Thursday, April 28, 2011

Reducing Energy Prices The Blumenthal Way

What do you get when you cross an attorney general with a U.S. Senator?

Answer: Dick Blumenthal.

People may not appreciate the joke until they’ve read Sen. Dick Blumenthal’s prescription for lower energy prices.

Appearing on Face the Nation” with Bob Schieffer, Mr. Blumenthal, who as attorney general of Connecticut for 20 years was very quick to pull the litigation trigger on companies large and small, called for “an investigation… involving subpoenas and compulsory process” to hold to the fire the feet of those who “may be driving prices up.”

A grand jury should be assembled, Mr. Blumenthal said, to “uncover the potential wrongdoing… The Justice Department should take the lead, seize this moment, and send a message — a very strong deterrent message — that this country will not tolerate the kind of illegal speculation and trading and hedge fund activity that may be driving prices up.”

The usual Blumenthal press release, when he was attorney general in Connecticut, was full of bluster and weasel words. The statements above are no exception: Stock speculators MAY be driving prices up; the Justice Department should SEND A MESSAGE rather than prosecute wrongdoing; illegal trading and hedge funds MAY be driving prices up.

Mr. Blumenthal’s solutions to high energy prices did not change when he moved from Hartford to Washington. An Environmental Protection Agency (EPA) movement enforcer, Mr. Blumenthal is convinced that energy prices may be sufficiently reduced on the demand side through conservation measures. But the prospect of a descent into Hell – the reduction of energy prices through an increase in energy products on the supply side – is to be assiduously avoided, because some energy products may be injurious to the environment. Supply boosters such as oil mining, Blumenthal has argued, is a long term solution that “will take years to achieve on a scope and scale that will make a real difference.”

There are two ways to reduce energy prices: Prices are lowered when demand decreases, and they also are lowered when the supply of energy increases. The theology of the EPA movement considers the second solution sinful --depending upon the kind of energy that is made more abundantly available.

Politicians in Mr. Blumenthal’s party who announce in favor of nuclear production – a clean form of energy that could make Connecticut energy self sufficient – find themselves flirting with the near occasion of sin. A bill promoted by the Democratic co-chairs of the General Assembly’s Energy and Technology Committee that would impose a crippling $330 million tax on nuclear energy is now making its way through the state’s legislature. As the bill was being pushed through the legislative sausage maker, Mr. Blumenthal was careful not to comment on SB1176, even though Dominion, the owner of Connecticut’s sole nuclear power plant, which provides HALF the energy used in Mr. Blumenthal’s state, had announced it would shut down operations if the bill were written into law.

With a Hartford gas station serving as a backdrop, Mr. Blumenthal last month told reporters in Connecticut that “the U.S. Commodity Futures Trading Commission should go after the speculators and the Justice Department should go after the foreign oil cartels that are ‘holding us hostage,’” according to a report in a Hartford paper.

Blumenthal supports legislation giving the Justice Department the authority to bring legal action against foreign entities. Accustom to brooking no challenges as attorney general in command of 200 lawyers, Mr. Blumenthal evidentially anticipates no retaliation from foreign entities, some of which are sovereign countries. The former attorney general is seemingly unaware that the entities’ equivalent of a Justice Department also may sue the U.S. government, producing a litigation war that doubtless would enrich lawyers even as it would bring international business to a screeching halt.

Mr. Blumenthal’s erstwhile Republican opponent in the late senatorial election, former wrestling impresario and business owner Linda McMahon, could have told Mr. Blumenthal that a good part of the price increase in energy, gas included, is the result of inflation. The price of gas and other products have increased in part because the value of the dollar has decreased. It takes more dollars to buy a gallon of gas because inflation has reduced the purchasing power of U.S. money. In addition, a large part of the dollar pumped into car tanks are taxes imposed by environmentally friendly state politicians who approve of high gas taxes as a means of SENDING A MESSAGE to car owners that they should switch from gas powered vehicles to other modes of transportation. High gas prices  in Connecticut fund Big Budgets and encourage mass transport -- supposedly.

Though inflation leads to higher prices -- the dollar last year lost 9 cents against the battered Euro -- Mr. Blumenthal has yet to demand that President Barrack Obama’s justice Department should convene a grand jury for the purpose of SENDING A MESSAGE to the folk who mind the money in the Federal Reserve that they should cease and desist pumping dollars into the money supply to pay off the unconscionable debt incurred for the last two years by Mr. Blumenthal’s largely veto proof Democratic Party in the U.S. congress.

Tuesday, April 26, 2011

How To Destroy A State In One Easy Lesson

Energy, as we all know, is the stuff that makes thing go: light bulbs, even the squiggly, earth friendly, energy saving kind that, some say, may cause cancer; cars and buses, preferred by “smart growth” utopianists who drive their non-motorized, non-gas guzzling bikes to work; and computerized presses that produce newspapers of a kind for which Senator John Fonfara of the 1st District and Vickie Nardello of the 89th Assembly District write op-ed pieces.

Mr. Fonfara and Ms. Nardello are co-chairs of the General Assembly’s Energy and Technology Committee, and together they are promoting a bill that at least one non-utopian academic, Richard D. Pomp, the Alva P. Loiselle Professor of Law at the University of Connecticut Law School, considers highly mischievous.

Political watchers may have noticed that there are every so often within the Democratic Party sudden flare ups, quickly suppressed, of economic good sense. Mr. Fonfara and Ms. Nardello have escaped this human frailty. The two are perfectly well aware that the taxing power of the state, always a withering hand, may be used either to destroy or build up industries. A drop in taxes, usually in Connecticut through some form of tax credit – or, equally effective, through the selective use of the transfer mechanism available to every utopian legislator who wants to make the world over – does wonders to suppress unwanted products such as nuclear energy and promote politically desirable products such as wind turbines, provided the flickering blades of the turbines do not disturb the tender eyes of voters in Ms. Nardello’s district.

