In West Virginia, the 1960s are often referred to as the Barron Era. Several prominent members of Governor Barron’s administration, Attorney General Robertson, and State Treasurer Kelly were all convicted on kickbacks or extortion charges. Governor Barron was acquitted at his trial but only because he bribed the jury, the crime for which he was later convicted. During this era, every possible way of trading government service for under-the-table payments was exploited. Even state employees were given coupon books and "asked" to contribute (in cash) two percent of their salary to the flower fund.
If state government ran like an organized crime syndicate in the 1960’s, the wide-open corruption of the 1980s took the form of Haitian looting. The players went their separate ways to find storefronts of their liking. Governor Moore, Attorney General Brown, three Senators and two Delegates were prosecuted by the Feds. The reason I refer to this period as "Haitian looting" is that the US Attorney’s office convicted nearly 100 public officials for various crimes. And beyond that, you can add the impeachment of State Treasurer Manchin.
It can be claimed, then, that West Virginia politicians fulfilled at least one of Karl Marx’s philosophies-that of history repeating itself. The Sixties were tragedy, the Eighties farce.
Though the Eighties may seem ancient, it would do well for us to remember that only a decade has passed since the last round of public corruption trials concluded. We are a long way from being out of the woods. Nevertheless, we have arrived at a turning point and the time is right to ask ourselves, "Are we due for another embarrassing, bidecadal housecleaning?"
I posed this question to my 8-ball and the black orb cautiously replied, "Better not tell you now."
One could argue that my trusty psychic errs because democracy is alive and well in the state. There are record numbers of candidates running for office in the upcoming primary election and, on its face, broad competition for public office is a good thing. But are a multitude of candidates, by themselves, enough to avert another disaster? Not unless they are nearly unanimous in overhauling state government.
Our state has used the same business plan since anyone can remember. Government has grown despite promises to shrink it and taxes have soared to unimaginable heights. Next year, over $8 billion will be spent on a population that has shrunk to fewer than 2 million. Yet the answers given for our current problems are the same as they were for our past problems-grow the government by taxing or borrowing and all will be well.
When it comes to funding a centrally-planned society, all roads lead to Rome. And like the Roman model, our capitol has sucked dry the lifeblood of the provinces in order to maintain its grip on power. Our cities risk bankruptcy because of antiquated taxing authority and growing pension debts. Our counties are relics from antebellum days and, aside from their judicial function, courthouses are not much more than clerical offices that cost a small fortune to operate. In the mean, the powers to tax, to spend, and to decide the fate of the economy are concentrated at the state level in the hands of a select few autocrats. The provinces be damned, render all tribute unto Rome!
Lord Acton said, "Power corrupts and absolute power corrupts absolutely." His observation is as timeless as it is true. And it is this very same observation that Hayek used to introduce the chapter, "Why The Worst Get On Top."
What more could I add other than "Three strikes and you’re out."?
Friday, April 2, 2004
Friday, March 12, 2004
The Steel Tariff! It's Deja Vu All Over Again!
John Deere did not invent the green & yellow riding lawn mower. Should your children ask you what he did invent, be careful in answering. If you tell them (correctly), "The steel plow.", then they will surely ask you, "What’s a steel plow?" This is a trick question.
Although we are living in the Golden Age of Carbohydrate Consumption, precious few farmers now plow the land and harvest the crops. When Deere invented his plow in 1838, quite the opposite was true. Most Americans were farmers--by necessity, not by choice. Our modern era, nevertheless, does have one thing in common with the agrarian past--import tariffs. No invention--not even the plow--has been able to uproot this vile weed.
Before I begin, let me point out that iron is a metal element. Steel, on the other hand, is a manufactured alloy containing mostly iron and about 1% carbon. Iron and steel are not the same. Iron is weaker and softer than steel. In simplest terms, steel makes your lawn-mowing experience possible.
Prior to the Civil War, America was not a steelmaker. Steelmaking was the domain of England. Although we were the 3rd leading producer of iron, our technology lagged 50 years behind the steelmakers at Sheffield, England. We were only capable of producing cast iron and wrought iron, neither of which made for a durable, long-wearing plow.
John Deere, a Vermont blacksmith, moved to Illinois in 1837 and soon learned from local farmers that the standard iron plow would not turn over the sticky, Midwest soil. Further, it is said that it took an 8-oxen team a week to plow just one acre. Deere solved the tillage dilemma by fabricating a plow from a piece of Sheffield steel. The prairie earth didn’t cling to steel like it did to the softer iron and agriculture changed forever.
Imagine if you will, that all of a sudden it no longer took 8 oxen a week to plow one acre but instead, two oxen could plow that acre in a day or so. This moment in history is far more significant than you have been taught. And it almost didn’t happen.
Politicians in that era were keen on protecting our primitive iron industry and keeping it primitive. At times, the tariff doubled the price of imported iron. With such a cushion, the ironworks proceeded with business as usual. American iron mills continued to fill orders for low-end products rather than innovate. Wheeling, WV earned its nickname, "Nail City", during this period.
