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​Socialism, Progressivism, Etc.: What’s the Difference?

3/19/2019

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By Ron Knecht – 19March2019
Recently, I enjoyed a very thoughtful talk by the eminent scholar and public servant, Jerry O’Driscoll.  He spoke to Reno’s Hayek Club, a group that promotes limited government and individual freedom and has endowed area high schools with a fine curriculum and materials on managing personal finances.
His talk and the discussion following it addressed, among other things, similarities and differences among socialism, communism, Nazism, fascism and progressivism.
He noted that Nazism was officially the National Socialist German Workers Party.  Also, Benito Mussolini, a long-time socialist activist, was expelled from that party when he began to advocate and practice violence; but his policies as Italy’s dictator were quite socialist.  Communism, as practiced by the Soviets and others, was distinguished from Axis German and Italian systems mainly by its greater viciousness: It killed over 100 million of its own people even outside of wars with other nations.
Many young people who advocate socialism today claim Sweden, Denmark and Finland are socialist.  In fact, they are mixed economies with significant social welfare sectors and business freedom like the United States.  The U.S. ranks 12th among 180 countries in the Heritage Foundation’s 2019 Index of Economic Freedom, with Denmark 14th, Sweden 19th and Finland 20th.  All four nations are considered “mostly free,”
So, what about differences among socialism, communism, fascism, statism, progressivism, crony capitalism and mixed economies?  These days, some people try to escape the consequences of their actual politics and of derogatory labels by highlighting minor and technical differences among left-wing sects.
Earlier that day, I heard citizens accuse a former local public official of being a socialist – to which he took exception, saying he’s a Republican conservative.  If you want a spirited argument among Republicans, ask a group of them: What and who is a RINO (Republican in Name Only)?
As reflected in the four controller’s annual reports (CARs) I wrote, all this stuff misses the mark.  The point is collectivist coercion, and the extent to which it dominates an economy, permeates a society and burdens people and businesses’ daily lives.
We need government to deter criminality, provide for the common defense, protect personal and economic rights, etc.  But we need to recall that all the benefits government delivers, especially when it extends beyond those fundamentals, are contingent (they may materialize or not) and subject to the law of diminishing returns.
Government action, being collectivist coercion, always involves destruction of human wellbeing that is certain before any putative benefits are actually delivered.  Thus, to confer payments to some group requires taxes, but every dollar taken in taxes is an absolute act of destruction of human wellbeing on those taxed.  And every law or regulation that benefits some group is also an act of certain destruction of human wellbeing by limiting the freedom of others in order to confer benefits on its intended targets.
The real question facing any policy or government action is whether the uncertain benefits are very likely to exceed the certain destruction of human welfare.
Jerry pointed out, as I did in my CARs, that regulation of all kinds is often as damaging to the public interest in economic growth, net social benefits and fairness as is public spending and the taxation it requires.  I noted there’s good data that allows us to determine the optimum level of public spending relative to the size of the economy and the level of damage from excess spending.  However, we have no metrics for determining the optimal level of aggregate regulation and the social damage from excess levels.
So, the real issue is not whether socialist or communist governments own the means of production or, instead, fascists allow crony capitalists to own them as long as they supply what government wants in the manner and quantity it wants and at prices it dictates.  The issue is the overall level of collectivist coercion any configuration of government produces and thus the level of net social damage and burden on individual freedom and economic growth it inflicts.
The ultimate problem is collectivist coercion, which is the essence of government, not merely an unfortunate byproduct.  Via economic freedom, we must minimize the net damage from excessive government, not argue rhetorical or technical matters.
Ron Knecht has served Nevada as state controller, a higher education regent, legislator and economist.  Contact him at RonKnecht@aol.com.
 
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Optimism, Pessimism, Legacies and Being a Father