In a free economy – one not directed by proto-fascists such as operate efficiently in China and utopias elsewhere – the consumers of products direct the flow of goods and services through their purchases. Products considered by consumers to be desirable are purchased, and the industries producing them prosper and make profits that, like the farm in the Robert Frost poem, are “plowed under” to create jobs and an improved product. Under a free market system, whoever makes the most efficient mouse trap at the most affordable price succeeds and enjoys rich dividends. In command economies, the only kind considered tolerable by utopianists, the supply and demand structure is replaced by politicians such as Mr. Fonfara and Ms. Nardello, the invisible hand of a formerly free economy then made visible as a mailed fist. Even in free societies, the jump from a free to a quasi-fascist command economy is but a progressive baby step forward.

Mr. Fonfara and Ms. Nardello are well aware that the joint bill they are promoting -- Senate Bill 1176 (SB1176), An Act Concerning Electric Rate Relief -- slaps a massive punitive tax on Connecticut’s nuclear energy provider. The Bill unabashedly seeks to readjust radically the economic DNA of the state. Dominion Resources, the owners of Millstone, which provides HALF the state’s energy needs, is taxed so strenuously under SB1176 that the owner has threatened to shut down operations.

An idle threat, Fonfara-Nardello charge in a recent op-ed column that should be scrutinized with a jeweler’s eye.

F&N point out in their joint op-ed that the product produced by Millstone is LESS EXPENSIVE than that provided its competitors: “The Millstone nuclear plant, owned by Virginia-based Dominion Resources, generates some of the lowest-cost electricity in New England. For this, the owners of Millstone should be rewarded” – presumably by means of a tax that can only make Millstone’s product more costly for the company to produce.

Although less expensive, the product has never-the-less been economically burdensome to those who use it. Somehow the profits earned by a company that produces a less costly product “has caused all of our state's businesses to be less competitive and left many households on limited incomes to make choices between their electric bill, food or heat.”

But never mind the inherent absurdity: A lower cost product makes companies purchasing it less competitive than they would be were they imprudently to purchase higher cost energy from other companies. Look over here while F&N pull a rabbit out of their bill: The nuclear product is so hedged about by federal regulations that Dominion, F&N imagine, cannot pass along to consumers the increased costs generated by higher taxes. And indeed, it is precisely because such increased costs cannot be passed along to Connecticut consumers that F&N have chosen to put a crippling tax on the company. But just as there is no such thing as a free lunch, so there is no such thing as a tax without consequences.

Here are the real world consequences of F&N’s $330 million tax increase on Dominion:

F&N’s tax will kill nuclear energy production in Connecticut, because no other nuclear energy producer or distributor would enter the market in a state that imposes predatory taxation on nuclear energy. And the absence of competition drives up prices. In fact, that is precisely the thrust of SB1176: It seeks to eliminate a product that lowers the cost of business of everyone in the state using it because…

Because the only way to lower the cost of higher priced energy from undeveloped sources that please the utopianists is to take from Peter the profits he has earned by producing a low cost efficient product and give it to Paul, whose product is a) undeveloped, b) commercially untested, c) very costly to produce and d) favored by utopianists such as Mr. Fonfara and Ms. Nardello, whose dearest desire is to acquire more status and power than is good for either them or us.

Bill SB1176 is constructed in such a way as to permit the energy taxes it imposes primarily on nuclear resources to leech into the general fund. In this way, spine free politicians need not tax citizens to promote their fantasies, and the bill, if passed, will move Connecticut towards an operative command economy under the direction of a political elite that has shown itself to be inefficient and dismally stupid. To control the means of production, the most important of which is energy, is the utopian dream of proto fascists everywhere.

Friday, April 22, 2011

Malloy’s Pig In A Poke Tax Plan

Moments after Governor Dannel Malloy and majority Democrats in the General Assembly had more or less signed off on the governor’s tax plan, a half-budget that includes doubtful savings from state unions, minority Republicans asserted that the so called budget could not be passed in its present form by the legislature because the state constitution requires a balanced budget.

The Democrat’s tax plan might be in balance if the $2 billion the governor hopes to recover from state unions were assured. But negotiations between the governor’s office and Connecticut’s fourth branch of government -- Larry Dorman, the chief spokesman for SEBAC, the union coalition in negotiations with the governor -- have not been concluded, and no one in the Democratic dominated legislature may know at the point at which they will be asked to vote on the Democratic tax plan whether the anticipated savings have been secured.

Statements made by Mr. Dorman and Mr. Malloy suggest that a quick resolution is not in the offing. The state, said Mr. Dorman, hasn’t sufficiently squeezed millionaires and the CEOs of major corporations in Connecticut that have not yet sent jobs out of state in an attempt to lower business costs.

"We are pleased,” Mr. Dorman said, “to see that the budget has seen some improvements, such as asking the very rich to pay more of their share, as opposed to other ideas, like eliminating the property tax credit, that further hurt struggling working and middle-class families. We would still like to see much more asked from big multi-state businesses and the very rich who have so far been the only ones to share in our state's so-called economic recovery.''

Concerning negotiations with Mr. Dorman, Mr. Malloy resorted to a papal metaphor: “There’s no white smoke coming out of the chimney now, but there is no black smoke, either.'”

Meaning: Mr. Dorman has not yet capitulated to the governor’s demand that the union members he represents cough up 4$ billion in savings. It is very much an open question whether the Democrat dominated General Assembly will vote favorably on Mr. Malloy’s tax plan if the concession is not in place when the matter comes up for consideration.

The so called budget voted out of two important tax writing committees ASSUMES cost savings from union concessions in advance of the concessions; the savings have yet to be realized. Without a finalized, signed on the dotted line agreement between the governor and the heads of state unions, legislators who vote affirmative on Mr. Malloy’s tax plan will be voting for the proverbial a pig in a poke.

Though there are important differences between Mr. Malloy and Mr. Dorman, the negotiator for SEBAC has not yet pulled out of the talks. Mr. Dorman believes that the governor and “those struggling middle-class families who happen to work for the state” ultimately will find common ground – presumably after Mr. Malloy’s tax plan, which now contains a very iffy placeholder savings from union concessions, has been written into law.

