RockTheCapital.org

by Eric Epstein

Columnist Glen Thomas follows a litany of writers proclaiming the success of electric deregulation based on a single and misleading indicator - an increase in  the number of suppliers selling out-of-state and subsidized fuel products at inflated prices.

Defenders of deregulation cannot deny their promises, erase history or hide the economic facts on the ground. Deregulation was supposed to grow the economy, increase tax collations, and cut rates. At least that’s what Mr. Thomas and his cohorts promised 10 years ago.

On Aug. 4, 2000, Gov. Tom Ridge announced  that electric competition would lead to job growth, economic  expansion, and decreased rates. According to Ridge, “Pennsylvania’s national leadership in electric competition continues to bring dramatic  savings and economic benefits to Pennsylvanians.” Gov. Ridge added, "And, according to this new report, those savings and benefits will continue for  some time to come!”

So, let's check out the report. The Department of Revenue  released "Electricity Generation Customer Choice and  Competition” (August, 2000), and predicted free-market  nirvana. Secretary of Revenue, Robert A. Judge Sr., forecast  reductions in retail electricity prices would lead to the following economic impacts in Pennsylvania by 2004:       

The real gross state product will be $1.9 billion higher;     overall employment will increase by 36,400 full-time and  part-time jobs, nominal personal income will increase by  $1.4 billion; the price index will decrease by .47 percent;  and the population will increase by 51,400 people as workers are attracted to job opportunities in Pennsylvania.

The Department of Revenue also reported that deregulation would result in greater sales tax and Personal Income Tax collections.

Could the deregulators have gotten it more wrong? 

Electric companies are collecting $11.4 billion in stranded costs, shifting taxes onto the backs of property owners, dumping customers at record rates, and celebrating 20 percent to 30 percent rate increases.

Deregulation moved power plants to the local tax rolls under the assumption that utilities would pay at least the same amount to which they had been subject under real estate taxes. Oops, they did it again. By 2004 homeowners were paying an average 30 percent more in property taxes than they did in 1997. Meanwhile, electric utility companies are paying 85 percent less in taxes on their plants, down from about $120 million annually to about $20 million.

But it got worse for Joe the Plumber.   

Uncollectible accounts were supposed to decrease with the price of electric. Yet, deregulation’s “Consumer Protection Act” has produced a 113 percent increase in terminations. In the first eight months of  2008, PPL cut electricity to 28,561 customers, a 111 percent increase over the number of customers whose power was shut off during the same period in 2007. The statewide average was 24 percent.

This is a hell of a “success story” for the third oldest state in  the nation where citizens living under the federal poverty level has increased from 19 percent to 25 percent over the last 10 years.

Here, where the rubber meets the ideological road, a study  published by Carnegie Mellon University's Electricity Industry Center found, “On average, power users in restructured states  pay 2 to 3 cents per kilowatt hour more than customers in states  that didn't restructure.”

PPL ratepayers now enjoy the “choice” of choosing between  a 20 percent to 30 percent generation rate increase, and face a 5.3 percent distribution  rate increase next year.

These numbers are staggering and coincide with the  deteriorating health of Pennsylvania's shrinking middle class.  The promise of deregulation leading to  more jobs, lower taxes,  and affordable prices has turned out to be a profitable illusion for a select few.

by Eric Epstein

Dwight Evans (D-Philadelphia), the quintessential insider, declared during last year’s budget’s impasse that the budget, “Is a process. It’s a process.”

The problem is that all budgets are the result of a bad process. The budget process is annual exercise of reassembling Frankenstein's wallet. Even an entrenched bureaucrat like Senate Republican spokesman Erik Arneson conceded, "...our budget process is clearly dysfunctional and needs to be improved."

No kidding.

However, reforming the process is at the bottom of the legislative priority list. All the post-budget whining, crying and opining failed to address the collapse of reform safeguards enacted to protect the process.