When the iron tariff was substantially reduced in the 1840s, English goods flooded the market and American iron mills took a hit. By focusing on efficiency and developing a reputation for unmatched quality, the English were able to import pig iron from Sweden, finish it at Sheffield, and transport their manufactured goods to America cheaper than our protected iron industry could produce locally.
As we look back in history for answers to today’s questions, there are two lessons to be learned here. First, it was innovation that created vast new markets for steel. The steel plow led to the development of other steel farm implements as well as Henry Ford’s farm tractor. And just try and count the railcars and cargo ships that have transported Illinois corn and Kansas wheat to the far reaches of the globe. All of this because of one man’s idea.
Second, and perhaps more salient, is that America was a third-world nation in the early 1800‘s. Third-world nations expect to be coddled and sheltered by tariffs. Today, we are the world’s superpower. If we want to keep that title, we need to stop building fences and start plowing new ground.
Although we are living in the Golden Age of Carbohydrate Consumption, precious few farmers now plow the land and harvest the crops. When Deere invented his plow in 1838, quite the opposite was true. Most Americans were farmers--by necessity, not by choice. Our modern era, nevertheless, does have one thing in common with the agrarian past--import tariffs. No invention--not even the plow--has been able to uproot this vile weed.
Before I begin, let me point out that iron is a metal element. Steel, on the other hand, is a manufactured alloy containing mostly iron and about 1% carbon. Iron and steel are not the same. Iron is weaker and softer than steel. In simplest terms, steel makes your lawn-mowing experience possible.
Prior to the Civil War, America was not a steelmaker. Steelmaking was the domain of England. Although we were the 3rd leading producer of iron, our technology lagged 50 years behind the steelmakers at Sheffield, England. We were only capable of producing cast iron and wrought iron, neither of which made for a durable, long-wearing plow.
John Deere, a Vermont blacksmith, moved to Illinois in 1837 and soon learned from local farmers that the standard iron plow would not turn over the sticky, Midwest soil. Further, it is said that it took an 8-oxen team a week to plow just one acre. Deere solved the tillage dilemma by fabricating a plow from a piece of Sheffield steel. The prairie earth didn’t cling to steel like it did to the softer iron and agriculture changed forever.
Imagine if you will, that all of a sudden it no longer took 8 oxen a week to plow one acre but instead, two oxen could plow that acre in a day or so. This moment in history is far more significant than you have been taught. And it almost didn’t happen.
Politicians in that era were keen on protecting our primitive iron industry and keeping it primitive. At times, the tariff doubled the price of imported iron. With such a cushion, the ironworks proceeded with business as usual. American iron mills continued to fill orders for low-end products rather than innovate. Wheeling, WV earned its nickname, "Nail City", during this period.
When the iron tariff was substantially reduced in the 1840s, English goods flooded the market and American iron mills took a hit. By focusing on efficiency and developing a reputation for unmatched quality, the English were able to import pig iron from Sweden, finish it at Sheffield, and transport their manufactured goods to America cheaper than our protected iron industry could produce locally.
As we look back in history for answers to today’s questions, there are two lessons to be learned here. First, it was innovation that created vast new markets for steel. The steel plow led to the development of other steel farm implements as well as Henry Ford’s farm tractor. And just try and count the railcars and cargo ships that have transported Illinois corn and Kansas wheat to the far reaches of the globe. All of this because of one man’s idea.
Second, and perhaps more salient, is that America was a third-world nation in the early 1800‘s. Third-world nations expect to be coddled and sheltered by tariffs. Today, we are the world’s superpower. If we want to keep that title, we need to stop building fences and start plowing new ground.
Friday, February 6, 2004
Geckos? We Don't Need No Stinking Geckos!
A program whose basic thesis is, not that the system of free enterprise for profit has failed in this generation, but that it has not yet been tried.
Franklin D. Roosevelt, Message to Congress on the Concentration of Economic Power, April 29, 1938
Leo Goodwin had a brilliant idea in 1936. He decided that insuring the personally-owned automobiles of government workers would be a sure-fire success. After all, government workers tend to be responsible people who have stable employment. Leo’s idea became the Government Employees Insurance Company, which you know better by its acronym, GEICO.
GEICO was chartered as a publicly-owned corporation. GEICO was not a New Deal government agency.
GEICO remained a solid performer until the 1970s when it began writing policies for high-risk customers to achieve growth. The strategy backfired and the company was soon on the ropes. Enter Warren Buffett.
The Sage of Omaha saw an opportunity and his Berkshire Hathaway Co. began acquiring GEICO stock. Warren Buffett understood what Leo Goodwin knew-that government workers, GEICO’s core customers, were good risks. Buffett returned the insurer to its root philosophy and GEICO was soon profitable again.
I suppose GEICO chose the gecko as its marketing mascot because of the similarity of pronunciation. But I wonder sometimes if the firm chose the gecko as a playful jab at Oliver Stone who created Gordon Gecko, the corporate raider in the film "Wall Street." If that’s the case, I am sure that Warren Buffett laughs about it on his way to the bank each morning.
