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Expenses

If only I could be the government

It’s tough around here. I’ve picked up some expenses, with a new house two years ago, a child last year, some unexpected maintenance this past year, and now some inflation. Yet, I manage to keep the household above water. I do this in spite of lacking two things that certainly would help:

  • The ability to force involuntary payment to me.
  • The ability to print money
The state of Illinois can do the first, and the federal government can do both. With both governments facing an explosion of entitlement spending soon — and already huge debts — our executive leadership has opted to force me to pay more.
So I go my merry way making changes in the way we spend money. We cut back where we can and we have no choice but for it to be enough. Making more money is attractive, but it’s never guaranteed. The only thing you can really guarantee is how much you spend.
And so it goes with tax receipts. We raise taxes and project what economic activity (which more taxation will necessarily discourage) will generate what income. And then we hope the projections pan out. Meanwhile, we haven’t done anything to confront two of our largest economic problems: productivity and inflation.
This year, Paul Ryan came up with a serious budget plan that contains serious spending cuts. These are hard choices as they will affect more than half the electorate. President Obama responded with an unserious speech that seeks to bring income taxes last seen more than a decade ago.
Whose budget will be more successful?

Where is wealth created?

Hint: It’s not created in Washington, DC, where federal policy making has become the country’s only real growth industry.

Government work isn’t only in Washington, DC. It’s in every state. According to Stephen Moore’s column in yesterday’s Wall Street Journal, there are more government workers than there are working in manufacturing, farming, fishing, logging, construction, mining and utilities combined.

The food you eat, the clothes you wear, the homes you live in, the goods your purchase, the energy you need to heat or cool your home, power your vehicles, those are made by someone other than the government (and made pretty damn well).

As Moore notes:

We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments is the $1 trillion-a-year tab for pay and benefits of state and local employees.

Inflation is coming, too, whether or not Ben Bernanke unleashes QE3 on us (God, no). In simple terms, inflation is too much money chasing too few goods. A cure could be found in demand-side economics. Suppress demand! Yes, you! Stop eating! Don’t leave your house! Better yet, get out of your house, sell everything you own, and live off the land!

Another cure could be found in supply-side economics. Stoke supply. Become the land of plenty again. As true wealth isn’t found in a dollar figure, but in the goods and services available to the populace.

It will only happpen if we prune the government payroll and increase the number of productive workers.

A Common Thief … Too Common

Hackney’s on Harms celebrated St. Patrick’s Day the way you would expect a neighborhood restaurant owned by an Irish-Catholic family. They had an Irish band, Harp and Guinness on tap, corned beef, cabbage and all the expected fare.

They also got the Glenview Police involved and had them collar a 52-year-old woman, a former bookkeeper at the Harms Rd. location. Because she was in charge of making the nightly deposits and because inadequate controls were in  place, she was able to embezzle something to the tune of $186,000 from September 2008 until the restaurant caught on last fall.

It appears that the bookkeeper was pocketing cash from each day’s receipts and then writing a check from Hackney’s account to the bank to make up for the lost cash. It was a confusing scheme, and it’s a little surprising neither the bank nor Hackney’s caught on sooner.

That said, I know exactly how it feels to find someone in my own organization with his hand in the cookie jar. His scheme was doctored (or plain forged) receipts that went on his expense reports. This fraud totaled only a tenth of what Hackney’s experienced, but it was no less stinging. Family businesses rely on trust — sometimes too much — with employees.

We discovered this in January and I wonder why we didn’t catch on sooner. The problem is simple. The system of controls we have in place is inadequate. We’re a small business, and most employees are stretched thin. The company president approves the expense reports, but he only checks to be sure all the receipts are in the report and that the numbers match. He’s not spot-checking them for irregularities.

It was a brutal lesson for one man to learn when he came into the office to be informed he was fired. It could have been worse. Unlike the Masterson family who owns Hackney’s, we decided not to prosecute. (I use the word we to indicate it was discussed. Collectively we decided not to get police involved. I won’t tell you what my course of action would have been had it been my call.)

At least we learned our lesson, too. Right?

WSJ on Illinois

The Wall Street Journal mocks us Illinoisans on the Saturday editorial page.  A couple quick facts: state revenues increased in Illinois by $7 Billion over the past six years and the state’s population decreased by 736,000 over the past decade.

This is a state that does almost everything wrong economically. It is not a right-to-work state and is thus heavily unionized, repelling new business investment. It has the fifth highest minimum wage among the states, the fifth most trial-lawyer friendly legal code, the sixth highest workers’ compensation costs, and the 11th highest property taxes. It has one of the highest inheritance taxes, at 16%, so retirees flee to states with no death tax, such as Florida and Arizona. A rare Illinois advantage has been its relatively low income-tax rate, but that will shrink or vanish under Mr. Quinn’s increase.

It’s time to start from scratch in this state.  Unfortunately, the same voters who gave us Blago will get a chance to pick a new governor (and a general assembly).

Watch your Wallet; Quinn’s Here

Our corrupt and wasteful governor has been impeached and replaced with the “Light-Guv,” Pat Quinn, the shamelessly populist “do-gooder” who ran alongside our crooked governor twice.  So now we have a plausibly clean, yet wasteful Governor Quinn.

Rod Blagojevich was steadfast in refusing to raise taxes while trying to initiate all kinds of feel-good (but ultimately unhelpful) social programs. Put that alongside chief Republican crook George Ryan, and you have a state in distress. 

So Pat Quinn has come in on a white horse and was kind enough to stop quoting Lincoln to propose some tax hikes. A 50% hike in the personal income tax. A sizable hike in the corporate rate. A slew of fee increases. 

In general, if you work in Illinois, you should hope your company can stay in business long enough to relocate to the Sun Belt. And you should follow them.  Or you should get a government job and go down with the ship, because wait until you find out the state employees’ pension system is broke.

Anyway, in the real world, organizations that are short on money will make some cuts and hold off capital projects. Too bad Illinois is not in the real world. To start, us sucker taxpayers are on the hook for the 2016 Olympics.

But now comes some more from the Mighty Quinn:

The governor then started talking about his $26 billion statewide construction program. It would be paid for by increasing fees on vehicle titles, driver’s licenses and license plate stickers. He’s calling it his “Illinois Jobs Now” program.

“There’s much to be done and little time to do it,” he said. 

Ah, never waste a crisis, eh?