Back in March 2007, House members moved to “allow complete examination of legislation,” and mandated a 24-hour waiting period after a bill is amended before a final vote is taken. Then Speaker pro forma, Dennis O’Brien (R-Philadelphia), gushed, "The populace in Pennsylvania has demanded that we make change. There are significant changes here."

Rick Fellinger of the Evening Sun reported, “After two days of feisty debate, House members approved a reform package Tuesday that will change the way they vote on bills and put new limits on how they spend taxpayer money.” (March 14, 2007)

Ancient history?

This year’s $28 billion budget version of pain and suffering was released around 10:00 pm on June 28. In reality, the deal was cut by the Governor and Caucus leaders earlier in the day. Rank and file - as well as the media and general public - were locked out of the process and given hours to decipher and review the details of a complex budget document.

Here comes the best part, one of the rules instituted to protect the public and curb budget shenanigans was a mandatory time out prior to voting on the budget.

Bam. The Senate voted unanimously to lift its six hour waiting period on the budget

The House appears to have waived its 24 hour rule prior to voting on HB 1186 creating the Department of Drug and Alcohol Programs and changing the PHEAA board. The bill passed the Senate in the afternoon of July 2 and passed the House before noon on the 3rd. That's less than 24 hours, so either the House suspended the rules with an unrecorded vote or the motion to proceed is the same as a motion to suspend the rules.

Wam bam.

Taken together, the votes were sharp and unmistakable shots across the reform bough.

Where was Rep. Josh Shapiro (D-Montgomery) and the vaunted Speakers Commission on Legislative Reform? What happened to the Senate GOP leadership's request for House Democrats to act on reform legislation? Where was Sam Smith (R-Punxsutawney) and his party’s PATH to reform? What happened to Sen. Jeffrey Piccola’s (R-Dauphin) call for Pennsylvania first special session on ethics and government reform?

Calls waiting.

The truth of this matter is that reform has come to mean nothing. We need a new moral vocabulary.

This year’s budget process was a rushed and hushed process.

Almost five years to the date of the late-night, pay raise scam, legislators waived off the rules that were temporarily erected to protect the public and taxpayers from back room deals.

The Governor and legislature stuck a collective middle finger in the public's reform eye. The rules have not changed to protect the innocent, and they are not going to change until we have a constitutional convention or a sustained, broad based insurrection against the political lard gumming up the works.

by Eric Epstein

I am convinced we are on the cusp of a pension debacle due in large part to our marriage to a defined benefits’ system. I also believe that we should implement defined contribution plans for incoming government workers.

I view this year’s version of “pension reform light” - docketed as House Bill 2497 - as a bookend to last year’s version of “pension reform dark” - House Bill 1828.

Flashback to last summer. No matter how you feel about state and municipal pensions, most Pennsylvanians agree that sunlight is the best cure for what ails our system. With that prescription in mind, you’ve got to wonder why the Senate passed far-reaching pension legislation under a bill initially designed to bail out Philadelphia.

HB 1828, as approved by the House, laid out the authority for the City of Philadelphia to raise $700 million over a five year period to prop-up ailing municipal pensions and balance the City’s budget. By the time the Senate Finance Committee reported the legislation to the floor, the twelve page text ballooned to a 97 manuscript. The scope was changed from a City of Philadelphia bailout to statewide pension changes affecting 41,000 police officers, 10,000 fire fighters, and tens of thousands of municipal employees.

The Senate legislation was classic “cut-and-gut” legislation.

Now - under the watchful eye and heavy-hand of Rep. Dwight Evans (D-Philadelphia) - comes the next, best pension delaying ploy: House Bill 2497.

HB 2497 sets the clock back for new state hires. This legislation creates a two-tier, hybrid retirement system. The newbies would be swaddled in pre-2001 pension guarantees. The bill would provide for longer vesting periods. Not a bad start.

