No Runny Eggs

The repository of one hard-boiled egg from the south suburbs of Milwaukee, Wisconsin (and the occassional guest-blogger). The ramblings within may or may not offend, shock and awe you, but they are what I (or my guest-bloggers) think.

Archive for May 26th, 2009

BOHICA – cell-phone edition

by @ 23:53. Filed under Politics - Wisconsin, Taxes.

Kelly William Cobb over at Americans for Tax Reform put up a post outlining just how bad Doyle and the Spendocrats have it for the money of cell-phone users:

  • First, they raided the $20 million left over in the now-sunsetted E911 fund. That’s right; instead of you getting that $20 million overpayment to upgrade the 911 system to allow the dispatchers to find you if you call them on a cell phone, they’re going to spend it.
  • Then, they created a fresh $0.75/line/month tax on both cell phones and landlines to supposedly fund another upgrade to the 911 system. That would replace an existing $0.16/line/month charge on landlines.
  • For the first time, the Universal Service Fund fee of $0.56/line/month will apply to cell phones, to the tune of about $18.8 million/year.

All told, that’s roughly $100 million per year in new cell-phone taxes according to ATR. But wait, it gets worse. First, Rep. Kevin Petersen (R-Waupaca) reports that the Joint Finance Committee raided $11.2 million of the USF fund for public libraries.

Second, forget about that “next-gen” E911 system – Doyle wants to raid that to directly pay for police and fire.

I could bring up what Doyle said in 2003 (again), but like any ‘Rat, he doesn’t care about lying.

Revisions/extensions (12:15 am 5/27/2009) – The Wisconsin State Journal reports (H/T – The MacIver Institute) that the 911 fund diversion would make Wisconsin ineligible for federal grants to help pay for that “next-gen” 911 system, and that including the cell-phone charge as part of that diversion would violate federal law.

Also, since the 911 fund would replace the current $0.16/line/month charge on landlines, that diversion would cause a $7 million local tax increase.

R&E part 2 (10:50 pm 5/27/2009) – I probably should have done this while temporarily at the keyboard this afternoon, but thanks for the link-love, Americans for Tax Reform. Oh well, better late than never.

Meanwhile, WisPolitics is reporting that the rest of the Necro-budget (© Kevin Binversie) will be passed by the Joint Finance Committee tomorrow. Since Democrats control the entire process, what comes out of the JFC is likely what will plop onto Jim Doyle’s desk.

One note; since the Wisconsin line-item veto is still one of the most-powerful in the country, and because Doyle has no respect for the Wisconsin Constitution, it is vital to not only pay attention to the JFC votes, but to the actual verbiage used. Just one item I’m keeping an eye on – the proposed “compromise” from WEAC (the largest teachers’ union) that would delay the elmination of the QEO (the prohibition of work stoppages by teachers as long as a district offered a 3.86% annual total compensation increase) by a year.

As the wheels turn, automaker edition

by @ 21:42. Tags:
Filed under Business, Politics - National.

The first stop is at UAW Motors (formerly known as Chrysler). Reuters reports (H/T – Gabriel Malor) that a District Court case brought by three Indiana trust funds (the teachers’ union retirement fund, the police retirement fund, and a road construction fund) has been rejected, which means the sale of Chrysler to the UAW/Fiat/US government/Canadian government (technically a hearing on that sale in bankruptcy court) will go on as scheduled tomorrow. The trust funds have been arguing that the federal government does not have any authority to give funds to Chrysler to facilitate the sale, which Judge Thomas Griesa sidestepped in his denial of the motion.

The next stop is Govern…er, General Motors, and their agreement with the UAW. Reuters has a comprehensive summary of that. The Cliff’s Notes version (which assumes that GM doesn’t go into bankruptcy; more on that in a bit):

  • In exchange for a $10 billion payment into the VEBA (the retiree health care fund that GM was scheduled to pay $20 billion), the UAW would get a 17.5% common-share stake (with warrants to increase it to 20%), a $6.5 billion, 9% dividend (or $585 million/year) prefered-share stake, and a $2.5 billion note (with an effective APR of 11.1%, and scheduled payments of $1.38 billion in 2013, 2015 and 2017). Previously, GM had offered a 39% common-share stake to the UAW.
  • GM reacquires 5 Delphi plants in Michigan, New York and Indiana.
  • GM will make its small cars at an idled UAW plant, and will reopen 3 additional assembly and 1 stamping plant if sales “beat expectations”.
  • GM will offer buyouts to all its UAW-represented employees.

The $1 billion-17.5% common-share UAW stake would make the common shares worth just over $5.7 billion at issuance of that stake. Reuters notes in that summary that other creditors and the government would get the rest of the common-share stake (more on that in a bit), with no mention of the fate of the current stock. The prior reorganization plan had the government getting 55%, UAW getting 39% in exchange for the $10 billion VEBA liability, unsecured bondholders getting 10%, and the current stockholders getting 1%, with the common shares worth $25.65 billion at issuance assuming the $10 billion-39% common-share UAW stake ratio).

