October 7, 2006

More Detail on the Budget Deficit

From an extended report by AP carried at Forbes, with a minor dose of bias by writer Andrew Taylor:

But when measured against the size of the economy, which is the comparison economists think is most important, the deficit picture looks even better.

At 1.9 percent of gross domestic product, the 2006 deficit registers far below those seen in the 1980s and early 1990s. The modern record of 6 percent of GDP came in 1983 and deficits greater than 4 percent in 1991 and 1992 drove Congress to embark on a 1993 deficit-cutting drive.

….. Tax receipts are up $253 billion, a whopping 12 percent over last year. That’s the thirds consecutive year of strong revenue growth after a dismal performance in the early part of the decade. Revenues dropped three years in a row after fiscal 2000 but picked up again in 2004.

Taxes paid quarterly on corporate profits and by wealthier people and small businessmen were especially strong in 2006. Corporate income taxes rose 27 percent over 2005 while nonwithheld receipts increased 19 percent.

Uh, sorry Mr. Taylor, the “deficit-cutting drive” known to most as “the 1993 tax increase” did signal the beginning of serious attempts to reduce the deficit. The final Bush budget for the fiscal year that ended in September 1993 (based on the budget passed in 1992) held federal spending growth to only 1.6%. Fiscal 1994′s deficit was over $200 billion. Then from 1995-1999, the Gingrich Congress managed to hold average annual spending growth to an average of 3.8% per year, while growth-stimulated tax revenue growth averaged 7.7% during that period. That’s why there were finally budget surpluses in the late 1990s.

But this isn’t the REALLY big news. Wait until tomorrow for that.

Weekend Question 2: What’s the Best Way to Learn about What’s REALLY Happening at Gitmo?

Filed under: News from Other Sites,Taxes & Government,TWUQs — Tom @ 2:15 pm

ANSWER: Read Patterico’s 5-part interview with a former Gitmo nurse.
It’s something that should NOT be missed:

Part 1 — Introduction
Part 2 — Stashiu (name used by the nurse to protect his identity) arrives at GTMO, and tells us what the terrorists are like.
Part 3 — Hunger strikes, suicides and suicide attempts, and mental illness.
Part 4 — Treatment of the detainees
Part 5 — Stashiu reacts to Big Media pieces about GITMO.

You’ll learn more truth about Gitmo in those five posts than the rest of the country has in years of reading biased 527 Media reports.

Weekend Question 1: Why Do State-Run Enterprises Have Such a Poor Financial Track Record?

Filed under: Business Moves,Economy,Taxes & Government,TWUQs — Tom @ 10:12 am

ANSWER: Because the government(s) that own them won’t leave them alone.


The latest exhibit is Airbus, as described in a Thursday subscription-only editorial in the Wall Street Journal:

Airbus has never been just any company. It was formed as a joint venture of French, German, Spanish and British firms to compete in a market that had been dominated by American manufacturers. Its founders never judged its success solely on a commercial basis: Airbus versus Boeing (and, at the time, Lockheed and McDonnell Douglas) was a battle to prove that Europe’s “mixed capitalism,” in which the state plays a large role, was superior to America’s “cowboy capitalism.”

For a time, Airbus thrived. Taxpayer subsidies in the form of soft loans, known as “launch aid,” allowed Airbus to churn out new models more quickly than if it had had to finance them on its own. During the past decade it overtook Boeing as the leading maker of large civil aircraft.

As with any overbearing parent, though, the government’s good intentions soon became suffocating. Politicians pushed for the landmark A380, which has proven both technically difficult — wiring problems have been at the heart of all three production delays so far — and commercially disappointing. With only 159 orders so far, the world’s largest passenger plane remains far below its break-even point, believed to be between 250 and 400.

Since the A380 was designed chiefly to inflate European egos, its production work was divided between factories in Toulouse, France, and Hamburg, Germany. Now Mr. Streiff reportedly wants to consolidate all the work in Toulouse. Work on the successful A320 single-aisle family, also divided between the two cities, would be consolidated in Hamburg.

Sounds like a smart move. Too bad the same political forces that led to this unwieldy division of labor in the first place are still at work.