If Leo Goodwin were with us today, he just might be tempted to write health insurance policies for West Virginia government employees. After all, the state-run government insurance monopoly known as PEIA insures one-eighth of the state’s population. Goodwin would realize that a 12.5% market share in such a small state would present an attractive economy of scale. But therein lies the problem-PEIA is a government monopoly.
I cannot predict whether health insurance companies could provide cheaper or better coverage for the state’s employees than what PEIA currently provides. Only the marketplace can do that. But given the fact that some companies currently write group health coverage for private sector employers, it certainly would be worth exploring an open market and allow them to compete for the state’s business. Just as President Roosevelt remarked in his Message to Congress in 1938, we have a situation where the system of free enterprise "has not yet been tried."
The accompanying quote from FDR was selected by F. A. Hayek to introduce "The Abandoned Road", chapter one of The Road to Serfdom. Hayek and Roosevelt knew that the concentration of economic power in the hands of a few was the surest way to undermine a democracy. As well, they understood that free competition throughout the system was the best way to prevent a handful of elitists from controlling the government. It is, therefore, not an idle coincidence that Hayek and Roosevelt speak to us from the same page.
Should you ask the average West Virginian about FDR’s policies, he or she will probably tell you that FDR was all for government control of every aspect of life. This is a sad misunderstanding but, nevertheless, an accurate appraisal of our folk. Building the Tennessee Valley Authority should not be equated with administering the health insurance claims of WV public employees. But somehow, West Virginians have managed to put these tasks on par with each other-that government must do everything.
The taxpayer is the obvious loser in this equation. The taxpayer has no choice but to pay the monopoly. The real loser, however, is the person who works for government and is insured by PEIA. It is not simply a matter of money to them. It is, after all, their healthcare that is being bandied about. As to why public employees are compelled to shop at the company store in this day and age baffles me.
If PEIA does a cost-effective job at what it does, then the agency should not fear competition from the private sector. But we’ll never know how well (or how poorly) PEIA performs without the opportunity to comparison shop.
FDR also said, "We have nothing to fear but fear itself." He did not fear geckos. Indeed, from his remarks in 1938, we can see that he encouraged the little fellows.
Franklin D. Roosevelt, Message to Congress on the Concentration of Economic Power, April 29, 1938
Leo Goodwin had a brilliant idea in 1936. He decided that insuring the personally-owned automobiles of government workers would be a sure-fire success. After all, government workers tend to be responsible people who have stable employment. Leo’s idea became the Government Employees Insurance Company, which you know better by its acronym, GEICO.
GEICO was chartered as a publicly-owned corporation. GEICO was not a New Deal government agency.
GEICO remained a solid performer until the 1970s when it began writing policies for high-risk customers to achieve growth. The strategy backfired and the company was soon on the ropes. Enter Warren Buffett.
The Sage of Omaha saw an opportunity and his Berkshire Hathaway Co. began acquiring GEICO stock. Warren Buffett understood what Leo Goodwin knew-that government workers, GEICO’s core customers, were good risks. Buffett returned the insurer to its root philosophy and GEICO was soon profitable again.
I suppose GEICO chose the gecko as its marketing mascot because of the similarity of pronunciation. But I wonder sometimes if the firm chose the gecko as a playful jab at Oliver Stone who created Gordon Gecko, the corporate raider in the film "Wall Street." If that’s the case, I am sure that Warren Buffett laughs about it on his way to the bank each morning.
If Leo Goodwin were with us today, he just might be tempted to write health insurance policies for West Virginia government employees. After all, the state-run government insurance monopoly known as PEIA insures one-eighth of the state’s population. Goodwin would realize that a 12.5% market share in such a small state would present an attractive economy of scale. But therein lies the problem-PEIA is a government monopoly.
I cannot predict whether health insurance companies could provide cheaper or better coverage for the state’s employees than what PEIA currently provides. Only the marketplace can do that. But given the fact that some companies currently write group health coverage for private sector employers, it certainly would be worth exploring an open market and allow them to compete for the state’s business. Just as President Roosevelt remarked in his Message to Congress in 1938, we have a situation where the system of free enterprise "has not yet been tried."
The accompanying quote from FDR was selected by F. A. Hayek to introduce "The Abandoned Road", chapter one of The Road to Serfdom. Hayek and Roosevelt knew that the concentration of economic power in the hands of a few was the surest way to undermine a democracy. As well, they understood that free competition throughout the system was the best way to prevent a handful of elitists from controlling the government. It is, therefore, not an idle coincidence that Hayek and Roosevelt speak to us from the same page.
Should you ask the average West Virginian about FDR’s policies, he or she will probably tell you that FDR was all for government control of every aspect of life. This is a sad misunderstanding but, nevertheless, an accurate appraisal of our folk. Building the Tennessee Valley Authority should not be equated with administering the health insurance claims of WV public employees. But somehow, West Virginians have managed to put these tasks on par with each other-that government must do everything.