On the other hand, the cost savings negotiations with unions will be much easier for Mr. Dorman after the so called budget – in the absence of the $2 billion in concessions from unions, it’s really a tax plan – has been etched in stone, because in that case the governor will have surrendered to Mr. Dorman his most valuable bargaining chip: the possibility that, absent a union agreement, the governor may either pass on the pain involved in cost savings to municipal union workers to recover savings lost through failed negotiations with Mr. Dorman or simply remove tax increases from the bargaining table until such time as Mr. Dorman is more amenable to pain sharing.

Mr. Malloy’s tax plan has been sent to the floor by two obliging committees, one of which, the tax-writing finance committee, showed Sen. Edward Meyer the door when the upstart protested that he would like to see the pig in a poke before voting upon it. Mr. Meyer, a fiscal conservative Democrat, told his colleagues on the committee that he opposed the package because legislators were “virtually ignorant” of the details concerning union concessions. And then, approaching heresy, Mr. Meyer said, “This budget history now requires our focus on responsible spending before we entertain an historical package of tax increases, particularly when we see that those tax increases are not sunsetted.”

Sunsetted tax increases? Be thou anathema Meyer!

Mr. Meyer was quickly exiled from the finance committee’s Democratic caucus by co-chairwoman Sen. Eileen Daily of Westbrook. Having asked the committee’s other chairwoman, Rep. Patricia Widlitz of Guilford – his own state representative – to intervene on his behalf, Mr. Meyer was unceremoniously booted from the caucus. Winking at the pig in the poke, the ladies and gentlemen on the referring committees, having received their marching orders from pope Malloy, were in no mood to hear fiscal conservative dissenters talk truth to power.

Thursday, April 21, 2011

A Tax Plan Is Not A Budget

The banner headline in the Hartford Courant read “Budget: It’s A Deal.” And an accompanying photo showed Governor Dannel Malloy pressing the flesh of various Democrats whose votes were crucial in passing the Democratic Tax Plan.

President of the Senate Don Williams was mildly applauding, an enigmatic Mount Rushmore smile playing upon his face. Sen. Edith Prague, the most obliging senator state union leaders ever bought, was half out of the picture, also applauding. Mr. Malloy was pitched forward, grasping the hand of Rep. Susan Johnson, eager to launch Connecticut forward on a path of prosperity, gratefully accepting plaudits from Democrats in the legislature who had helped him set in budget stone their preferred Tax Plan.

Significantly, the second half of Mr. Malloy’s budget, a Savings Plan that includes the “shared sacrifice” Mr. Malloy has demanded from state workers, is still in process of being negotiated. The cost savings part of Mr. Malloy’s budget has, so far, been written on the waves.

Republicans, a slender minority in the General Assembly, were out of the picture, both figuratively and literally. Their fingerprints will mar neither the Democrat’s Tax Plan nor their rumored Savings Plan.

Earlier in the week, Republicans unveiled their own no-tax-increase budget; among the Democrats shown happily celebrating in the Courant’s front page photo, you could have heard a pin drop.

In past budget negotiations, Republicans, when they were not cooperating with majority Democrats in crafting spending plans, were simply shunted out of the way of Courant photographers and airily dismissed by Courant commentators as irrelevant nuisances, a sprinkling of ashes tossed upon the big spender’s feast. “Laissez les bons temps rouler,” as Marti Gras revelers said in New Orleans before Katrina buried them, “let the good times roll.”

This time around, all the serious negotiations on the budget were conducted in back rooms of the state capitol marked “no Republicans need apply,” because Democrats who now control both the General Assembly and the governor’s office need no longer keep up the pretense that legislative Republicans have a hand in constructing a so called budget that is, for all practical purpose, little more than a tax plan with a promissory note from Connecticut’s fourth branch of government, state unions, attached to it: “The bearer of this note will pay in “shared sacrifice” $4 billion in cost savings to Mr. Malloy, Mr. Williams, Speaker of the House Chris Donovan, Ms. Prague and Ms. Johnson – maybe.”

The times, they are not a’changing, at least not here in Connecticut. Both the the times and the state’s fatally deficient public policy will change when the people of Connecticut, battered on all sides by an omnipresent and omniscient government that robs them of the fruit of their labor to secure for itself the means to wipe dry every tear, begin to take seriously the advice posted on a billboard on route 44 during the last election season: “If you don’t like your congress, change your congressman.”

In the course of his 17 town tour, during which Mr. Malloy presented to the general public his proposed budget – a Tax Plan that included the largest increase in taxes since Gov. Lowell Weicker addressed a similar deficit problem in 1991 and a Spending Plan that included essential promised savings from concessions to be made by state union workers – Mr. Malloy called for “shared sacrifice” from both taxpayers and unions.

Mr. Weicker solved his budget deficit through the imposition of an income tax, the so-called “gas” poured on the spending fire that Mr. Weicker during his campaign for governor promised would not be poured out in the form of an income tax. The Weicker income tax produced ungovernable spending, obscene surpluses that swelled the bottom line of future budgets, and THE FIRE THIS TIME that Mr. Malloy says he hopes to snuff out – with a promissory note from Connecticut’s biggest spenders and their legislative enablers, the celebrants who were applauding Mr. Malloy’s Tax Plan.

The Democrat’s so called “budget” is really a tax plan to which has been attached a promissory note of savings and cost cuts. The real budget is still very much a work in progress.

It is expected that the Malloy-William-Donovan half budget will be passed quickly over media muted objections from Republicans.

And then?

Then General Assembly Democrats, having secured Mr. Malloy’s commitment on a signed Tax Plan, may begin to roll the first Democratic governor since Gov. William O’Neill was washed out of office on a sea of red ink.

Of course, the governor could always maintain an effective negotiating posture with unions and their enablers in the General Assembly by declining to sign the Democrat’s half-budget until he has secured his $4 billion in cost savings from the people whose hands he was pressing in the Courant’s photo; in this way, Mr. Malloy could be certain that the promises he made to Connecticut citizens in no fewer than 17 town meetings have been secured in budget stone before he commits fatally to the pleasures of Mr. Williams, Mr. Donovan, Ms. Prague and Ms. Johnson.

Bets are now on the table that union bought Democrats in the General Assembly will roll Mr. Malloy -- just as they had rolled his two Republican predecessors.