3/5/2019

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The last 17 years have taught me some important lessons previous decades didn’t.  Being a parent will do that to you.
Before our daughter was born, I focused on political activism, athletics, building a strong professional career, enjoying life as a single yuppie in San Francisco’s Marina district, being a good citizen and then being a good husband, as well as son, sibling and in-law.  Even in all those roles, it was mainly about me and what I could achieve, become, contribute, create and enjoy.
After our daughter Karyn arrived in 2001, I began to focus on what legacy I, our family and our society would leave her and all America’s children and grandchildren.  Things became more about them than us.
Due to great economic growth in the 1980s and 1990s and a resurgence in limited government libertarian conservative principles in politics, it was easy to be optimistic and hopeful about the legacy we would leave.
Our family became California refugees and moved to Nevada, where my professional career continued to blossom and I got seriously into politics by being elected to the legislature and then the board of regents.  A young daughter and serving in those roles focused me on leaving the next generation the kind of inspiring legacy our parents and previous generations left us.
It was still possible to be optimistic about that as the Great Recession unfolded like a slow-motion train wreck.  But then we elected one of our worst ever presidents, a dishonest, smug cynic who peddled false post-racial unity and hope, plus unspecified transformation while privately despising America and Americans.  When he revealed that his promised transformation was destructive identity politics, collectivist coercion everywhere and leading from behind, the outlook turned grim.
Barack Obama, his goofy advisors and fellow Democrats were outed as the rubes they are for thinking they could impose virtual socialism as a solution to the recession.  By 2011, it was clear their stupid collectivist coercion was piling the greatest non-recovery ever on top of the long, deep recession.  Dealing with a downbeat economy and outlook as a regent and state economist, it became apparent we were crafting a legacy as a society that was the opposite of the hope, growth and opportunity our parent and grandparents bequeathed us.
Becoming controller in 2015, I had a statutory duty to promote frugality and economy, better management of Nevada’s fiscal affairs and better understanding of all that.  So, I wrote my first controller’s annual report with specific analyses and suggestions and an extensive assessment of the grim economic outlook and reasons for it.  All four of my annual reports focused increasingly on righting the legacy we’ll be leaving.
The election of President Donald Trump fostered some hope as well as anxiety.  While there have been some downsides to his administration, the key substantive issues have been resolved much better than one might have hoped.
He delivered a great start on reversing the regulatory excesses of the federal government.  He and congressional republicans delivered the first major tax reform in 30 years, and it plus regulatory reform may be getting our economy back on track despite continued government overreach, trade mis-steps and various adverse economic and demographic trends.
His thoughtful and principled judicial appointments have been a huge tonic for our society and hope for the future.  Likewise, some notable successes in foreign affairs.
The hate-driven and corrupt Mueller investigation revealed that claims of Trump Russian collusion were lies. That and the Democrats’ monstrous vendetta’s against Trump, aided by the completely compromised lamestream media, have unraveled as we learn the real Russian collusion was promulgated by the Clinton campaign and their thoroughly corrupt allies in the justice department, FBI, CIA and media.
But the empire strikes back as the new congressional Democrat majority is doubling down on all this, cheered on by the New York Times, CNN, Washington Post, HuffPost, AOL, MSNBC, etc.  The good news is they seem to be so much overplaying their hand and they have such a weak group of candidates, they may get Trump re-elected.
I’m optimistic and hopeful by nature, and things may be turning around.  But only if we redouble our efforts on our society’s legacy.
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State K-12 Spending Up, Results Not Improved

2/26/2019

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State K-12 Spending Up, Results Not Improved
By Ron Knecht – 26February2019
This is the fourth in a series of columns summarizing my Controller’s Annual Report for fiscal year 2018 (FY18).
The first two columns showed that since FY06 state spending has grown faster than Nevada’s economy, thus imposing an ever-larger real burden on Nevada families and businesses, whose real incomes are lower now than in FY06.  The third one noted Health and Social Services spending, the largest budget item, has grown most rapidly by far, driven greatly by federal health care mandates and funding.
This column addresses the second largest and second fastest growing budget item: K-12 education.  The problem is that additional spending, instead of the policy reform we need, has not significantly improved student performance.
State K-12 spending grew from $1.24-billion in FY06 to $2.34-billion in FY18.  On a per-student basis, not including local K-12 spending, this was an increase from $3,172 to 4,760 annually. In 2007, Nevada eighth-graders ranked 44th nationally on reading and mathematics evaluations.  By 2015, Nevada’s ranking rose only to 43rd in reading and 41st in math.
Not only have increases in spending, without policy reforms, failed to improve results here, but international comparisons also show spending levels are uncorrelated with results.  Per-student U.S. spending is fourth among 33 developed nations, but our achievement rank is 23rd and our test scores are below average.  Japan’s achievement is highest, but its spending is only 15th.
To improve the effectiveness of Nevada’s education spending, we must allocate funds to programs that have been shown to boost student achievement.  Instead, we continue to placate teacher and administrator unions, which are selfish special interests, by throwing ever more money at them.
State and local politicians and the unions, administrators and school districts continue to serve primarily the adults running the system, instead of students and their families and the other taxpayers who pay the bills.  These groups continue falsely to claim that Nevada K-12 is “underfunded,” needs “full funding” or “adequate funding,” etc.  But they never say what level of funding would be adequate or how they know.  Instead, they simply want more for themselves at taxpayer expense, even as they deliver poor and stagnant value.
Research literature shows no school-controlled variable has greater influence on student achievement that the quality of the teacher.  Studies show that students lucky enough to have a top teacher make 1.5 times as much testable progress in a school year as those with average teachers.
Also, the best teachers are able to deliver effective instruction regardless of class size across a wide range.  That gives the lie to the continuous bleat from the education establishment and their political supporters about class sizes, which are greatly reduced from the levels that served most adults.  Mostly, class-size complaints are simply another way for the unions and districts to milk taxpayers for money for themselves.
The primary focus should be on recruiting and training highly talented teachers.  Nevada should relax restraints on who can apply for teaching licenses, instead of catering to the self-serving monopoly that education colleges now have on teaching positions.  Many good professionals, with only minor additional pedagogy training, could become excellent teachers.
Schools should also be free to offer attractive compensation packages to the most talented (effective) teachers.  Strict, formulaic schedules, especially those that reward longevity instead of excellence, give insufficient flexibility to administrators seeking to recruit top talent.  Again, the system serves the adults running it, not the students, their families and other taxpayers.
Families are the primary consumers of public education, and each family knows best its needs.  So, allocation of public spending on education is most effective when families are free to exercise choices among a wide range of educational offerings.  Studies have shown that schools of choice, including public charter schools and private schools, operate at lower costs than traditional neighborhood monopoly public schools, while delivering better results.
Strong evidence also exists that technology-assisted learning leads to better student outcomes while also allowing teachers to better manage larger classes.  Thus, on-line home-schooling is becoming ever more popular.  Many students are much happier with it, while doing ever better.
If we focus on these policy initiatives, instead of throwing more money at the current system, we can improve.
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Washoe County Republican Leadership Doing a Fine Job