Chancellor Angela Merkel’s coaliltion government has already indicated that Berlin will “resist” the realignment, as an economic expert for the Christian Democrats told the Bild Zeitung newspaper. The Germans did, after all, spend about €750 million to improve the Hamburg plant specifically for the A380. Yet such economic logic doesn’t hold up; if anything, the A320 line appears to have a surer future than the A380 at this point. Even if protecting jobs were a valid reason for government meddling, preventing Airbus from taking the necessary steps to set things right will jeopardize more jobs in the long run than it will save in the short run.

….. The double whammy of government shareholdings and subsidies give European capitals far too much sway over Airbus’s decisions. No one can serve two masters. As long as Airbus is beholden to politicians instead of its customers and EADS shareholders, this “European champion” will continue to look beaten.

The challenge of running a profitable company is daunting enough without having to serve four masters (Britain, France, Germany, Spain) whose interests, unlike those of public-company stockholders, will never be solely profit-oriented. There is a limit to what even billions of dollars of government subsidies can accomplish. One hopes that other countries with unwieldy state-ownership ambitions are taking note of Airbus’s difficulties.


UPDATE, Oct. 9: Christian Streiff, CEO of Airbus’s parent company, who was mentioned in an unexcerpted portion of the Journal editorial, resigned Monday

Streiff drew up a cost-cutting turnaround plan for Airbus that enjoyed strong support from EADS directors, but he clashed repeatedly with the board over how the plan should be implemented and how much control he would personally exercise, according to three officials familiar with the discussions.

Streiff wanted to report to the parent company on a quarterly basis and have final say on Airbus appointments, while senior EADS executives including Enders demanded closer oversight, according to the officials, who asked not to be named because the discussions were confidential.

UPDATE 2, Oct. 10: From a subscription-only Wall Street Journal editorial

Government meddling is the chief reason Airbus is in freefall from its spot as the world’s No. 1 maker of large civil aircraft. Years of making decisions based on political rather than business rationale have put the company in its current bind.

….. But the real upshot of his resignation — aside from being more bad news for a company that last week announced further embarrassing and costly delays in delivering its A380 superjumbo — is that Paris has regained control over Airbus.

Positivity: Talk-Show Host Spares Amish Families from Hateful Protest

Filed under: Positivity — Tom @ 7:04 am

I understand that Mike Gallagher is catching some flak for this, but the flak-givers are way out of line. By any reasonable standard, he did a noble thing:

No good deed goes unpunished

When I managed to convince the hateful, horrible members of the Westboro Baptist Church to call off their planned “protests” outside the funerals of the little Amish girls in Pennsylvania, I didn’t expect to get a ticker tape parade or anything. In fact, I wasn’t looking to do anything at all except figure out how to use my radio show to thwart these people from hurting the Amish mourners any further.

You know these people by now. They’re the hateful people who carry picket signs outside the churches of the funerals of American soldiers that say things like, “Thank God for Dead Soldiers” and “Your Sons are Burning in Hell.” It’s hard to understand their warped, twisted logic for doing this, but why try.

I saw a news report that said that these same people were planning to protest outside the funerals of the slain Amish girls in Pennyslvania, with signs that would say, “Your daughters are burning in Hell” and “They deserved to die.”

I just wanted to do anything in my power to stop this from happening.

So while interviewing Shirley Phelps-Roper, I asked her what it would take to stop her from proceeding with their plans. “Money?” I asked. “Could we take up a collection for a new air conditioner for your church or something?” I asked. “You and your money can go to Hell”, she snarled. “We just want to get our message out.”

Suddenly, a light went on in my brain. What if I gave them an hour of my national radio show to say what they wanted to say (within reason), in exchange for their written guarantee that they would abandon plans to protest in Pennsylvania?

While hammering out the details with her, my mind was racing. And I was praying. If this could work, it would spare these poor people who are burying their children so much more grief.

Somehow, thank God, it worked. They bought it. They came into my studios in the Empire State Building in New York and signed the agreement. They spouted off for an hour. And the debacle in Pennsylvania was averted.