The taxpayer is the obvious loser in this equation. The taxpayer has no choice but to pay the monopoly. The real loser, however, is the person who works for government and is insured by PEIA. It is not simply a matter of money to them. It is, after all, their healthcare that is being bandied about. As to why public employees are compelled to shop at the company store in this day and age baffles me.
If PEIA does a cost-effective job at what it does, then the agency should not fear competition from the private sector. But we’ll never know how well (or how poorly) PEIA performs without the opportunity to comparison shop.
FDR also said, "We have nothing to fear but fear itself." He did not fear geckos. Indeed, from his remarks in 1938, we can see that he encouraged the little fellows.
Monday, January 26, 2004
The Paving Cycle: A Sad Tale of West Virginia
Back in the 1970s, we had double-digit inflation combined with price gouging by OPEC. And we learned a new phrase-The Paving Cycle.
Whereas in normal times our roads were resurfaced every seven years, by 1979 the paving cycle had increased to 17 years. Two actions were taken to shorten the duration. First, a 5% tax on the wholesale price of motor fuel was imposed. And second, the Legislature added a line to the Department of Highways budget for Paving.
The fuel tax, by being levied on the wholesaler, was a clever ploy because the consumer never saw it posted at the pump. On the other hand, the budget line item for Paving guaranteed our legislators that they could, in effect, micro-manage the paving cycle.
In FY 1986, the Department of Highways was short on cash. Faced with spending $77M for debt service on road bonds plus increased costs to match federal aid construction, the DOH had just over one million dollars to allocate to Paving. In other words, the paving cycle soared to 350 years!
The Legislature wasn’t about to let FY 1986 pass without some sort of paving program so it transferred $9.4M from the General Fund to the DOH budget and earmarked it for Paving. Where did the money come from? From redirecting a portion of the appropriation for payments to the state employee’s pension plan. That’s right-pension money became election year pavement.
At this point, I could load my slingshot and pick off Lilliputians with ease. But it is better to focus on the macroeconomic picture than this particular snapshot.
West Virginia cannot afford the services that it commits to. This state does not have the financial wherewithal to borrow huge sums for superhighways, re-pave secondary roads every 7 years, and promise a pension to retired state workers. And this observation does not apply just to the Highway Department. Every department of state government operates beyond its capacity.
Recently, the School Building Authority approved $1,750,000.00 for the new Pickens School. Pickens is our most remote outpost for crying out loud. And people who live at outposts should expect outhouses, not plumbing.
We have far too many colleges. But try to close just one. Politics has prevented implementing a comprehensive plan for higher education such as the one that the Carnegie Commission recommended thirty years ago. Instead, both WVU and Marshall University have been forced to cut programs and staff in order to subsidize unneeded colleges. We will, if we have not already done so, redefine our higher education institutions as being mere "13th Grades" by continuing this charade.
West Virginia has a very nice system of state parks. Though a stated goal of the park system is to maximize self-sufficiency, the system annually relies on a 40% taxpayer subsidy to pay its bills. Our parks are, quite simply, a luxury.
There is the issue of payroll. Government employees are paid well. And they have been paid with scarce cash at the expense of incurring a $5 billion long-term deficit in their pension accounts.
The "Enron of pension plans", as it is known nationally, is now making clear just how dire the situation is. But there’s more. The state has deferred maintenance on every asset it owns, including the capitol and over 1,000 highway bridges. And with so little to spend, our government has not invested in technologies that would actually improve the productivity of state workers and, thus, reduce annual operating costs. The pension debt, as astronomical as it is, comprises perhaps just half of the state’s financial black hole.
If you think I exaggerate, then consider this. Gov. Wise took office in 2001 and pledged to sell all excess state vehicles. It took two years for state agencies to inventory their vehicles and submit a count to his office. By comparison, not only does FedEx know exactly how many vehicles it owns, the dispatcher can locate each one at any given moment of the day.
This, then, is the true cost of spending pension money to pave roads in an election year. It’s the difference between knowing where you are and knowing where you’re headed versus getting waylaid in Pickens, WV with aspirations for the 13th grade.
Whereas in normal times our roads were resurfaced every seven years, by 1979 the paving cycle had increased to 17 years. Two actions were taken to shorten the duration. First, a 5% tax on the wholesale price of motor fuel was imposed. And second, the Legislature added a line to the Department of Highways budget for Paving.
The fuel tax, by being levied on the wholesaler, was a clever ploy because the consumer never saw it posted at the pump. On the other hand, the budget line item for Paving guaranteed our legislators that they could, in effect, micro-manage the paving cycle.
In FY 1986, the Department of Highways was short on cash. Faced with spending $77M for debt service on road bonds plus increased costs to match federal aid construction, the DOH had just over one million dollars to allocate to Paving. In other words, the paving cycle soared to 350 years!
The Legislature wasn’t about to let FY 1986 pass without some sort of paving program so it transferred $9.4M from the General Fund to the DOH budget and earmarked it for Paving. Where did the money come from? From redirecting a portion of the appropriation for payments to the state employee’s pension plan. That’s right-pension money became election year pavement.