Laissez les bons temps rouler!

Monday, April 18, 2011

Foley On Malloy’s Current Services Budget Chicanery

After Tom Foley lost the gubernatorial race to then former Mayor of Stamford Dan Malloy, he did not slink away into that good night in which many losing politicians find their ultimate repose.

Mr. Foley, a former ambassador and business owner, started a research organization that develops public policy proposals, and a recent op-ed piece Mr. Foley wrote for a Hartford paper represents part of the fruit of his post campaign labors.

Mr. Foley’s column vigorously attacks “current services budgets” as a means used by shiftily, non-transparent politicians to fool some of the people all of the time, in Abraham Lincoln’s piercing phrase.

The method of reckoning getting and spending in Connecticut’s current services budget is little more than a partially successful sleight of hand used by professional politicians to “pitch their causes and confuse their constituents to suit their purposes,” according to Mr. Foley.

Governor Malloy’s current services budget first implausibly assumes that tax policy and state services will not change in the new budget year and then uses this dubious assumption to project future revenues. In planning expenses for the new budget, Mr. Foley writes, current services budget writers factor in “anticipated wage and benefit increases for the same number of state workers and inflationary increases in the cost of things the government buys.”

Under the states current services budget in the fiscal year ending in June 2012, spending will increase 9.8 percent, $1.75 billion higher than spending for this year, a figure Mr. Foley characterizes as “ridiculous.”

Using the current services budget as the base year, Mr. Malloy claims in his budget proposal to have cut spending by $1.76 billion. His proposal shows personal income taxes increasing by $879.8 million, while total taxes increase by $1,840 million. The anticipated give backs Mr. Malloy hopes to recover from unions appear in his proposal as Labor Management Savings and are presented as an expense reduction.

Most people suppose that current year budgets serve as the baseline for future budget projections. But using the current year budget as a staring point, spending in the new fiscal year will increase rather than decrease by $263 million; personal income taxes will increase by $1,443 million; and total taxes will increase by$2,466 million.

And spending for the benefit of state workers will according to Mr. Foley remain “approximately even with this year, i.e., no givebacks… On this basis, the budget deficit is being funded entirely with new taxes and no spending reductions. That is a very different story from the shared sacrifice story being used to sell the budget.”

“Sell” is the operative word. To sell his proposed budget both to the general public and union workers from whom Mr. Malloy hopes to realize a “shared sacrifice,” it helps to peddle the notion that union givebacks – i.e. spending reductions -- are a fait accompli in the new budget; they are not. And anyone who believes that real time spending in the new budget has been slashed or that personal income taxes have been increased $879.8 million rather than by $1,443 million or that inflation will not drive up the costs of various state agencies in the new fiscal year has been successfully deluded by number crunches who rely on current services budget persiflage.

“Using the current services budget,” Mr. Foley asserts, “degrades the clarity and quality of debate on the budget. It enables bureaucrats to pad budgets and move the goal line in the hope of achieving ever higher funding. It enables politicians to obscure bad news and fabricate good news. It enables advocates of government spending to demagogue anyone who questions the ever-increasing funding for their causes. It confuses the concerned citizen who is trying to understand what is going on.”

Early in his campaign with Mr. Foley, Mr. Malloy announced that he would move the state towards a new budget accounting process, Generally Accepted Accounting Principles (GAAP), so as to assure transparency and forestall the budget gimmickry that had allowed prior governors and legislatures to present a false picture of budgets though the manipulation and abuse of sound accounting procedures. According to Office of Policy Management Secretary Ben Barnes, GAAP should be operational by July 1 2013 and begin in fiscal year 2014.

Current service budgeting does for political campaigning what dishonest budget accounting does for politicians who survive budget red ink by fooling some of the people all of the time. Democratic governor of New York Mario Cuomo has honestly addressed budget issues by using immediate prior budgets rather than current service budget chicanery in measuring the progress he has made in stemming the flow of red ink.

With a gentle poke in Mr. Malloy’s easily bruised ribs, Mr. Foley asserts that Mr. Malloy’s dark angel in New York got it right and suggests, “It isn't too late for our leaders in Hartford to follow Gov. Cuomo's lead and begin making things clearer for us as they debate next year's very important budget.”

Wednesday, April 13, 2011

The Real Budget Deal

Governor Dannel Malloy’s strong suit in budget negotiations with unions is that his proposed budget limits the pain for unionized workers in Connecticut only to state employees. In a hitch, he might easily choose to broaden the shared sacrifice to cover municipal union workers as well. Under a contingency plan prepared by the governor’s office, municipalities would lose one-third of their state aid should the legislature unwisely resist Mr. Malloy’s proposed budget.

Having already socked taxpayers for $1.5 billion, the governor is asking $2 billion in spending cuts only from state union workers. Given the economic condition of the Connecticut – ambulatory, according to The Connecticut Society of Certified Public Accountants -- the state’s long term debt can only grow larger over the years. Very little in Mr. Malloy’s plan patches the hole in the boat caused by excessive spending, which can be ameliorated only by permanent long term cuts. The governor has to wring $2 billion or more from the budget – permanently.

Following the presentation to the legislature of Mr. Malloy’s budget outline, the word on the political street and in union halls was that the savings Mr. Malloy had demanded in very stern tones from state union workers could not be realized, largely because the pool from which he hopes to recover $2 billion in savings has been restricted only to state workers. Unionized Municipal workers are not touched by Mr. Malloy’s withering hand. The “shared sacrifice” Mr. Malloy has asked of taxpayers has not been expanded to include unionized municipal workers, a group that would include teachers, the largest tax drain on state resources.

Delighted with this arrangement were: municipal politicians – especially town administrators who are members in good standing of the Connecticut Conference of Municipalities, sometime derisively titled the Connecticut Conference of Crying Mayors -- legislators elected in districts composed of town voters, and all municipal workers, including teachers, a voting bloc partial to Democrats.

