding to increase training. Police departments have ample money already. Money is wasted in union graft, overpaid officers, and untenable pension programs. There is nothing wrong with increased training. However, there is everything wrong with assuming extra funds are needed.
4. Increasing penalties for straw purchasers may not help a lot. However, it cannot hurt either. In conjunction with item 1, there may be a modest benefit. If not, at least item 4 will not cost anything.
5. Funding 15,000 extra police is of course ridiculous. Having extra officers may not be. The solution is getting rid of collective bargaining of public unions to drive down costs, not to throw more money at the problem.
6. By now you should be tuned into my line of thinking. Funding school emergency response plans is also ridiculous. This is not to say I oppose having a plan. Rather, I simply oppose spending additional taxpayer money on the idea. Schools ought to be doing this already. All it takes is for schools to schedule time with police departments to go over some common sense ideas. Do this for one school and it will apply to thousands. Throw money at it, and every school will seek 1000 times more money than they need.
7. There is absolutely no need for anyone to have an assault weapon to protect themselves. Nor do citizens need hand grenades, nuclear missiles, or any other such devices. It is beyond idiotic to ascertain assault weapons are constitutionally protected.
8. A ban on armor-piercing bullets is of course a no-brainer. There is no legitimate use of armor-piercing bullets for private citizens.
9. A ban on magazines with over 10 rounds is also a common-sense proposal. No one can possibly need more than 10 rounds in a clip to defend themselves in public or in their homes. 

Cost Effective Analysis

From a cost-effective standpoint, the items that would likely do the most good, at the least cost, were the items that had the least support. Items 7, 8, 9, and 4 would not cost a dime. I solidly support all four.

I support preparing emergency plans (item 6), but that should not cost a dime either. As worded, I have to vote no.

I am fearful that the most supported idea (item 1) will end up costing too much in relation to the benefit. I voted yes, for now, but I  need to see details of the plan as well as realistic measures of the cost.

As it stands, I am solidly in favor of 4 things that will not cost a dime. Those 4 items will not trudge on any conceivable rights either. I support an additional item, with reservations.

Once again, if Gallup asked taxpayers if they support increasing taxes to pay for these programs, I bet the answers would be different and the order of priorities would be different.

How Helpful Are Concealed Weapons?

Inquiring minds may be interested in a post by Barry Ritholtz How Helpful Are Concealed Weapons?

Click on the link to see a couple of interesting videos.

Note that Barry took a lot of flak for his post. Read the comments and see for yourself. I side with Barry.

The most sensible comments came from Disinfectant and GreenTom.

Disinfectant says ...

It is amazing, but not at all surprising, that so many watch these videos and utterly fail to understand the message. The point is simple and should be uncontroversial – unless you are well trained, defending yourself with a gun in a live scenario is very difficult; your body and mind are not prepared for this. It doesn’t matter how often you go to the gun range or how heroic you imagine yourself to be. Going through the motions of protecting yourself, getting the gun out, then firing at the target (and ONLY at the target) does not happen naturally.

To the critics: nowhere does it imply that a gun will never be useful in defense. Obviously, if you are not in the immediate line of fire and can take cover, you will have more time to prepare yourself. But if the shooter is standing right in front of you, your odds are likely much lower than you think. And as far as anecdotal evidence goes, I’m sure 0% of you can actually say that you have been in such a situation and performed as flawlessly as your imagination would have you believe.

GreenTom says ...

I’d agree this is kind of staged, but more rigorous studies show the same thing. Study below reports that people carrying weapons are about 5 times more likely to be shot than those who don’t carry. It’s funny, I predict a lot of negative reactions to this comment, but does anyone really claim that escalating a robbery to a gunfight isn’t a risky move?

Investigating the Link Between Gun Possession and Gun Assault

Here is the study cited by GreenTom: Investigating the Link Between Gun Possession and Gun Assault

...Individuals in possession of a gun were 4.46 times more likely to be shot in an assault than those not in possession. Among gun assaults where the victim had at least some chance to resist, this adjusted odds ratio increased to 5.45.

Among a long list of issues facing the American public, guns are third only to gay marriage and abortion in terms of people who report that they are “not willing to listen to the other side.” In concert with this cultural rift, scholarly discussion over guns has been similarly contentious.1 Although scholars and the public agree that the roughly 100 000 shootings each year in the United States are a clear threat to health, uncertainty remains as to whether civilians armed with guns are, on average, protecting or endangering themselves from such shootings.

I commend Barry for taking a controversial stand on a controversial topic. Most bloggers stay away from controversial subjects, generally out of fear of offending readership. As my readers know full well, I will not shy away from controversial topics either.

By the way, gun control may not seem like an economic topic but it is. Many of Obama's proposals will require significant expenses to implement down the road (even if hidden initially).

Reflections on Libertarianism 

I am certain to be charged by some of violating Libertarian beliefs.

However, libertarianism is not anarchy. Rules exist to protect property. Reasonable legislation will prevent some of these incidents, and no amount of legislation will stop all of them.

Moreover, common sense says that encouraging average citizens or teachers to walk around with assault weapons or concealed guns (the actual remedy proposed by some gun advocates) would cause a lot of needless deaths and property damage as a result would-be John Wayne types trying to be heroes, but accidentally killing innocent bystenders. 

Reflections on the Constitution

As passed by Congress, the Second Amendment reads "A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed."

As ratified by the states, the Second Amendment reads "A well regulated militia being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed."

Notice the dispute over commas. Also note how the concept of a "well regulated militia" is completely dropped by gun advocates.

The Supreme Court did rule the Second Amendment protects an individual's right to possess a firearm, unconnected to service in a militia.

Regardless, the rights to bear arms to protect oneself certainly can and should have limits.

To clarify that its ruling does not invalidate a broad range of existing firearm laws, the majority opinion, written by Justice Antonin Scalia, said:

"Although we do not undertake an exhaustive historical analysis today of the full scope of the Second Amendment, nothing in our opinion should be taken to cast doubt on longstanding prohibitions on the possession of firearms by felons and the mentally ill, or laws forbidding the carrying of firearms in sensitive places such as schools and government buildings, or laws imposing conditions and qualifications on the commercial sale of arms."

One does not need bazookas, hand grenades, missiles, assault weapons, armor-piercing bullets, or 10-clip magazines to defend one's person or one's house. Those items all need to be outlawed.

Gun advocates argue we need to enforce existing laws, while arguing against every law on the books. Meanwhile, state-to-state variations in laws make enforcement a nightmare, at best.

Now Is The Time

Obama says "now is the time". I agree but only where costs are low and benefits high. There are four (perhaps five) items out of nine on the president's agenda that meet that criteria.

My top three ideas are 7, 9, and 8 (pretty much in that order, but possibly 9 ahead of 7 which I will leave to the experts). Unfortunately, Republicans are likely to fight 7 and 9 (if not 7, 8, 9, and 1).

Given the sad state of Congressional compromises, Republicans may even agree to waste taxpayer money on programs simply to appease voters who clearly want something done.

Unfortunately, the end result is highly likely to be a combination of the most money spent for the least benefit.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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