At this point, I could load my slingshot and pick off Lilliputians with ease. But it is better to focus on the macroeconomic picture than this particular snapshot.
West Virginia cannot afford the services that it commits to. This state does not have the financial wherewithal to borrow huge sums for superhighways, re-pave secondary roads every 7 years, and promise a pension to retired state workers. And this observation does not apply just to the Highway Department. Every department of state government operates beyond its capacity.
Recently, the School Building Authority approved $1,750,000.00 for the new Pickens School. Pickens is our most remote outpost for crying out loud. And people who live at outposts should expect outhouses, not plumbing.
We have far too many colleges. But try to close just one. Politics has prevented implementing a comprehensive plan for higher education such as the one that the Carnegie Commission recommended thirty years ago. Instead, both WVU and Marshall University have been forced to cut programs and staff in order to subsidize unneeded colleges. We will, if we have not already done so, redefine our higher education institutions as being mere "13th Grades" by continuing this charade.
West Virginia has a very nice system of state parks. Though a stated goal of the park system is to maximize self-sufficiency, the system annually relies on a 40% taxpayer subsidy to pay its bills. Our parks are, quite simply, a luxury.
There is the issue of payroll. Government employees are paid well. And they have been paid with scarce cash at the expense of incurring a $5 billion long-term deficit in their pension accounts.
The "Enron of pension plans", as it is known nationally, is now making clear just how dire the situation is. But there’s more. The state has deferred maintenance on every asset it owns, including the capitol and over 1,000 highway bridges. And with so little to spend, our government has not invested in technologies that would actually improve the productivity of state workers and, thus, reduce annual operating costs. The pension debt, as astronomical as it is, comprises perhaps just half of the state’s financial black hole.
If you think I exaggerate, then consider this. Gov. Wise took office in 2001 and pledged to sell all excess state vehicles. It took two years for state agencies to inventory their vehicles and submit a count to his office. By comparison, not only does FedEx know exactly how many vehicles it owns, the dispatcher can locate each one at any given moment of the day.
This, then, is the true cost of spending pension money to pave roads in an election year. It’s the difference between knowing where you are and knowing where you’re headed versus getting waylaid in Pickens, WV with aspirations for the 13th grade.
Friday, December 26, 2003
How Martha Stewart Almost Stole Christmas
This time two years ago, the Martha Stewart story was taking shape. It was December 27th , 2001. The Queen of Style was jetting down to Mexico when she made an unscheduled stop in Texas to phone her stockbroker. "Dump the ImClone stock immediately!" were her frantic words to Merrill Lynch.
The mainstream press frenzied itself when it learned of the stock trade and reported that Martha had dumped her shares based on insider info about FDA test results for ImClone’s experimental cancer drug. So frenzied was Dan Rather that he gave up night classes studying El Niňo to come back ON AIR. The ImClone story was hot, hotter than even El Niňo.
It all smelled fishy to me from the get-go. This story smelled of a grand conspiracy.
I have since hacked into the Homeland Security website and this is what I learned. The cockpit voice recording from the Mexico flight of Air Stewart One is on file. During the playback, all appears normal until the co-pilot shouts, "We have a blue light on the collision avoidance panel!"
He sounds utterly shocked-"Never", he remarks, "have I seen the blue light come on!" Then the pilot commands, "Pull Up! Pull Up!" But it’s too late. The next sound we hear is, "Thud."
I dug further into the story, and I am shocked to say this, but ImClone’s drug trials were nothing more than a front for the real, horrid truth--Martha Stewart’s scientists had cloned Santa Claus! The "Thud" we hear on the voice recorder is that of the Santa clone being hit by Air Stewart One.
Had this accident not happened, Martha Stewart might just have pulled off the biggest coup in marketing history. Think of the impact on Wal-Mart. All of the nation’s illiterates, those unfortunates who comprise one-third of all Wal-Mart shoppers would have been so confused when Santa clones started showing up at K-Mart, and only K-Mart, during the summer months.
Think about this as well: Would Gov. Bob Wise fall victim to granting state workers another paid holiday every time one of these clones showed up at the Capitol on a Thursday?
"Alas!" you say. "No one would fall for that trick in the heat of summer!" But who can say for sure, what with all of Dan Rather’s blather about global warming and El Niňo!
Who knows? Maybe Martha pulled it off anyway. Maybe other Santa clones have already been produced and released into the atmosphere.
Now that we’re in the midst of the Christmas cycle, you need to ask yourself this: Is the Santa at the mall the real Santa or is he a Santa clone? See what I mean? About this conspiracy and cover-up? These Santa clones? It just makes you wonder.
I can only be sure of one thing. When her trial begins, the government will prosecute Martha Stewart for insider trading and nothing more. The government will never let the truth about cloning come out. The cloning cover-up will be buried in the X Files.
At least, that’s what the real Dick Cheney told me.
Friday, October 24, 2003
Peter Robbed Again! Capitol Cops Clueless.
I know that you have an opinion of the coal industry. Please put it aside for a moment.