Assuming that the current stockholders would still get 1% of the company, their current $873.1 million net investment (down from $1.25 billion when the previous reorganization plan was announced last month) would dip to $57 million (down from $256 million in the previous reorganization plan, which was rather inflated).

Stop number three is Governme…er, General Motors and the bondholders. Reuters has the interest in the aforementioned $27 billion for 10% stake offer, which expires in a couple hours and requires a 90% acceptance level to stave off bankruptcy, at well under 10%. Meanwhile, Fox Business says that the process could run all the way through the end of the weekend and up to the June 1 GM drop-dead deadline set by the Obama administration.

The final stop is Government (screw it, it’s no longer General) Motors and the government. The New York Times reports that the new deal envisions the federal government taking 70% of the common stock, with another $70 billion-$90 billion in taxpayer money on top of the $20 billion in TARP money already “loaned” anticipated to get GM through the bankruptcy process. Remember that UAW Motors will not be paying back either the $4.3 billion in TARP money that Chrysler received or the $3.2 billion in interim government bankruptcy financing, but will be expected to pay back the $6.2 billion in post-bankruptcy taxpayer money loaned to it. Using that ratio, it looks like there’s $60 billion, give or take $10 billion, down the hole in exchange for $4 billion in Government Motors stock.

Revisions/extensions (10:15 pm 5/26/2009) – DrewM. points us to an interesting quote in The News Organization That Cannot Be Quoted’s™ story from Kip Penniman, analyst for KDP Investment Advisors:

If GM announced they got low single-digit participation, it would be a slap to GM and the absolute response to the Treasury-mandated offer. … A cynical person would say that the offer was set up to ensure GM would go into Chapter 11 and provide the government a scapegoat.

That story also notes that those bondholders with credit default swaps could make up to $2.33 billion in the event of a GM bankruptcy filing. It does not specify what percentage of bondholders has credit default swaps, but under the prior, highly-inflated plan, the at-issuance worth of the bondholders’ equity stake would have been $2.56 billion, and under the current plan (assuming they still get 10% of the equity), the at-issuance worth of that stake would be $570 million. Do remember that the paper value of those bonds is $27 billion.

Further, The Wall Street Journal reports that, unlike the Chrysler offering, the government is going to pay off the secured creditors in full, to the tune of $6 billion.

ObamiNation turning on its master?

by @ 11:32. Filed under Politics - National.

(H/T – Rob Port)

Rasmussen reports that, as part of their daily tracking polls, the Presidential Approval Index (the “strongly approve” minus the “strongly disapprove”) dropped to its lowest number yet for President Obama, a +1 (31% strongly approve, 30% strongly disapprove). Of note, the 31% strongly approve is a new low.

We’re not quite at the overall low differential of +8 (on 4/22) yet, but with total approval at 55% and total disapproval at 44%, we’re close.

NML wants to soak you so it doesn’t have to pay

by @ 10:51. Filed under Choo-choos, Idiotorial of the Day, Politics - Milwaukee, Politics - Milwaukee County, Politics - Oak Creek, Politics - Wisconsin.

(H/T – Patrick McIlheran via Dad29)

Edward Zore, CEO of Northwestern Mutual Life, had perhaps the dumbest letter ever published in yesterday’s Milwaukee Journal Sentinel. Let’s start by fisking said letter:

I am writing to express my support for the creation of a three-county Regional Transit Authority and a viable, dedicated funding source for transit and Kenosha-Racine-Milwaukee commuter rail. As CEO of a major business in Milwaukee County, I know dedicated funding for transit is critical to the future success of my business.

The local business community in Milwaukee is solidly behind the current RTA’s recommendations to shift funding for transit to a dedicated sales tax. Many opponents of this transit proposal argue that shifting transit from the property tax to a sales tax is anti-business or will drive business away. That is categorically untrue.

As one of the commenters over at P-Mac’s place said, I wonder if Zore’s attitude would change if insurance premiums on NML policies were subject to that sales tax. Dad29 notes that businesses like NML pay a lot in property tax, but don’t exactly pay a lot in sales tax.

A quick point or two of order – while there is a 3-county transit authority in the state budget being worked ov…er, on now (and indeed, there is a nascient 3-county RTA now), its sole purpose will be the KRM, and its major funding source would be a massive increase in the car-rental tax (from $2/rental to $16/rental). There also is in that budget a Milwaukee County-only RTA, which would be funded by a 17+% increase in the sales tax (from 5.6%-5.85% to 6.6%-6.85%).

What that sales tax will kill is retail businesses, especially those near the county borders and those specializing in high-cost items. It doesn’t take all that much for someone living in, say, Wauwatosa to go to Brookfield for a fine four-star dinner or a camera and spend less money.

Let’s continue…

Northwestern Mutual has two major offices in Milwaukee County and employs a significant number of residents of Wauwatosa. Our current transit system is so inadequate and obsolete that my employees cannot get from our downtown office to our Franklin location on the Milwaukee County Transit System. The lack of available transit in this region has a much greater impact on my company than a shift in how we pay for transit.