The state-wide tax increases Mr. Malloy had proposed were trumpeted as a highly principled effort to share the pain of sacrifice. Because the sacrifices were so widely shared, they would be more tollerable for everyone. All were to shoulder an equitable burden. Had Mr. Malloy disappointed the above named interests by requiring a similar “shared sacrifice” of all union workers in the state, including teachers and other municipal employees, none of the state workers now protesting the enormity of their sacrifice, said to be an unrealizable $20,000 per year per worker, would have had much reason to complain – because, in that case, the “shared sacrifice” would have been distributed more equitably among all unionized workers throughout the state.

Mr. Malloy could only have distributed the pain of “shared sacrifice” more equitably throughout the state’s larger union pool by passing along the burden of “shared sacrifice” to municipalities in the form of – listen for the GASP! – state cuts to municipalities. It was argued at the time that this would inevitably raise the dreaded property tax, a prospect that always had drawn crocodile tears from the Connecticut Conference of Crying Mayors, unionized municipal workers, town property taxpayers and state legislators.

There was but one political commentator in the state who suggested this line of reasoning was hokum; the governor all along should have been proposing cuts in state aid to towns said Chris Powell of the Journal Inquirer.

Under threat of increased property taxes, municipalities have often chosen though budget referendums to cut spending; and, in fact, the ever increasing tax buck in Connecticut more often is brought to a stop at the desk of a mayor than that of a state legislator or governor. It is far easier for state legislators to raise taxes -- because Connecticut has no state budget referendum, whereas many towns do. It is at the municipal level, in other words, that cost cutting is most effective, because through referendums town voters directly influence budgets, doubtless at the cost of many tears shed by mayors and other administrators who find cost saving measures too painful to execute.

The latest news is that union negotiators are largely satisfied with the outline of Mr. Malloy’s budget proposal. They want to tweek it a “very little” bit, according to Senate President Don Williams. One cannot help but think of Danton itching to tweek the neck of Marie Antoinette, who was said to be imperious.

The Democratic majority in the legislature has been much in the habit of tweaking the budgets of previous Republican governors, and there is little reason to suppose the same extravagant spenders will not similarly tweak the budget of one of their own on behalf of their most clamorous and grateful constituency – union workers. If the Republicans were of a revolutionary frame of mind, they’d propose a constitutional convention to be convened only for the purpose of establishing a state budget referendum and attach the measure to any and all pending bills increasing the cost of state government.

Monday, April 11, 2011

Connecticut’s Economic Report Card, F-

The report card the state has received from The Connecticut Society of Certified Public Accountants is alarming.

Connecticut ranks 50th in personal debt, 48th in debt measured a share of personal income, 49th in pension funding, and 49th in the amount of working capital it has in hand.

Marcia Marien, president of the Connecticut Society of Certified Public Accountants, put it this way when she was invited to give a presentation at the state Capitol: “We’re not going broke. We’re broke right now.”

Over the last five years, state revenues have increased 5 percent, while state spending has increased 28 percent. And although stimulus funds provided by the federal government have helped some states to get by, federal funds – tax money withdrawn from the private marketplace and distributed to states and favored industries in the form of grants or credits – are not likely to continue because, according to Ms. Marien, “The federal government doesn’t have the resources, either.”

If the federal government did have a surplus, it might more efficiently provide stimulus funds through the expedient of tax reductions; the least harmful way to stimulate the economy is by leaving economic resources in the pockets of people who most efficiently decide which companies will prosper or fail though the purchasing choices they make. When market winners and losers are decided by political federal and state bureaucracies, the funds necessary to support the winners are a perpetual drain on both the economy and taxpayer resources.

Connecticut’s CPAs have singled out for attention a number of pressing issues:

• State spending has increased by 227 percent since 1980 from $4,400 per household to $10,000 per household.

• The number of state employees expecting pension and after retirement benefits is a stunning 205,000. “About 185,000 Connecticut taxpayers account for more than 60 percent of the state’s income tax revenues. This second group can leave Connecticut, and many probably will if their tax burden increases dramatically.” These proportions strongly suggest that if Connecticut has a revenue rather than a spending problem, as so many union leaders now negotiating pay and benefit packages with the administration of Gov. Dannel Malloy persistently urge, Connecticut is not likely to increase revenue from already besieged taxpayers.

• The CSCPA reminds us that “Connecticut’s fiscal problems are structural. Budget deficits aside, we spend more that we take in, we have legal obligations that will further escalate spending, and Connecticut’s aging population will pressure the budget still more. At the same time, we need to fund essential services. The state has made unfunded post-employment benefit promises to its employees that will soon prove extremely difficult if not impossible to keep.”

In addition, the state’s “fund balance,” the amount of money the state of Connecticut would have 60 days after the end of the fiscal year if the government were to stop doing business, an accounting measure of the state’s short term financial health, is a NEGATIVE figure of $922 million. A healthy fund balance would be ten percent of Connecticut’s annual expenditure. The state’s present fund balance is a negative five percent of expenditures.

And Connecticut’s long term financial health is worse. The state’s total liabilities amount to $70 billion – 4.5 times its assets. Connecticut has the highest debt per capita of all the 50 states; as a percentage of personal income, we lag behind only two states, Hawaii and Massachusetts.

Now then, companies considering a move into the state and Connecticut companies considering out migration to other states that ARE NOT ALREADY BROKE -- whether contiguous to Connecticut or not -- are likely to weigh seriously such reports as have been issued by the CSCPA, an organization that has, unlike silver tongued politicians, no political dog in the national fight to retain and attract businesses.

The CSCPA report is a vivid and accurate description of the economic state of the state. THIS is the defective state product that Governor Dannel Malloy hopes to sell to portable businesses as he begins to keep his promise to merchandise Connecticut both nationally and overseas. Mr. Malloy has shown himself to be an able salesman, Most elected politicians are smooth talkers, which is how they attain office. However, the writing on this wall can only be changed when the state’s assets exceed by a comfortable margin its deficits. And to lead the state from its Babylonian captivity, Mr. Malloy must first convince those here at home in his own party who have been largely responsible for running up the state’s debt and exhausting its assets that WE HAVE A SPENDING PROBLEM.