2/19/2019

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A month after the November 2018 election, I wrote an analysis of the results of recent statewide elections.  From total statewide voter turnout data, I came to one clear conclusion: 2014 was the outlier year and the most recent results were quite in line with the long-term trends in Nevada.
Recently, Republican state party leaders and national staff have been trying to pin our 2018 losses on the new leaders of the Washoe County party who refused to knuckle under to them.  They have conned some rural Republicans into repeating their false narrative.  But they’ve avoided numbers and facts, sticking to name-calling (“ankle-biters”) and rant.
An even more detailed look at the numbers and facts below shows clearly Washoe County’s new Republican leadership has done a fine job – certainly much better than the state party and national staff did with Clark County in 2018.
The other good news is that the Clark County party now also has new and energized leadership and is getting out from under the thumb of the state party and national operatives.  Thus there is reasonable hope we may overcome the Democrat hegemony in the vital 2020 elections that will determine which party draws the district boundaries for the next decade.
So, to the numbers.
As I noted previously, the total statewide turnout in 2014 was 45.56 percent of active voters, while that in 2018 was 62.51 percent.  Delving into the data for the two previous “midterm” elections (those between presidential elections), I noted the 2006 turnout was 59.16 percent and that for 2010 was 64.62 percent.  Hence, 2014 was the outlier event and 2018 was right in the mainstream.
To further test this conclusion, I obtained county-by-county and party-by-party data from the Nevada Secretary of State’s website for the years for which it is available, 2010-2018.
Comparing the results for all four elections and especially comparing midterm and presidential elections separately, one fact jumps out.  In 2014, all Clark County turnout, especially that for Democrats and other parties even more than Republicans, just dropped through the floor.  Because Clark County votes total 67-68 percent of the statewide totals in other years but were only 62 percent in 2014, Republicans had a banner year, led by the other 16 counties.
The Clark Democrat vote in 2014 was only two percent higher than the county’s Republican vote, but in the other three elections the Democrat margin was 33-43 percent.  Essentially, the Clark Democrats and other party voters in 2014 deserted in droves.
So, we won all six state constitutional offices and both houses of the legislature.  Of course, what the governor and 2015 Republican legislative leadership did with that bonanza was despicable. Sadly, it will be exceeded by what Democrats will do with their big advantage this term.  Hence, it is essential for the Clark and Washoe Republicans, who provide 80 percent of our votes, to do well in the 2020 elections.
Turning specifically to Washoe County, it’s notable that Democrats there made a great leap forward from 34 percent of the Washoe vote in 2014 to nearly 37 percent in 2016 (before the current Washoe Republican leadership took over), rising to 37.5 percent in 2018.  However, Washoe Republicans improved their percentage of the county-wide vote slightly this year, too, with the other parties taking the losses.
Washoe County had the highest turnouts of their registered voters for all three parties: 74.9 percent for Democrats, 74.4 percent for Republicans and 58.5 percent for the others.  In Clark County, Republicans got 67 percent, Democrats 62.5 percent and others 48.8 percent.  In the other 15 counties as a group, Republicans got 63.2 percent turnout, Democrats 61.3 percent and others 46.9 percent.
With cracker-jack ground work organization and strong local fundraising, Washoe Republicans won 19 of 23 contested local races, including one city council and two school board flips.  Of the six state constitutional and two federal races on which the whole county voted, Republicans won four.  In Clark County, Republicans won no statewide and federal races, while in the other 15 counties as a group, they won all.
If the new Clark leadership joins and matches Washoe and the ever-steady other 15 counties, we can win in 2020.
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The Green New Deal: Doubling Down on Past Mistakes