The Coal Workers’ Pneumoconiosis Fund, commonly called the Black Lung Fund, has been around for thirty years. During that period, politicians have changed eligibility requirements. Initially, a claimant needed only to prove employment in coal mining and then have a doctor certify that black lung was present. In the program’s second decade, eligibility rules were tightened considerably by the Reagan administration and afterwards the claims approval rate dropped to about 7% of claims filed. Then, on his way out the door, Bill Clinton loosened the cuffs with a last minute order. It is now projected that 12 claims per hundred will be approved-an increase of 71%.
Regardless of how you vote, you need to realize that the black lung benefit program has always been about political expediency. It is not a humanitarian effort to aid and comfort miners who will die from this horrible occupational illness. It’s just a government program that is periodically massaged to curry favor.
Coal companies that are participating members in the Black Lung Fund (BLF) fund the plan by paying a percentage tax on gross payroll. While eligibility requirements for black lung benefits have ebbed and flowed, the payroll tax rates have remained constant. This anomaly allowed the BLF to grow substantially beyond its initial payout projections.
In 1990, the WV Legislature smelled the giant truffle growing in the BLF. They rooted out $210 million of overfunding and transferred it to the Workers’ Compensation Division. Yes, Workers’ Comp needed a slug of money even back then. There was a proviso in that legislation that Workers’ Comp could only invest the $210M and spend only the income that it earned.
This year, the legislature faced the ignominy of placing Workers’ Comp in receivership and was once again in crisis mode. As expected, they went sniffing for truffles. They found that the BLF was again overfunded and ordered a transfer of $170 million to Workers’ Comp.
But the 2003 Workers’ Comp bill took a different turn when it came to spending the BLF money. Not only does the law allow the new and improved Workers’ Compensation Commission to spend this current transfer of $170M but it also frees the restriction on the 1990 transfer of $210M. Thus, $380,000,000 of coal industry payroll taxes are being spent to stem the growing Workers’ Comp unfunded liability which is $7 billion.[1]
The black lung tax is a specific tax levied on a specific group of taxpayers to redress a specific problem. By rights, the money should either be paid out to black lung claimants or else be refunded to the companies that overpaid the tax.
Failing that, let’s be practical. You might argue that the BLF surplus be used to build new coal-hauling highways or to repair existing roads damaged by overweight coal trucks. You might argue that the surplus be used to reclaim abandoned coal mines. You also might argue that the surplus be used to abate acid water drainage. These damages are, at the least, coal-related.
However, to argue that the BLF surplus be used to subsidize the Workers’ Comp deficit is very wrong.
The WV Legislature created the Coal Workers’ Pneumoconiosis Fund in 1973 to allow coal companies to comply with federally mandated requirements. The Fund is required by law to be, and has always been, separate and distinct from the Workers’ Comp fund, not an adjunct to it. This distinction needs maintained for either plan to have legitimacy.
Whether you call this a "commingling" or a "confiscation" makes little difference. The safe has been cracked, the money is gone. If the taking of BLF surplus is deemed acceptable for this purpose by the citizenry, then what is to prevent the legislature from seizing other trust funds and spending them on the Comp debt?
We are just one step away from making Workers’ Comp a general obligation of the taxpayer. If that step is taken, then the ultimate trust fund is tapped-your individual savings. The road to serfdom is shorter than you had hoped.
There is a great political irony playing out on our mountain stage. Ronald Reagan’s policy changes created the giant BLF surplus. But now that the money has been spent, Bill Clinton’s reversal of fortunes might actually cause the BLF to develop an unfunded liability in future years.
Wouldn’t that just be West Virginia’s luck?
You may now return to your previously-held opinion of the coal industry.
[1] From interview with WV Worker Compensation Commission Director Greg Burton in the State Journal, October 3, 2003
The Coal Workers’ Pneumoconiosis Fund, commonly called the Black Lung Fund, has been around for thirty years. During that period, politicians have changed eligibility requirements. Initially, a claimant needed only to prove employment in coal mining and then have a doctor certify that black lung was present. In the program’s second decade, eligibility rules were tightened considerably by the Reagan administration and afterwards the claims approval rate dropped to about 7% of claims filed. Then, on his way out the door, Bill Clinton loosened the cuffs with a last minute order. It is now projected that 12 claims per hundred will be approved-an increase of 71%.
Regardless of how you vote, you need to realize that the black lung benefit program has always been about political expediency. It is not a humanitarian effort to aid and comfort miners who will die from this horrible occupational illness. It’s just a government program that is periodically massaged to curry favor.
Coal companies that are participating members in the Black Lung Fund (BLF) fund the plan by paying a percentage tax on gross payroll. While eligibility requirements for black lung benefits have ebbed and flowed, the payroll tax rates have remained constant. This anomaly allowed the BLF to grow substantially beyond its initial payout projections.
In 1990, the WV Legislature smelled the giant truffle growing in the BLF. They rooted out $210 million of overfunding and transferred it to the Workers’ Compensation Division. Yes, Workers’ Comp needed a slug of money even back then. There was a proviso in that legislation that Workers’ Comp could only invest the $210M and spend only the income that it earned.