Saturday, April 9, 2011

Who Done It? A Lesson In Constitutional Probity

When the convention that gave birth to the U.S. Constitution had finished its work, the great charter of liberties was left on a table so that the founders of the Republic might, if they wished, sign their names to it.

Ben Franklin had earlier warned his band of revolutionary brothers that if they did not hang together they would of a certainty “hang separately.” And he was not playing with metaphors. Had the agents of King George captured George Washington or any of those who had signed the Declaration of Independence, the father of our country most certainly would have been hanged, even as Nathan Hale, Connecticut’s Hero and one of Mr. Washington’s spies in New York, was hanged without benefit of trial. Mr. Hale, a school teacher, repented that he had but one life to give for his country.

John Hancock’s large and audacious signature, a defy that resounds through the years like a great shout of joy, leaps out of the Declaration of Independence five years before Lord Cornwallis surrendered to Mr. Washington at Yorktown. Mr. Hancock of Boston said he had signed his signature so conspicuously “so that the king would not miss it.”

When the constitution had been completed, the constitutional architects drifted one by one to the table where it lay and, on the understanding that a Bill of Rights was later to be added, claimed ownership of the nation’s foundational charter by signing the document. Since the founding, courageous architects of bills in both state and federal governments have signed their handiwork.

There are no signatures on Raised H.B. No. 5460, tendentiously titled “An act concerning captive audience meetings” -- because this bill, outlawing religious and political speech in the workplace, effectively repeals the First Amendment to the Constitution, which provides that “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.”

The bill is introduced by “LAB”; no names of those sponsoring the legislation are appended to this disgraceful piece of legislation.

The rights enumerated in the First Amendment quite literally hang together; they depend upon each other. Over the years, the antique expression “establishment of religion” has created some difficulties in interpretation, but the rights here specified clearly proscribe the national congress, and by extension state legislatures as well, from constructing bills that prohibit the free exercise of religion, abridge freedom of the press and speech – most especially political speech – as well as rights of assembly and the right of citizens to petition their governments for a redress of grievances.

Raised H.B. No. 5460, approved by the state’s labor and public employees committee, an ideological annex of Connecticut’s employee unions, now awaiting action by the House and Senate, prevents employers from talking about religious or political topics with their employees, the two forms of speech most protected by the First Amendment.

The new state bill, prompted by failed attempts to unionize Yale-New Haven Hospital in 2006, effectively repeals that portion of the National Labor Relations Act (NLRA) that affirms an employer’s right to express an opinion about unionization provided the employer does not threaten reprisal or promise a benefit that coerces employees. The National Labor Relations Board (NLRB) administers the law and rules on specific cases alleging unfair labor practices. The NLRB allows captive audience meetings more than 24 hours before a union election as long as the employer does not commit an unfair labor practice such as, for instance, threatening reprisal for supporting a union. The NLRB may order a new election if it finds either the employer or a union held a captive audience meeting of employees within 24 hours of a union election.

The bill under consideration by the General Assembly is inherently unjust and unconstitutional because it prohibits so called captive audience meetings for employers but not for union organizers and unconstitutionally restricts political and religious speech in the workplace. Given the already stringent impositions imposed by the NLRA, the constitutionally dubious union supported bill is a solution in search of a problem.

In addition to promoting “new and costly litigation,” said Andy Markowski, the state director of the National Federation of Independent Businesses, Connecticut’s leading small business association, portions of the bill are “ambiguous, overly broad and subject to varying interpretations,” a goldmine for lawyers, some of whom may be familiar with constitutional proscriptions.

Any ban on religious and political speech is content based, and the Supreme Court has not been silent on such issues. In a case involving the right of workers to picket, the court reversed on First Amendment grounds a prior court ruling prohibiting the picketing:
“To permit the continued building of our politics [p96] and culture, and to assure self-fulfillment for each individual, our people are guaranteed the right to express any thought, free from government censorship. The essence of this forbidden censorship is content control. Any restriction on expressive activity because of its content would completely undercut the profound national commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open.”
So grave a violation of the Constitution does this menacing bill entail that its legislative architects should be impeached for irreducible stupidity by offering it for serious consideration. But the cowards have taken care to hide themselves from public censure, and we do not know under what rock the slithering idiots may be found.

Thursday, April 7, 2011

The Senator From Central Casting: The Rise, Fall and Resurrection of Thomas Dodd

The Senator from Central Casting
The Rise, Fall and Resurrection of Thomas Dodd
By David E. Koskoff
Publisher: New American Political Press
Price: $29.95/hardcover

If I had to choose between betraying my country and betraying my friend, I hope I should have the guts to betray my country.” E. M. Forster

Lacking such scruples, it was the other way around for the close associates of Senator Thomas Dodd, the subject of David Koskoff’s book, appropriately titled, perhaps with a wink in the direction of Mr. Dodd’s son, Chris Dodd, “The Senator from Central Casting: The Rise, Fall, and Resurrection of Thomas J. Dodd.”

There are some important differences between father and son. When Dodd the younger retired from the US Senate, he was almost immediately scooped up by Hollywood as the chief lobbyist for Tinseltown. After Dodd the elder had been censured by the senate for having used public funds for his personal benefit, in addition to having accepted from both the government and private organizations money for the same travel expenses, he withdrew as a candidate at the Democratic nominating convention and ran for re-election as an independent. In a three way race between Mr. Dodd, anti-Vietnam war candidate Joe Duffey and pro-Vietnam War Republican convention nominee Lowell Weicker, the senator’s career came to an abrupt and, as some think, tragic end. Seven months after Mr. Weicker arose from Mr. Dodd’s ashes, the senator was dead of a heart attack at the age of 64.

Mr. Koskoff, the author of three well received books – Joseph Kennedy: A Life and Times, The Mellons: The Chronicle of America’s Richest Family, and The Diamond World – “became engrossed in the relationship among Dodd, Boyd and O’Hare, three extraordinarily bright, complex men whom Shakespeare would have woven into a great tragic play,” after he had read Michael O’Hare’s obituary. The principal plot line of the tragedy also spurred him to write the book: “Dodd became a caricature of “The Senator” with stirring orations, a caricature of the highly important Senator well aware of his own importance, and finally a caricature of a Senator ethically compromised on a dozen fronts. He was the Senator from Central Casting.”