But the plan is weighted down in false hope, and does not address the impending pension melt down. This package is a kinder, gentler pension Frankenstein.

"We don't think the current defined benefit plan is sustainable," PSBA Executive Director Thomas J. Gentzel said. Ok. But this legislation simply postpones the inevitable, and shifts a greater share of the tax burden from school districts to the state. Code for increased state taxes.

The tax shift does not deal with core spending and liability issues. In fact this legislation re-amortizes pension liabilities over 30 years. Together with PSERS’ unrealistic return assumptions of 8%, HB 2497 actually increases tax payer exposure for our kids.

Talk about kicking the can down a dead end road.

I find myself in agreement with State Sen. Pat Browne (R-Lehigh) who chairs the Senate Finance Committee. Mr. Browne called the proposal an improvement, but not a solution. "There needs to be a liability management plan," Browne said. "To just kick the can down the road and manage the liability without recognizing what is happening is plan redesign. It is not reform."

We need to create a defined contribution system for new hires that allows for a menu of options. This system would decrease the potential for an intergenerational bail out, increase user choice, and allow for optional, aggregate investment strategies.

by Eric Epstein

To the best of my knowledge, no person, corporation, organization or political party officially endorses waste as a business practice or political platform. Yet, this vast black hole continues to rotate and thrive around the twin laws of political physics - corruption and collusion.

This parallel universe is populated by hordes of wasteoids who comfortably nest within the major political parties and feed on their host - the taxpayer. They gain access through insider trading, campaign contributions, blood lineage, fraud, deception, and apathy.

Planet Waste is thriving and smothering political and economic competition.

Taxpayers are besieged with reports, investigations and convictions relating to welfare and weatherization fraud, ID theft, senior scams, airplane rides to work, pay raises, pension “bounces”, WAMs, judicial car washes, $5 bags of peanuts, no bid contracts, Pay to Play, charm school, Pay to Pray, culinary classes, “European facials, “Escape Pedicures,” falconry lessons, “Golfers Glow,” bad SWAPs, mud baths, “Polling for Dollars”, Bonusgate, 25 hour billing days, “Ghost Employees”, nepotism, and “Special Leadership Accounts.”

Waste, fraud, and duplicity have become the forth branch of government. Pennsylvanians are predictably overwhelmed by systematic, state-sponsored abuse. So, how do we confront waste and cultivate a culture of accountability?

Most states sponsor programs or departments that investigate abuse, fraud, and waste. Some states even reward whistle blowers. Pennsylvania maintains several offices for consumers and taxpayers to report bilking practices.

The Auditor General’s Office of Taxpayer Advocate provides a hotline #1-800-922-8477. The Advocate does not offer financial rewards, but asks, “If you know of or suspect waste, fraud or abuse in a state program, agency or other endeavor, please contact the Office of the Taxpayer Advocate.”

The Attorney General has several outlets including hotlines for consumer protection #1-800-441-2555 and health care #1-877-888-4877.

The Department of Revenue also enlists citizens to report fraud to a Taxpayers’ Rights Advocate (717)-772-9347. The Department allows for anonymous tips, but “does not offer monetary rewards for reporting tax evasion crimes.”

Yet, the waste stream continues to grow like a bloated deer tick. How do we arrest this plague? Do we need to consolidate departmental advocates into a dedicated and independent Government Accountability Office? Should we reward waste busting efforts?

We can implement measures to save taxpayers dollars by incentivizing waste and fraud reporting. But we risk creating one monster to devour another. Monetizing whistleblowing has merit, but it also raises issues of privacy, access to proprietary data, cyber invasions, and character assassinations.

We should evaluate the experiences in other states and examine Best Management Practices for combatting waste and fraud.