2/12/2019

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My first full-time job after college was assistant city engineer in Urbana, Illinois in 1972.  I worked on my liberal Democrat green interests: bikeways, undergrounding communications and power lines, better sewer systems, sidewalks, traffic, planning and zoning codes.
I learned a key lesson in those matters.  Its breadth and importance would become clearer as my career progressed.
One day the public works director, a crotchety old conservative Republican, said: “You want bikeways, underground lines, sidewalks and all those things?  Well, it really is easy and cheap.”
I was stunned.  Previously he’d always been the naysayer, citing costs, practicability, etc.
Then he said: “At the edge of town, find a green field and you can design and build in all the amenities you want fairly inexpensively.  But once you start laying out a subdivision and constructing things and then you decide to add those features, it gets difficult and expensive.  And when you try to retrofit an already built neighborhood for them, it becomes ridiculous.”
Immediately I understood the point, but not all the implications.  Those became clear only as I pursued my environmental and consumer interests in a greater professional context.
Upon completing my civil engineering masters project, I became expert in the full range of power generating economics, with particular focus on nuclear power.  As an expert witness, I had small partial credit in helping stop perhaps a dozen nuclear units around the country.
In my analyses, I highlighted the skyrocketing costs over time of building nukes, which were rising as much as 15 percent annually in real terms, a trend no one seemed able to explain.  I suggested the increases would continue and were due to “cost internalization” processes driven by new regulations.  As it turned out, that was true, but it missed two important aspects of the problem I would see only later.
In 1984, as principal economist at California’s Public Utilities Commission, I toured the Diablo Canyon nuclear plant, which had been delayed many years and was to come on line at a cost about 20 times the original estimate.  My first look inside the building housing the reactor was stunning.  Instead of elegantly and cleanly designed, it looked like a mess with structural beams in odd places and many other misplaced weird features.  Like something constructed in a nightmarish hallucinatory fit.
I learned this was due mainly to the retrofit problem explained to me years earlier.  Nuclear construction was licensed to safety and environmental standards prevailing when the license was issued.  However, as those standards changed – and they changed greatly and fast – the builders were required to retrofit projects being built to the new standards.  Thus, the visual nightmare.
The other problem also soon became clear.  Sound public policy for safety, environmental and all standards is to raise them only as high as the point at which the diminishing incremental social benefit they provide equals their cost, which rises with the regulatory requirements.  But nuclear standards weren’t set with reference to social cost and benefit.  Instead, they were set as high as technically feasible, regardless of cost.
So, nuke costs increased ridiculously as builders were required continuously to retrofit to wasteful standards, especially as retrofit caused schedule delays that led to further retrofit.  And utility ratepayers paid the cost.  Once I understood that, I reversed my opposition to nuclear power and began to support nuclear regulatory reform.  (I also became a limited-government Republican conservative.)
In sum, unsound public policy – unjustified standards and retrofit regardless of its costs – combined to damage the public interest by killing a no-carbon energy option and sticking people with ridiculous costs.
So now comes Congresswoman Alexandria Ocasio-Cortez and today’s liberal Democrat enviros with their Green New Deal.  They plan to remake the world to an unsound standard, zero carbon emissions – achieved by retrofitting or replacing all existing buildings, ending use of fossil fuels in transportation, outlawing steaks and destroying numerous industries.  Also, implementing many of their socialist dreams.
The folly of earlier greenies in killing the nuclear power option cost the country many billions of dollars.  The Green New Deal, if it could be achieved, would cost many trillions of dollars.  For uncertain but paltry benefits much below the costs.
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Trump Rises to the Occasion

2/5/2019

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Rising above the persistent political turmoil and smallness of Democrats and the mainstream media, President Donald Trump Tuesday delivered a memorable State of the Union speech.
Forget the incessant whining and complaining of CNN, et al. that followed.  Let’s focus on what he said.
He began by noting our “unlimited potential” as a country, and he told legislators he is ready to work with them to realize it: “We must govern not as two parties but as one nation.”  So, from the start, he focused on the most important thing, especially in view of the nastiness and pettiness of politics this decade: America’s potential.  And how to achieve it by working together.
Visionary and conciliatory.  The ideal way to start in these troubled times.
He began by noting two great anniversaries that remind us of our unlimited potential and what we have done in the past when we worked together.  First, he saluted three World War II veterans who participated in the 1944 D-Day landing in Europe to rescue the world from the fascist and socialist Axis powers.  That drew a huge, enthusiastic standing ovation.  Inspiring.
The second event was the 50th anniversary of the Apollo 11 landing on the moon.  He introduced lunar module pilot Buzz Aldrin and promised that this year Americans will be going back to space in American rockets.
Next, he directly appealed for compromise to promote the common good and break decades of political stalemate.  “Tonight, I ask you to choose to make America great.”
His main theme was a plain-spoken and clear list of specific issues and policies.  He noted that, despite the problems of the last decade, we have a strong economy on which to build.  Unemployment is at its lowest in 50 years, with record low figures for African, Asian and Hispanic Americans.  And five million Americans lifted off food stamps in recent years.  Later, he noted 58 percent of last year’s newly created jobs went to women.
He pointed to the growth-inducing tax cuts and regulatory reforms that are major achievements of his administration.  He noted we have become the world’s leading producers of oil and gas and a net exporter of oil for the first time in 65 years.
“The state of the union is strong. ... Our country is vibrant.”  That’s as true as we make it.
He asked senators to confirm 300 qualified needed nominees the Democrats have held in limbo.
He praised the ground-breaking criminal justice reform First Step Act the administration and congress passed by working together.  He recognized two good people who benefitted from it.
Then he turned to the many burdens of illegal immigration, saying providing safety and security to Americans from the minority of dangerous illegal aliens is a moral issue.  He recognized the heirs of the Jerry and Sherri David of Reno, recently murdered by an illegal alien.  He celebrated the legal immigrants who enrich our nation and strengthen our society and challenged congress to act on the issue in the next ten days.
Mr. Trump saluted the brave men and women of the Immigration and Customs Enforcement bureau and promised walls and see-through steel barriers will be built where they are needed.  What he rightly called a common-sense solution.
Although I have reservations about his tariff wars, he extended an olive branch to China in this regard and offered other constructive trade initiatives.
Promising efforts to lower the cost of health care and protect people with pre-existing conditions, he again reached out to the Democrats.
Recognizing the needs for real solutions in education, he promised school choice for American children.  He challenged us to build a culture that cherishes and protects innocent life.  He noted foreign affairs progress, especially in Venezuela.  And he promised, “America will never be a socialist country.”
In the end, he returned to the D-Day heroes, noting one of them later helped liberate the Dachau concentration camp, including a survivor seated next to him.  He denounced the vile poison of anti-Semitism and celebrated moving our Israel embassy to Jerusalem.
He closed by again inviting the Democrats to work in bi-partisan cooperation with Republicans and his administration so our most thrilling achievements are still ahead.  Just right.
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Gordon Lightfoot’s Canadian Railroad Trilogy