The Senator from Central Casting is a straight narrative that carries Tom Dodd through his various permutations: as a young lawyer, finding a place with his mentor, Homer Cummings, Franklin Roosevelt’s first attorney general, during the golden age of American bank robbery in the mid 1930s; as chief assistant to Justice Robert Jackson during the Nuremberg Trials, a vehicle used by Mr. Dodd to enter first the House of Representatives and later the U.S. Senate; as a fervent anti-communist seeking office in the U.S. Senate; and as a senator whose principal weakness, a chronic inability to manage his own personal finances, led inevitably to his downfall. In Mr. Koskoff’s account, Mr. Dodd is a man of large imagination, not unfriendly to liquor, whose means never really were sufficient to secure the future he imagined for his wife and several children.

Much more than an anti-communist who lived, as the Chinese say, in interesting times, Mr. Dodd was a fervent anti-totalitarian who recognized much earlier than most of his contemporaries the vital connection between the fascism of Hitler and Mussolini on the one hand and the communism of Josef Stalin on the other, best described by Mussolini in his paean to the state: “All within the state, nothing outside the state, nothing against the state.”

Mr. Dodd, who kept his distance from state Democratic Party entanglements, though he was able to play the game with the best of them, was not shy of striking attitudes, and his self estimation, never running on low, did not play well with the opposition. Susceptible to flattery, Mr. Dodd was most comfortable among those who aspersed him with compliments; he was combative by nature with others. Interestingly, but perhaps not unexpectedly, son Christopher was in many ways the obverse of his father -- and rather more determined than most to fetch his dad’s reputation from the rubble.

The Conspiracy

Mr. Dodd was brought down by his office staff working hand in glove with two respectable muckrakers: Drew Pearson and Mr. Pearson’s junior partner Jack Anderson, both prominent journalists of the day. Mr. Anderson was proficient at rooting up and exploiting dissatisfactions between politicians and their staff. His technique was described in his New York Times obituary: “He quietly cultivated dissatisfied and idealistic lower level government workers, convincing them that the public’s right to information trumped the bosses’ personal interests. His stock in trade was secret documents he persuaded sources to leak.”

On June 11, 1965, Anderson struck gold.

Initially, Mr. O’Hare, the keeper of accounts in Mr. Dodd’s office, was to purloin relevant documents and turn them over to Mr. Anderson, who then would fashion the data into bullets for his and Mr. Pearson’s column, the “Washington Merry-Go-Round.” But Mr. O’Hare’s morals intruded. At the last minute, Mr. O’Hare begged off, pleading that he thought it wrong to remove data from the office. Into this breach leapt James Boyd, later the author of “Above the Law: The Rise and Fall of Senator Thomas J. Dodd,” and Mrs. Marjorie Carpenter, with whom Mr. Boyd, the father of four children, was having an affair. Of the two lovebirds who later married, Mrs. Carpenter was said to be the more idealistic.

Much before Watergate, Mrs. Carpenter and Mr. Boyd, “who engineered and orchestrated the downfall of Thomas J. Dodd,” both of whom had been fired by Mr. Dodd, broke into their former workplace late at night and, over several nights, stole off with “some 7,000 pages of documents,” column fodder for Mr. Pearson and Mr. Anderson. “The odds on them completing their trespass without detection would seem to have been slim,” Mr. Koskoff writes, “but they never aroused suspicion. The account of their covert operation in Above the Law is as captivating as a thriller by Eric Ambler or Fredrick Forsyte.”

Mr. O’Hare, at first hanging back, later joined the conspiracy, his weakening “ties of loyalty” having been snapped by the firing of his girlfriend, Terry Golden. Mr. Dodd, who appears to have grown impatient with the raging hormones of his staff in the age of Woodstock, fired Ms. Golden because he perceived that Mr. O’Hare’s girl friend was too close to Mrs. Carpenter and Mr. Boyd.

It was a fire too many:

“The weekend following the dismissal of Terry Golden, O’Hare the bookkeeper snuck the full set of the Senator’s financial records for the preceding fire years out of the office. There were checkbook records, campaign finance returns, income tax filings – the works. According to Drew Pearson, there were tears in O’Hare’s eyes as he proceeded. He told Pearson: ‘I’ve been protecting this information with my life. Now I’m giving it for publication for the world to read’”

The “works” Mr. O’Hare delivered to Mr. Pearson and Mr. Anderson was the stuff of which Senate censures – and possibly prosecutions for tax fraud – are made.

The Aftermath

Every tip of the iceberg is attached to a broad bottom, treacherously expanding below the waters surface and out of sight. Mr. Koskoff, a lawyer himself, has a lawyer’s eye for the telling detail.

An incident that occurred at the time of President John Kennedy’s assassination, described in some detail in The Case Against Congress, a book written by Mr. Pearson and Mr. Anderson, is essential, Mr. Koskoff writes, “to understanding the downfall of Thomas J. Dodd, because it had a tremendous effect upon his most important aides and was important in turning them against him.”

When Mr. Kennedy was assassinated, Dodd was “having lunch at Franks, a downtown restaurant frequented by the political crowd, with Bill Curry, a local political powerhouse, who was also probably Dodd’s closest Connecticut crony other than Sullivan.” Ed Sullivan, “a former beer-truck driver with a graduate degree in street smarts,” Mr. Koskof writes, was Mr. Dodd’s opportunity spotter, “the only person Dodd ever trusted with the full picture of his financial operations.”

In his cups at the time, Mr. Dodd commandeered a plane from United Aircraft Corporation and met his staff at the airport in Washington, where he was told that Florida Senator George Smathers had just arrived wearing a black armband.

“Smathers,” Mr. Dodd said, “was a friend of the old administration. I am a friend of the new [Johnson] administration.” Watching at his Georgetown residence on television the tributes being paid to Mr. Kennedy, Mr. Dodd offered his assessment of the Kennedy administration: “I’ll say of John Kennedy what I said of Pope John the day he died. It will take us fifty years to undo the damage he did to us in three years.”