At a minimum, we need to strengthen existing portals for reporting waste and enhancing enforcement capabilities. Among the strategies we should consider include: increase sentencing guidelines for fraud offenses, facilitate better data sharing and interagency cooperation, increase surety bonds for contractors, and enhance and expand overpayment recovery efforts.

by Eric Epstein

Imagine a system that allows you to draw your own political districts, pick your personal voters, steal from taxpayers, raise your pay, vacation in far away places without spending any of your own money - and best of all - provides you with guaranteed lifetime employment, health care and a pension, no matter how worthless and unproductive you are.

Stop dreaming. Your home, comrade. This place is not a far away province stashed away in Russian literature. This is your back yard. Welcome to Pennsylvania.

Remember the old slogan, “America starts here.” Not any more. After the May 18, politburo affirmation exercise, we need to fess up and acknowledge our new tag line, “Political inertia vacation's here.”

Most of the deadbeats - and quite a few incumbents without heartbeats - coasted to victory without opposition. The rank and file fell into place without a whimper. The vaunted and overrated “reform class of 2006” and the new "greedership” of 2008” won reelection promising to deliver the same crap in a different pile.

Mr. Corbett bullied his way to anointment, and skillfully manipulated all the trappings of his office. Dan Onorato spent his way to a decisive plurality using the Governor’s Rolodex, and convinced voters that raising taxes to pave a road to nowhere is a virtue.

Here we go again! The IPP - Incumbency Protection Program -provided results less competitive than a Syrian primary or a Burmese general election.

It happens every election cycle. The IPP kicks into full gear, and the electorate grins and bears the brunt of a fictional democracy. The symptoms and results are the same: Voters call into radio shows, don’t show up at the polls or develop political amnesia. Politicians spend all their time and your money campaigning to keep their low-performance, bad results job.

What is their job? Duh, getting a budget done on time.

The political reality is devastating: This legislature and this governor - as well as the next Governor and next legislature - do not have the skill sets or calcium in their backbones to lead or govern.

The projected $2.3 billion state revenue shortfall is structural, and based on a $808 million MCARE gap, a transportation funding hole of $450 million, and a $720 million shortfall in tax collections through the first quarter of 2010.

Federal revenue, in the form of more stimulus funding, is an unlikely development during mid-term elections, and in a year when a Governor, with little political capital, is banking on $850 million in federal welfare.

Senate Republican have already advised superintendents to exercise caution when developing budgets, and predicted Gov. Rendell’s proposed $5.9 billion ($354 million increase) in basic education funding to support district operations is unlikely.

Yes, we’re on the cusp of another budget debacle. You may have forgotten last year’s heartfelt call for early engagement, a longer budget season or the Republican PATH to reform. Great campaign slogans; not reality. Don’t fret, the Governor and legislature remembered to forget last year too.

But it gets worse. These guys can’t even work with each other when they’re in town.

The Senate R’s don’t trust the House D’s. The House D’s are led by a retiring Speaker, and a Majority leader who is really a UFC combatant without a caucus. The House R’s don’t get along with the Senate R’s, and will do anything to gain the majority. The Senate D’s are MIA, but looking for WAMs. And the Governor is off auditioning for his next gig as a Fox commentator or Comcast sportscaster.

Confused? Don’t be. Gridlock is assured, and the budget won’t get done on time. The only thing the Republicans agree on is that they are not going to let Rendell break his seven year itch.

It’s time to face the facts. We do not live in a democracy. We don’t live in a republic. We live in a modern-day kleptocracy.

by Eric Epstein
 

Sometimes one must go to the past to rescue the future.

This is one of those times.

Discussions, debates, and diatribes relating to global warming and the development of a green economy invariably fail to account for the dark underbelly and economic burden associated with coal and nuclear energy.

Pennsylvania has paid a heavy price for fueling the industrial revolution: 51,483 people have died from mining accidents, and 2,400 miles of Pennsylvania’s waters have been polluted from coal mine drain off.

By the late 1950s acid rain's harmful footprint was detectable throughout Penns Woods, and in 1986 Elk County recorded the most concentrated acid rain figures in the nation. Pennsylvania has continued to receive more acid rain than any other state, damaging its natural resources, citizens, and economy.