1/29/2019

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I'm tired of politics this week, so something cheerful and moving to brighten everyone's day.

Gordon Lightfoot’s Canadian Railroad Trilogy
By Ron Knecht – 29January2019
There was a time in this fair land when the railroad did not run
when the wild majestic mountains stood alone against the sun
Long before the white man and long before the wheel
when the green dark forest was too silent to be real
But time has no beginnings and hist’ry has no bounds
as to this verdant country they came from all around
They sailed upon her waterways and they walked the forests tall
built the mines, the mills and the factories for the good of us all
The lyrics above begin Lightfoot’s “Canadian Railroad Trilogy,” which Johnny Cash called “an extremely fine piece of songwriting.”
Bob Dylan named Gordon Lightfoot his favorite singer/songwriter.  I think I agree.  “Everytime I hear a song of his, it’s like I wish it would last forever,” he said.  “Lightfoot became a mentor for a long time.  I think he probably still is to this day.”
The Canadian Broadcasting company commissioned the song by the country’s special son for a special broadcast on January 1, 1967 to start Canada’s centennial year.  It took him three days to write, and it has a slow tempo middle section between faster paced beginning and end sections.
Lightfoot was an inspired and inspiring choice.  The song describes the building of the trans-Canada Canadian Pacific Railway in the early 1880s, a dozen years after Leland Stanford drove the golden spike to celebrate our first trans-continental railroad.  Its awesome lyrics and sound herald the optimism of the railroad age in the opening stanzas.
For they looked in the future and what did they see
They saw an iron road runnin’ from the sea to the sea
Bringin’ the goods to young growin’ land
all up through the seaports and into their hands
Look away said they across this mighty land
from the eastern shore to the western strand
Bring in the workers and bring up the rails
we gotta lay down tracks and tear up the trails
Open ‘er heart let the life blood flow
gotta get on our way ‘cause we’re movin’ too slow
His lyrics also tell the cost in blood, sweat and sorrow in the poignant slow middle section:
Behind the blue Rockies the sun is declinin’
The stars, they come stealin’ at the close of the day
Across the wide prairie our loved ones lie sleeping
beyond the dark oceans in a place far away
We are the navies who work upon the railway
Swingin’ our hammers in the bright blazin’ sun
Livin’ on stew and drinkin’ bad whiskey
bendin’ our backs ‘til the long day is done
A navvy, mainly a British term, was a laborer employed in the excavation and construction of a road, railroad or canal.  We can learn a few things from our northern neighbors.
In the final again upbeat section, he returns to the optimistic vision:
So over the mountains and over the plains
Into the muskeg and into the rain
up the St. Lawrence all the way to Gaspe
swingin’ our hammers and drawin’ our pay
Layin’ ‘em in and tyin’ ‘em down
away to the bunkhouse and into the town
a dollar a day and a place for my head
a drink to the livin’ a toast to the dead
Oh the song of the future has been sung
all the battles have been won
On the mountain tops we stand
all the world at our command
We have opened up the soil
with our teardrops and our toil
Again learning from the folks to the north: the muskeg is a North American swamp or bog consisting of a mixture of water and partly dead vegetation, frequently covered by a layer of sphagnum or other mosses.
The final verse unites both themes:
For there was a time in this fair land when the railroad did not run
…
When the green dark forest was too silent to be real
And many are the dead men too silent … to be real
Pierre Berton, who wrote “The National Dream” and “The Last Spike,” two bestselling books about the railway, said, “You know, Gord, you said as much in that song as I said in my book.”
I'm tired of politics this week, so something cheerful and moving to brighten everyone's day.

