Free Markets, Free People

Daily Archives: July 1, 2011


Hugo Chavez reportedly has cancer

Venezuelan socialist strong man Hugo Chavez is reported to have had cancer surgery in Cuba (how freakin’ bad is it when you have to go to Cuba for treatment).

The usually vivacious Chavez, 56, confirmed in a stern speech on Thursday he had surgery in Cuba to remove a cancerous tumor and was receiving more treatment. He said he needed time to recover before returning to Venezuela to run his self-styled revolution.

A fiery critic of the United States, Chavez will miss events marking Venezuela’s 200th anniversary of independence from Spain. He had to cancel a regional summit planned for the momentous July 5 date.

Markets have generally reacted positively to news of Chavez’s health problems, on the presumption they improve the chances of a more business-friendly government.

The last sentence says it all.   If ever there’s been a person to ruin the economic health of a country, it is Hugo Chavez.   He’s now vulnerable.  And as the article says, there’s a power vacuum forming and in most cases that’s not a good thing – in this case, it could be a good thing:

"Political vacuums are rarely to be encouraged, but this one could lead to a slowdown in public spending and could raise the likelihood of an opposition victory in the next elections, and thus a less confrontational governing style," said Richard Segal, an emerging markets analyst at Jefferies in London.

An interesting situation.  And the longer he remains in Cuba, the shakier his position in Venezuela becomes.  Nothing would do the world and Venezuela more good than to see another revolution which ousts him from power and returns the country to a real democracy and market based economy.

~McQ

Twitter: @McQandO


Geithner claims GOP has no right to question debt ceiling because Constitution prohibits it

Treasury Secretary Turbo Tax Tim Geithner, who is reportedly thinking about leaving the administration (and I say good riddance), is also, apparently, a constitutional scholar as well as a tax cheat.

While speaking with Mike Allen of POLITICO, Gethner held that the debt ceiling was likely unconstitutional:

"I think there are some people who are pretending not to understand it, who think there’s leverage for them in threatening a default," Geithner said. "I don’t understand it as a negotiating position. I mean really think about it, you’re going to say that– can I read you the 14th amendment?"

He then read it out loud:

"’The validity of the public debt of the United States, authorized by law, including debts incurred for the payments of pension and bounties for services in suppressing insurrection or rebellion’ — this is the important thing — ‘shall not be questioned.

So:

"So as a negotiating strategy you say: ‘If you don’t do things my way, I’m going to force the United States to default–not pay the legacy of bills accumulated by my predecessors in Congress.’ It’s not a credible negotiating strategy, and it’s not going to happen," Geithner insisted.

Wait.  Hold on.  Is Geithner saying that the Constitution, via the 14th Amendment, essentially gives Congress unlimited spending power that can’t be questioned?  Because that’s what it seems he’s saying. 

Secondly, there are ways to pay “debts”, “pensions”, etc. without breaking the debt ceiling – cut spending in other areas. 

Finally, depending on the interpretation, a debt ceiling could indeed be an authorized law which limits what can be incurred as public debt – and shouldn’t be questioned.  I doubt the founders had any intent to allow Congress to authorize unlimited and unquestioned spending.  Anyone who can find that sort of an intent stated anywhere by the will truly be informing me of something I didn’t know.

Always good to know you have a Treasury Secretary who sees unlimited spending as a feature, not a bug, and wants it clearly understood that the “important thing” is it shouldn’t be questioned.

Don’t let the doorknob hit you in the ass on the way out, Tim.

~McQ

Twitter: @McQandO


Wisconsin public union collective bargaining law benefits education

Byron York brings us the story of one school district in Wisconsin which sees the new law limiting collective bargaining by public sector unions as a "God send".

The Kaukauna School District, in the Fox River Valley of Wisconsin near Appleton, has about 4,200 students and about 400 employees. It has struggled in recent times and this year faced a deficit of $400,000. But after the law went into effect, at 12:01 a.m. Wednesday, school officials put in place new policies they estimate will turn that $400,000 deficit into a $1.5 million surplus. And it’s all because of the very provisions that union leaders predicted would be disastrous.

In the past, teachers and other staff at Kaukauna were required to pay 10 percent of the cost of their health insurance coverage and none of their pension costs. Now, they’ll pay 12.6 percent of the cost of their coverage (still well below rates in much of the private sector) and also contribute 5.8 percent of salary to their pensions. The changes will save the school board an estimated $1.2 million this year, according to board President Todd Arnoldussen.

Of course there’s an additional benefit to this – if they run a “surplus”, they can lower taxes, can’t they?

Anyway, other benefits accrued from the law:

In the past, Kaukauna’s agreement with the teachers union required the school district to purchase health insurance coverage from something called WEA Trust — a company created by the Wisconsin teachers union. "It was in the collective bargaining agreement that we could only negotiate with them," says Arnoldussen. "Well, you know what happens when you can only negotiate with one vendor." This year, WEA Trust told Kaukauna that it would face a significant increase in premiums.

Now, the collective bargaining agreement is gone, and the school district is free to shop around for coverage. And all of a sudden, WEA Trust has changed its position. "With these changes, the schools could go out for bids, and lo and behold, WEA Trust said, ‘We can match the lowest bid,’" says Republican state Rep. Jim Steineke, who represents the area and supports the Walker changes. At least for the moment, Kaukauna is staying with WEA Trust, but saving substantial amounts of money.

Funny how that works, no?  I’m just the vindictive enough type of person to let WEA stew in their own juices and take the lowest bid that isn’t theirs.  It tends to make for a very competitive bid the next time they’re given the opportunity.   Aren’t markets an amazing thing?

Finally:

Then there are work rules. "In the collective bargaining agreement, high school teachers only had to teach five periods a day, out of seven," says Arnoldussen. "Now, they’re going to teach six." In addition, the collective bargaining agreement specified that teachers had to be in the school 37 1/2 hours a week. Now, it will be 40 hours.

The changes mean Kaukauna can reduce the size of its classes — from 31 students to 26 students in high school and from 26 students to 23 students in elementary school. In addition, there will be more teacher time for one-on-one sessions with troubled students. Those changes would not have been possible without the much-maligned changes in collective bargaining.

Teachers’ salaries will stay "relatively the same," Arnoldussen says, except for higher pension and health care payments. (The top salary is around $80,000 per year, with about $35,000 in additional benefits, for 184 days of work per year — summers off.) Finally, the money saved will be used to hire a few more teachers and institute merit pay.

Or, the schools will have some options that actually benefit the students vs. benefitting the teachers.  I know … for most of us that’s what we thought the system should always have been about, no?  But for too long, public sector unions ruled the roost and were able to get working conditions and benefits from friendly politicians that were essentially ruining the education system (and other parts of government) by limiting options and choices.

The introduction of some market based mechanisms plus more options is sure to benefit students over teachers as it should be – not, I’d argue, that teachers come out of this on the poor side of things.  On the contrary – now they have to join the rest of us an work 40 hours a week, pay for their benefits and do a bit more to earn that $125,000 in salary and benefits for 184 days work.

Tough stuff, huh?

~McQ

Twitter: @McQandO

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