Comments such as these were to Mr. Dodd’s staff so many trip wires that undermined affections. “Alcohol abuse,” Mr. Koskof writes, “must be at least part of the explanation for the stark and tragic contrast between the respected, highly competent and disciplined prosecutor, who had directed the most important trial in the history of the world, and the tragic figure considered in the rest of this book.”

Mr. Koskoff’s lawyerly account of Mr. Dodd’s censure in the Senate is well told. Charged with two counts – obtaining and using public campaign and testimonial funds for his personal benefit; and accepting reimbursements for travel expenses from both the senate and private organizations – Mr. Dodd was censured by a 92 to 5 tally on the lesser count of using public funds for his private purposes. He was exonerated on the more troublesome count of double billing by a vote of 51 to 45. In 1969, the Nixon Justice Department announced there would be no tax prosecution.

Mr. Dodd’s resurrection began soon after the senator’s death in 1971, culminating in an archival mausoleum, the Thomas J. Dodd Research Center at the University of Connecticut. The archival material at UConn, Mr. Koskoff notes “has been sanitized by removal of those materials obviously related to Dodd’s downfall.” George Washington University, however, has 13 boxes that includes the several thousand sheets taken by Boyd and his associates that has been “expurgated from the official Dodd archive at UConn.”

A freedom of Information official at the FBI has told Koskoff that his longstanding FOI request for its files on Mr. Dodd, still awaiting processing, is likely to be finalized “in a year or two.” The Ethics Committee files on Mr. Dodd will be open to the public in 2017, and Mr. Koskoff has generously offered to share with UConn the FBI’s carton of documents when they materialize.

The Senator from Central Casting will be available in bookstores after May 1

Sunday, April 3, 2011

Running On Empty

Energy – particularly those forms of energy that cause green energy proponents to wrinkle their noses in dismay – is quickly becoming in Connecticut the new tobacco, a reviled product susceptible to punitive taxation. The object of punitive taxation is to drive up the price of the undesirable product so as to make it less competitive with other more desirable products, even if the more desirable product is in its larval stage.

The Democratic dominated General Assembly may pass just such a tax on nuclear energy for three reasons: 1) Green utopians and their facilitators in the General Assembly don’t like nuclear energy; 2) they much prefer energy produced by wind turbines, except when the turbines grate on the aesthetic sensibilities of their constituents; 3) they believe all things powered by oil, gas and coal -- cars especially -- are environmentally destructive; and 4) true utopians, they hope to construct out of whole cloth a better society by using the tax code to drive from a quasi private enterprise energy universe products they do not favor, while using the tax code and burdensome regulations to encourage the development of products they do favor.

The two co-chairmen of the General Assembly’s Energy and Technology Committee, Rep. Vickie Nardello of Prospect and Sen. John Fonfara of Hartford, are dangling before energy starved Connecticut a bill that would impose taxes on energy generators that use oil and coal, but their bill imposes especially onerous taxes on nuclear power. Energy producers that rely on natural gas and wind power would be spared the tax drubbing.

The Nardelo/Fonfara bill would be especially deadly for the Millstone plant near New London, the sole operational nuclear power plant in Connecticut. Having passed the Energy and Technology Committee, the bill is expected to raise $340 million in taxes, $330 million of which would come from the nuclear plant owned since 2001 by Dominion. The plant's two reactors, Dominion officials say, are capable of meeting 50 percent of Connecticut’s energy needs.

As might have been expected, Dominion is strongly resisting what it considers a crippling imposition.

Businesses do not pay taxes. Properly understood, they are tax collectors. All business taxes are passed along to product or service purchasers in the form of price increases. Highly regulated energy providers in Connecticut are private/public entities, since cost increases are imposed only with the approval of the Department of Public Utility Control (DPUC).

When a company cannot recover non-productive costs through a pricing structure and when the cost increase is unavoidable, which is inevitably the case both with tax increases and state regulations, the one remaining option available to a company that wishes to maintain a competitive advantage with respect to other companies producing a similar product is removal to a more friendly tax and regulatory environment. And this is precisely what Dominion, facing a bill that looks suspiciously like a bill of attainder against nuclear power generators, has proposed to do.

"If this bill passes, the Millstone power station will not be economically viable to operate and it will be shut down," Dominion spokesman Ken Holt said.

Dominion’s response should surprise neither Ms. Nardello nor Mr. Fonfara – because their bill is designed to make nuclear power generation in the state impossible by imposing strangling regulations and high taxes on those power generators they deplore.

Mr. Holt’s response is an indication that the ambitions of Ms. Nardello and Mr. Fonfara have been achieved. The co-chairs of the General Assembly’s Energy and Technology Committee should be popping champagne corks and congratulating each other at having nudged out of Connecticut a company that, with some encouragement from non-utopian realists in the legislature, could provide the state with half its energy needs.

“Ah!” opponents of nuclear energy say -- “Japan!”

“But,” proponents of energy self sufficiency for Connecticut say, “Nuclear plants will not be built on fault lines in the state, and the last recorded tsunami that hit the New London area was an April Fool’s joke. Ms. Nardello’s well publicized opposition to wind power turbines in her own political bailiwick – she opposes them -- is not an April Fool’s joke.

The inequitable and anti-competitive Nardello/Fonfara bill, designed to haul tax money into a depleted treasury and at the same time stake out a future in which nuclear energy will play little or no part, is itself not in compliance with the mission statement of Connecticut’s Department of Public Utility Control, an agency that “keeps watch over competitive utility services to promote equity among the competitors while customers reap the price and quality benefits of competition and are protected from unfair business practices.”

Indeed, the Nardello/Fonfara bill shamefacedly promotes inequity by giving preferred energy suppliers an unfair business advantage through an inequitable tax code at precisely the point when Connecticut businesses, always in competition with out of state businesses, are reaping the disadvantages of the high cost of energy the state legislature has attempted to address through a partially successful deregulation effort.

The economic benefits of deregulation cannot be achieved by a governmental command apparatus that chooses economic winners and losers by means of a business unfriendly regulatory and tax structure which, in addition to all else, makes planning for the future on the part of energy generators a win or lose guessing game.