Gordon Lightfoot’s Canadian Railroad Trilogy
By Ron Knecht – 29January2019
There was a time in this fair land when the railroad did not run
when the wild majestic mountains stood alone against the sun
Long before the white man and long before the wheel
when the green dark forest was too silent to be real
But time has no beginnings and hist’ry has no bounds
as to this verdant country they came from all around
They sailed upon her waterways and they walked the forests tall
built the mines, the mills and the factories for the good of us all
The lyrics above begin Lightfoot’s “Canadian Railroad Trilogy,” which Johnny Cash called “an extremely fine piece of songwriting.”
Bob Dylan named Gordon Lightfoot his favorite singer/songwriter.  I think I agree.  “Everytime I hear a song of his, it’s like I wish it would last forever,” he said.  “Lightfoot became a mentor for a long time.  I think he probably still is to this day.”
The Canadian Broadcasting company commissioned the song by the country’s special son for a special broadcast on January 1, 1967 to start Canada’s centennial year.  It took him three days to write, and it has a slow tempo middle section between faster paced beginning and end sections.
Lightfoot was an inspired and inspiring choice.  The song describes the building of the trans-Canada Canadian Pacific Railway in the early 1880s, a dozen years after Leland Stanford drove the golden spike to celebrate our first trans-continental railroad.  Its awesome lyrics and sound herald the optimism of the railroad age in the opening stanzas.
For they looked in the future and what did they see
They saw an iron road runnin’ from the sea to the sea
Bringin’ the goods to young growin’ land
all up through the seaports and into their hands
Look away said they across this mighty land
from the eastern shore to the western strand
Bring in the workers and bring up the rails
we gotta lay down tracks and tear up the trails
Open ‘er heart let the life blood flow
gotta get on our way ‘cause we’re movin’ too slow
His lyrics also tell the cost in blood, sweat and sorrow in the poignant slow middle section:
Behind the blue Rockies the sun is declinin’
The stars, they come stealin’ at the close of the day
Across the wide prairie our loved ones lie sleeping
beyond the dark oceans in a place far away
We are the navies who work upon the railway
Swingin’ our hammers in the bright blazin’ sun
Livin’ on stew and drinkin’ bad whiskey
bendin’ our backs ‘til the long day is done
A navvy, mainly a British term, was a laborer employed in the excavation and construction of a road, railroad or canal.  We can learn a few things from our northern neighbors.
In the final again upbeat section, he returns to the optimistic vision:
So over the mountains and over the plains
Into the muskeg and into the rain
up the St. Lawrence all the way to Gaspe
swingin’ our hammers and drawin’ our pay
Layin’ ‘em in and tyin’ ‘em down
away to the bunkhouse and into the town
a dollar a day and a place for my head
a drink to the livin’ a toast to the dead
Oh the song of the future has been sung
all the battles have been won
On the mountain tops we stand
all the world at our command
We have opened up the soil
with our teardrops and our toil
Again learning from the folks to the north: the muskeg is a North American swamp or bog consisting of a mixture of water and partly dead vegetation, frequently covered by a layer of sphagnum or other mosses.
The final verse unites both themes:
For there was a time in this fair land when the railroad did not run
…
When the green dark forest was too silent to be real
And many are the dead men too silent … to be real
Pierre Berton, who wrote “The National Dream” and “The Last Spike,” two bestselling books about the railway, said, “You know, Gord, you said as much in that song as I said in my book.”
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State Health Care Spending: The 900 Pound Gorilla

1/24/2019

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State Health Care Spending: The 900 Pound Gorilla