This year, the legislature faced the ignominy of placing Workers’ Comp in receivership and was once again in crisis mode. As expected, they went sniffing for truffles. They found that the BLF was again overfunded and ordered a transfer of $170 million to Workers’ Comp.
But the 2003 Workers’ Comp bill took a different turn when it came to spending the BLF money. Not only does the law allow the new and improved Workers’ Compensation Commission to spend this current transfer of $170M but it also frees the restriction on the 1990 transfer of $210M. Thus, $380,000,000 of coal industry payroll taxes are being spent to stem the growing Workers’ Comp unfunded liability which is $7 billion.[1]
The black lung tax is a specific tax levied on a specific group of taxpayers to redress a specific problem. By rights, the money should either be paid out to black lung claimants or else be refunded to the companies that overpaid the tax.
Failing that, let’s be practical. You might argue that the BLF surplus be used to build new coal-hauling highways or to repair existing roads damaged by overweight coal trucks. You might argue that the surplus be used to reclaim abandoned coal mines. You also might argue that the surplus be used to abate acid water drainage. These damages are, at the least, coal-related.
However, to argue that the BLF surplus be used to subsidize the Workers’ Comp deficit is very wrong.
The WV Legislature created the Coal Workers’ Pneumoconiosis Fund in 1973 to allow coal companies to comply with federally mandated requirements. The Fund is required by law to be, and has always been, separate and distinct from the Workers’ Comp fund, not an adjunct to it. This distinction needs maintained for either plan to have legitimacy.
Whether you call this a "commingling" or a "confiscation" makes little difference. The safe has been cracked, the money is gone. If the taking of BLF surplus is deemed acceptable for this purpose by the citizenry, then what is to prevent the legislature from seizing other trust funds and spending them on the Comp debt?
We are just one step away from making Workers’ Comp a general obligation of the taxpayer. If that step is taken, then the ultimate trust fund is tapped-your individual savings. The road to serfdom is shorter than you had hoped.
There is a great political irony playing out on our mountain stage. Ronald Reagan’s policy changes created the giant BLF surplus. But now that the money has been spent, Bill Clinton’s reversal of fortunes might actually cause the BLF to develop an unfunded liability in future years.
Wouldn’t that just be West Virginia’s luck?
You may now return to your previously-held opinion of the coal industry.
[1] From interview with WV Worker Compensation Commission Director Greg Burton in the State Journal, October 3, 2003
Friday, September 12, 2003
The 'Bread Standard' Provides Economic Gauge
Comparison of Bread 1957-2003
.
Sunbeam Bread '57 Fresh (3) '57 Day Old 2003
Price per loaf 0.16 0.08 1.59 (5)
Sales tax (1) .01 .00 .10
Mileage (2) .00 .00 .73
Totals 0.17 0.08 2.42
Footnotes to table:
1. 1957 rate equals 3¢ per $1.00, beginning at 14¢. 2003 rate equals 6¢ per $1.00.
2. IRS Mileage allowance of $0.365 per mile
3. Sunbeam bread baked in Clarksburg
4. Sunbeam bread baked by Flowers Baking Co., North Carolina
5. Kroger, Clarksburg. Sept. 2, 2003 _________________________________________
Once when I was a lad of eight, my mother sent me down the street to Ridenour’s Grocery with a quarter in hand to buy a loaf of bread. I returned with a loaf of Sunbeam bread and eight cents. Andy Ridenour was our closest neighborhood grocer. Allman Brothers Grocery was slightly farther away but still within walking distance. Sunbeam bread was baked daily here in Clarksburg.
Fresh bread was delivered within a few hours after the bread came out of the oven. Sunbeam bread is now baked out of state but I use it for comparison because, except for preservatives, the loaf hasn’t changed much in 46 years. Even the wrapper is nearly identical. Today’s fresh bread is comparable to day-old bread in 1957.
Neighborhood grocers are long gone from the landscape and the closest market is Kroger’s in the west end of town, one mile from my parents’ house. Even in 1957, I wasn’t allowed to take my bike to the west end where the A&P supermarket was then located.
Based on these few facts, I have developed a bread standard to value our money. Even if you challenge the cost of driving to Kroger’s at 73¢ per loaf as being superfluous, the cost of bread has still risen twenty-fold which is about twice the rate at which WV median household income has increased during the same period. Your family needs to earn in the mid 5-figures this year just to stay even on day-old bread. And to stay even, you would have had to have lost something along the way-your value system.
Day-old bread was discounted by half because homemakers wouldn’t buy it for anything other than making stuffing. Families demanded fresh bread despite the steep discount. And 8¢ was not a trifling amount in 1957; you could mail 2 letters and 2 postcards for that sum.
After food stamps were introduced in 1961, the custom of discounting day-old bread faded. This is just a coincidence because, as we all know, government spending makes everything better. But a point does need made for our comparison of costs. You buy your bread at the register but you buy other peoples bread through the payroll deduction plan. Thus, the next time you buy bread, remember that you’ll be a few slices short of a 1957 loaf as well as a day late in eating it.