P-Mac points out that the beautiful and recently-expanded Franklin campus is 1 1/2 miles away from the nearest bus stop (Route 27), and well past the point where the sidewalks on 27th St. ends (1 mile, to be exact).

I do have a point of order – there was, for a while, a limited-schedule extension of Route 27, Route 227, that went past the NML Franlkin campus to the Franklin Industrial Park south of Ryan Rd. between 46th St. and 60th St. However, that route was cancelled due to low ridership. Guess not many NML workers rode the bus out to Franklin.

Let’s continue…

Of the top 50 most populated U.S. cities or regions, only seven do not have or are not developing rail transit. Wisconsin is already behind other regions in this regard, and without a stable bus transit system – much less improved transit and commuter rail links connecting Milwaukee to other regions – southeastern Wisconsin will be left behind as the state’s talent pool is attracted to other developing regions. Those remaining in Wisconsin cannot get to their jobs.

STOP THE TAPE!!! Just how are enough NML employees making it out to Franklin for not one, but two good-sized office buildings if one can’t take a bus, train, or sidewalk there? I believe I forgot to mention that there are enough NML employees getting there by car that they built a parking ramp.

As for a commuter train, the closest point of approach for the westernmost rail line, which is used by AMTRAK, is just under 1 1/2 miles. The closest AMTRAK station is 4 1/2 miles away. The closest the KRM, which would be on the easternmost rail line, would get is 4 1/2 miles, with the station being roughly 5 miles away. Further, neither AMTRAK nor the proposed KRM serves (or would serve) Wauwatosa.

P-Mac also hacks away at the idea that light rail would work. Anybody care to guess how much it would take to run a light rail line between Wauwatosa, the downtown Milwaukee NML campus (because we can’t expect NML employees to be bothered by transferring to the streetcar) and the Franklin NML campus?

Four-Blocking the leading economic indicators

by @ 8:31. Filed under Economy.

Tom McMahon does it again…

As is usual when I borrow Tom’s stuff, I’m going to direct your comments over there.

I’m Sorry

by @ 5:26. Filed under Economy, Politics - National, Taxes.

First, a little music to set the mood:

This week Drudge ran the headline:

Obama Says We’re Out of Money

Oh yeah, big fat surprise that is!  While the headline is a bit out of context in that Obama was discussing health care, the overall take is correct.  Obama recognizes that he has spent more than he has, by a long shot, and realizes that he must find a way to cut costs or increase revenue or leave office with most Americans longing for another Carter term because in comparison, it was nirvana!  The problem Obama has though is that he has no clue how big the hole is that he has dug for himself and the nation.

Back when Obama released his fairy tale titled “A budget proposal,”  I laid out the many problems with his budget and why he would never come close to closing the gaps on the deficits that he has created.  In this post I pointed out several issues that would cause his budget to fail.  As of today we have enough information to conclude that Obama’s budget assumptions have failed on two key issues.

Obama’s budget assumes a dramatic improvement in unemployment rates.  This improvement is key on two fronts.  First, it reduces the outflows of expenses in unemployment compensation.  This is a huge budget item at both the Federal and State level.  Second, when people go back to work, income taxes get paid thus increasing the tax revenue.  Obama’s budget assumptions had the 2009 unemployment rate at 8.1% with 2010 improving to 7.9%.  Of course, the same team that put this budget together was also the team who never saw total unemployment exceeding 8.0% with the enactment of a stimulus package so we know that numbers aren’t really their thing.  The CBOs most recent survey of private sector forecasts of unemployment now shows that the most optimistic assessments have the unemployment rate averaging 8.8% for 2009 and increasing to 9.0% in 2010.

Second, I warned you that Obama’s budget had a wildly optimistic long term interest rate assumptions.  For 2009 the Obama budget assumed the 10 Yr. treasury would be at 2.8%, for 2010 the assumption was 4.0%  Well, get ready, that bubble is about to burst as well. 

This week the Financial Times is reporting that sales of debt for private businesses is again increasing.  While that is good and it shows a data point of improvement in the economy, it’s bad for Obama.  As private enterprise increases its desire for debt, at the same time that the government is having to finance huge amounts of additional debt, the overall demand will cause all interest rates to increase.  Already the 10 yr Treasury which was running  under 3% at the end of April has increased to over 3.4%.  That’s a 20% increase in rates over Obama’s assumptions and we’re barely three months past the date of the assumption issuance.

For the past two years Senator, PEBO and now President Obama has been running from one corner of the globe to another apologizing for what he believes, have been heinous actions by the US. You know, actions like freeing oppressed people, calling evil evil and using our economic tools to encourage dictators (hello Fidel!) to broaden involvement in governments and economies that have created the greatest gulfs between “haves” and “have nots” through the use of government intervention. I watch Obama’s groveling around the world and wonder: “When will he apologize to the American people?”  I doubt his teleprompter will ever allow that to happen!

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