This is the third in a series of columns summarizing my Controller’s Annual Report (CAR) for fiscal year 2018 (FY18).
The first two columns showed that since FY06 state spending has grown faster than Nevada’s economy, thus imposing an ever-larger real burden on Nevada families and businesses, whose real incomes are lower now than in FY06.  Health and Social Services (HSS) spending has grown most rapidly by far, driven greatly by federal health care mandates and funding.
Nevada spent $5.844 billion on HSS in FY18, up 166 percent from $2.199 billion in FY06.  We get partial reimbursement for many HSS programs, including Medicaid and food stamps, from the federal government.  However, Medicaid and some other programs also require at least partially matching state commitments.
Medicaid is Nevada’s largest single expenditure, accounting for 64.5 percent of the HSS total.  Federal operating grants to support it are inversely proportional to the per capita income in each state.  For 2017, the reimbursement rate to Nevada was 65 percent, up from 54 percent in 2006.  A prolonged decline in Nevada incomes relative to other states during and after the Great Recession drove this increase.  So, any robust recovery in our incomes will cause Nevada taxpayer spending for Medicaid to rise rapidly.
Almost one-third of the rise in Medicaid spending is due to expansion of eligibility parameters.  Historically, states participating in it were required to cover only highly vulnerable populations, including the elderly, disabled and children living below the poverty level.  The federal Affordable Care Act of 2010 (Obamacare), however, encouraged states to expand eligibility to all individuals with incomes up to 138 percent of the federal poverty level, including single, childless, working-age adults with no disabilities.
Expanded publicly funded health care benefits has coincided with declines in rates of private insurance coverage and other private health care spending.  In 2008, 68.6 percent of Nevadans held private insurance coverage, falling to 61.5 percent by 2012 before rebounding to 64.5 percent in 2015.
One explanation is that ACA mandates led to closure of many private insurance plans and temporarily left policyholders without coverage until some purchased new, ACA-compliant plans.  But the concurrent enrollment growth in Medicaid and other public health plans suggests that greater availability of these plans has displaced many consumers who previously could afford private insurance.  In 2015, 33.5 percent of Nevadans were enrolled in some form of public health plan, up from just 20.6 percent in 2008.
There’s evidence that expanding Medicaid to additional populations does not improve health outcomes and only further endangers the most vulnerable populations.  Medical reviews reveal that outcomes are better for holders of private insurance policies than for beneficiaries of public health plans.  Mortality rates for surgical procedures are nearly three times higher for Medicaid beneficiaries than for private insurance holders and even higher than for uninsured individuals.
Policymakers have historically squeezed provider reimbursement rates to control Medicaid costs, while expanding Medicaid eligibility rules.  One consequence is that many health care providers, including the most talented, refuse to accept Medicaid patients.  The result is growing demand for Medicaid services as eligibility rules have widened the and a diminishing supply of providers within the network has contracted.
The resulting supply shortage has fueled widespread reports of Nevadans who nominally have coverage through Medicaid but can’t get care.  Thus, the increased competition for care wrought by eligibility expansion harms the most vulnerable populations who were previously eligible and who now face reduced access to care.
Whether public or private, most health care plans today are more accurately described as third-party-payer plans than insurance.  Insurance is a voluntary pooling of risks by participants to hedge against unforeseeable events; but public and private health care plans offer payment for routine and foreseeable treatment, as distinguished from risk outcomes.
These arrangements encourage individual participants to seek superfluous care because the cost of additional care is socialized among the group.  This perverse incentive, called “moral hazard” by economists, leads to rapidly escalating premiums for private plans and very swiftly increasing demands on tax revenues to finance public plans.
History shows a near-perfect inverse relationship between the percentage of care financed by Americans’ out-of-pocket spending and the nationwide cost of health care per capita.

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Key Facts on Nevada State Taxes and Other Revenues

1/15/2019

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This is the second in a series of columns summarizing my Controller’s Annual Report (CAR) for fiscal year 2018 (FY18).  Based on the state’s official books and records, the CAR provides Nevada citizens, officials and others summaries of key facts, data, analysis and issues addressing Nevada’s fiscal condition and policy challenges.

Last week’s column reviewed state spending, concluding: Since FY06, state spending has grown faster than Nevada’s economy, thus imposing an ever-larger real burden on Nevada families and businesses, whose real incomes are lower than in FY06.  Health and Social Services (HSS) and K-12 spending have grown rapidly while total other spending, except that for transportation, declined.

So, how did our state fund its spending?

Non-tax revenues – grants and contributions to the state, charges for services and contract revenues – have grown very rapidly (59 percent faster than Nevada’s economy) to comprise 56 percent of total FY18 revenues of $13.63 billion.  General fund revenues, comprised mainly of tax proceeds, grew at the same rate as the state economy, and they provide the other 44 percent.

Government operating and capital grants and contributions of $5.296 billion accounted for 39 percent of total revenues and for 59 percent of the total revenue growth since FY06.  These revenues consist mainly of federal government spending for Medicaid, Supplemental Nutritional Assistance Program (SNAP, or food stamps) and Temporary Assistance for Needy Families (TANF).  They are the revenue support for much of the huge increase in HSS spending required mainly by federal government regulations.

A notable risk in this area is that federal funding is sometimes reduced, but federal spending mandates rarely are.  Now and in coming years, Nevada faces just such a problem with Medicaid revenues and spending.

In Nevada higher education, charges for services plus grants and contracts comprise $1.236 billion or nine percent of total state revenues, and they grew slightly slower than Nevadans’ incomes.  Other program revenues of $1.164 billion or 8.5 percent of total revenues grew much slower than incomes.

So, in FY06 most state revenues, 52 percent, came from taxes and the rest from program revenues.  But over the last dozen years program revenues grew 105 percent to $7.696 billion while general revenues rose only 46 percent to $5.934 billion.  It is doubtful that federal funding will allow Nevada program revenues to grow as rapidly in the future as in the past.  So, without restraint on state spending growth, Nevada families and businesses likely will face increasing taxes in coming years.

What are the facts and issues concerning taxes?

In sum, revenues from gaming, state property and state sales and use taxes fell sharply in real terms while tax revenues from non-gaming businesses, including unemployment assessments, rose greatly.  The burden carried by consumers and residents, not including the pass-through effects of business taxes, grew slower than their incomes.

The incidence of the declining tax revenues lies greatly with consumption, not with savings, investment and employment; and with persons, not businesses.