You can argue all you want that you are better off than folks were 46 years ago. You aren’t. But to walk the point home, let’s re-visit Mr. Ridenour’s store.
In 1957, you would have bought chicken from Andy at the butcher’s meat cooler. It was fresh, not pre-packed, and it certainly wasn’t frozen or laced with preservatives. I always remember how homemakers demanded to see if there was any blood in a bone joint. If there was so much as a speck of blood, then the chicken was refused. Nobody would buy chicken with any amount of taint.
Years later, when I bought packaged chicken at a supermarket, I noticed that the bird was swimming in blood. I asked a clerk in the meat department if there would be any problems with the poultry. I will never forget his answer: No, sir! Our cashiers double-bag chicken packs so they won’t leak on your groceries!
And he said it with so much pride that I dared not interrogate him further!
In 1957, we had two neighborhood groceries nearby and the A&P supermarket was less than a mile from home. There was competition. There was variety. There was service with a smile from people we knew. Home delivery was available. And both Ridenour’s and Allman Brothers let creditworthy customers run a tab.
Compare bread. Compare stamps-both food and postal. Compare chicken. Compare Ozzie Nelson to Ozzie Osbourne. The results are all the same-devaluation, big time.
The Bread Standard, updated for 2008
.
Sunbeam Bread '57 Fresh (3) '57 Day Old 2003
Price per loaf 0.16 0.08 1.59 (5)
Sales tax (1) .01 .00 .10
Mileage (2) .00 .00 .73
Totals 0.17 0.08 2.42
Footnotes to table:
1. 1957 rate equals 3¢ per $1.00, beginning at 14¢. 2003 rate equals 6¢ per $1.00.
2. IRS Mileage allowance of $0.365 per mile
3. Sunbeam bread baked in Clarksburg
4. Sunbeam bread baked by Flowers Baking Co., North Carolina
5. Kroger, Clarksburg. Sept. 2, 2003 _________________________________________
Once when I was a lad of eight, my mother sent me down the street to Ridenour’s Grocery with a quarter in hand to buy a loaf of bread. I returned with a loaf of Sunbeam bread and eight cents. Andy Ridenour was our closest neighborhood grocer. Allman Brothers Grocery was slightly farther away but still within walking distance. Sunbeam bread was baked daily here in Clarksburg.
Fresh bread was delivered within a few hours after the bread came out of the oven. Sunbeam bread is now baked out of state but I use it for comparison because, except for preservatives, the loaf hasn’t changed much in 46 years. Even the wrapper is nearly identical. Today’s fresh bread is comparable to day-old bread in 1957.
Neighborhood grocers are long gone from the landscape and the closest market is Kroger’s in the west end of town, one mile from my parents’ house. Even in 1957, I wasn’t allowed to take my bike to the west end where the A&P supermarket was then located.
Based on these few facts, I have developed a bread standard to value our money. Even if you challenge the cost of driving to Kroger’s at 73¢ per loaf as being superfluous, the cost of bread has still risen twenty-fold which is about twice the rate at which WV median household income has increased during the same period. Your family needs to earn in the mid 5-figures this year just to stay even on day-old bread. And to stay even, you would have had to have lost something along the way-your value system.
Day-old bread was discounted by half because homemakers wouldn’t buy it for anything other than making stuffing. Families demanded fresh bread despite the steep discount. And 8¢ was not a trifling amount in 1957; you could mail 2 letters and 2 postcards for that sum.
After food stamps were introduced in 1961, the custom of discounting day-old bread faded. This is just a coincidence because, as we all know, government spending makes everything better. But a point does need made for our comparison of costs. You buy your bread at the register but you buy other peoples bread through the payroll deduction plan. Thus, the next time you buy bread, remember that you’ll be a few slices short of a 1957 loaf as well as a day late in eating it.
You can argue all you want that you are better off than folks were 46 years ago. You aren’t. But to walk the point home, let’s re-visit Mr. Ridenour’s store.
In 1957, you would have bought chicken from Andy at the butcher’s meat cooler. It was fresh, not pre-packed, and it certainly wasn’t frozen or laced with preservatives. I always remember how homemakers demanded to see if there was any blood in a bone joint. If there was so much as a speck of blood, then the chicken was refused. Nobody would buy chicken with any amount of taint.
Years later, when I bought packaged chicken at a supermarket, I noticed that the bird was swimming in blood. I asked a clerk in the meat department if there would be any problems with the poultry. I will never forget his answer: No, sir! Our cashiers double-bag chicken packs so they won’t leak on your groceries!
And he said it with so much pride that I dared not interrogate him further!
In 1957, we had two neighborhood groceries nearby and the A&P supermarket was less than a mile from home. There was competition. There was variety. There was service with a smile from people we knew. Home delivery was available. And both Ridenour’s and Allman Brothers let creditworthy customers run a tab.
Compare bread. Compare stamps-both food and postal. Compare chicken. Compare Ozzie Nelson to Ozzie Osbourne. The results are all the same-devaluation, big time.
The Bread Standard, updated for 2008
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