To compensate, Nevada added new levies mainly on savings, investment and employment, and on businesses.  It did so mainly the modified business tax (MBT), which taxes employment and federally mandated unemployment assessments; and also via the new Commerce Tax (CT) and levies on auto leasing, lodging and insurance premiums.

Some people claim repealing the CT would significantly harm K-12 education.  This is false and misleading.  There’s no direct connection between CT revenues, which flow into the general fund (not education accounts), and state K-12 spending.  Further, because CT revenues decrease MBT revenues, the net effect of deleting the CT would be to reduce the overall revenue growth rate less than the growth rate of the Nevada economy.  So, eliminating the Commerce Tax would still allow net total revenues to grow.

The shift in tax burden from consumption to investment and employment and from persons to businesses diminishes tax neutrality and transparency.  Businesses don’t much absorb the economic burden of their increased taxes; instead, they increase prices to consumers and lower total employee hours and compensation rates.
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The good news is that, with ten taxes accounting for two percent to 24 percent of general revenues, and considering their incidence mainly on persons and consumption, Nevada’s tax base is reasonably well diversified.
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Ron Knecht has served as Nevada Controller, a higher education regent, a legislator and economist.  He can be reached at RonKnecht@aol.com.  
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Key Facts on Nevada’s Spending Problems

1/7/2019

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This is the first of a series of columns summarizing my Controller’s Annual Report (CAR) for fiscal year 2018 (FY18).  Based on the state’s official books and records, the CAR provides Nevada citizens, officials and others a summary of key facts, data, analysis and issues addressing Nevada’s fiscal condition and policy challenges.
Here’s the bottom line: Over the last dozen years, state spending has grown faster than Nevada’s economy, thus imposing an ever larger real burden on Nevada families and businesses, whose real incomes declined over that time.
Rapid increases in spending on health and social services (HSS) and K-12 education are driving state spending growth.  HSS and education (K12 and higher) grew to comprise 79 percent of total state spending of $12.827 billion in FY18, while all other state spending in total declined significantly in real terms.
In FY18, HSS consumed $5.844 billion (46 percent of total state spending), with K-12 education taking $2.344 billion (18 percent) and higher education adding $1.911 billion (15 percent).  Their growth totaled $5.360 billion, or 93 percent of the growth of $5.761 billion in total state spending.
All other activities – law enforcement, justice, public safety, transportation, unemployment insurance, general government, regulation, resources, etc. – spent $2.729 billion, or 21 percent of the total. While this total increased 17 percent in nominal dollars, the real per-person spending fell by 25 percent.
With population growing 22 percent since 2006 and inflation of 28 percent, real per-person HSS spending grew 70 percent and real per-student state K-12 outlays rose 24 percent.  Real per person transportation spending increased seven percent and real higher education outlays fell six percent.  As a result, HSS and K-12 by themselves accounted for 82 percent, or the lion’s share of the increases.  Remaining spending on a wide range of government functions fell 34 percent in real per person terms.
In contrast to the 70 percent and 24 percent growth rates ion HSS and K-12, the real per person incomes of Nevada families and business (personal income) fell six percent and the Nevada economy (gross state product) dropped 15 percent.
Because state spending grew while incomes shrank, the burden on Nevadans skyrocketed 81 percent for HSS, 29 percent for K-12 and 24 percent for total state spending.  It was constant for higher education and it fell 20 percent for all remaining spending, including transportation.
This is quite contrary to the popular myths and narratives one hears from advocates and special interests related to HSS and K-12.  They moan endlessly about budget cuts, which means their wish list requests were prudently trimmed back by the budgeting process.  Or they trumpet ridiculous hyperbole, such as the claim a few years ago of a Reno Assemblyman that on his watch he witnessed the systematic destruction of K-12. At the time, K-12 spending had grown faster than even HSS.
Advocates and special interests spewing out such claims either have no idea of the facts or cynically don’t care and just blather such false narratives hoping to advance their cause at the expense of the public interest.  Next time you hear their claims, ask them to be specific and to document them.  They can’t.
Some other key facts on state spending I will address in critical detail in future columns include the following:
The single largest item in state spending is Medicaid, which sucked up $3.772 billion due to Nevada’s embrace of Obamacare provisions a few years ago.  That’s 64.5 percent of total HSS outlays.
The second largest item is state contributions to county school districts via the Distributive School Account, which reached $1.618 billion in FY18.  That’s 69 percent of state K-12 funds.
Large increases in higher education tuition, fees, grants, contracts and “self-supporting” operations (meal plans, housing, ticket sales, etc.) offset decreases in spending from the state general fund.
There are no meaningful trends in transportation spending, which is mainly episodic capital investment.  Nor in unemployment insurance, which is driven by economic trends and federal policy.
The tax-and-spend folks claim Nevada has a revenue problem, because they want to increase taxes to continue aggressively raising spending.  They are fundamentally wrong: Revenues and sound public policy should govern (limit) spending; spending should not drive up revenues.
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    Ron Knecht has served as Nevada Controller, a higher education regent, legislator and economist. He can be reached at RonKnecht@aol.com.  
     

     

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