In the 1970s, recession, stagflation and two Arab oil embargoes, propelled nuclear energy to the front of the subsidy trough. Cost overruns, nuclear waste, water use, and lessons learned from the coal era were put aside to embrace the magic energy bullet: nuclear power.

However, the worst accident in US commercial nuclear power history began on March 28, 1979 at Three Mile Island when the plant suffered a core melt down. Rate payers and taxpayers have doled out $2 billion for a plant that operated 120 days, and remains a high-level radioactive waste site in the middle of the Susquehanna River.

With the arrival of deregulation, Pennsylvania rate payers were left holding the bag on $8.5 billion in cost overruns for energy “too cheap meter” at the Limerick and Susquehanna nuclear generating stations.

Finally, in 2002 the US government announced a plan to reduce greenhouse gas intensity (the ratio of greenhouse gas emissions to economic output) by 18% over the next 10 years.

Pennsylvania, a traditional coal and nuclear state, had virtually no contributions for clean, green or alternative energy sources at the turn of the century. In fact, Pennsylvania’s renewable energy portfolio was limited to hydro power - most of which was exported out of state.

It’s past time to move Pennsylvania’s economy and environmental stewardship into the 21st century.

Rep. Eugene DePasquale has proposed to expand the green economy in Pennsylvania by introducing bipartisan legislation that would significantly boost the amount of energy in Pennsylvania derived from cleaner energy sources. The legislation would strengthen the Alternative Energy Portfolio Standards Act of 2004 by requiring 28% of Pennsylvania’s energy come from clean sources by 2024.

The current clean energy requirement is 18% by 2020. The proposed legislation would nearly double the share of energy that must come from the cleanest sources by requiring 15% of energy to be derived from wind, low-impact hydro, geothermal, methane gas, fuel cells, biomass energy, and solar.

Unlike the rate shock caused by deregulation, consumers would be protected in this legislation by requiring the state Public Utility Commission to delay the alternative energy requirements by the utilities if it determines the cost of compliance is too high or there isn’t enough alternative energy ready for the grid.

by Eric Epstein

In 1970 we imported 24% of the oil we consumed. The  amount doubled by the time of Jimmy Carter’s epic energy  speech on April 18, 1977.

With the exception of preventing war this [energy crisis]  is the greatest challenge our country will face during our  lifetimes. The energy crisis has not yet overwhelmed us  but it will if we do not act quickly. It’s a problem we will  not solve in the next few years, and it’s likely to get  progressively worse through the rest of this century.  Many of the proposals will be unpopular. Some will  cause you to put up with inconveniences and make  sacrifices.  

Today we import 70% of the oil we use, and Americans  continue to consume a disproportionate amount of the world’s  reserves. But the percentage of foreign imports is misleading,  and not necessarily bad news when you diagnose where we  get our oil.

For example, OPEC’s share of American oil imports has  been sliced down to 56%, and 42% percent of  the weakened  cartel’s contribution comes from our allies in Iraq and Saudi Arabia. Both nations contain a significant American military  presence and vast reserves.  

The new real politick is that we have a diversified and  proximate addiction inventory. Three of our five main  suppliers - or 50% of the oil we import - are located in our  front and back yard. Canada, Columbia, Ecuador, Mexico,  Venezuela, and the Virgin Islands have displaced Middle  Eastern sources.

The geopolitical reality is that large stocks of regional  resources are currently being tapped. Contrary to public  opinion and political hysteria, drilling off the coast of  New Jersey, Delaware, Florida and Alaska is not a  panacea.  There are important, but limited oil reserves in American  waters, and there are risks to our multibillion dollar fishing and tourism industries.

However, before we drill, we need to know what we  have and where it’s located. The nation’s off shore drilling  data is from the Cold War. Job one is to conduct a thorough  due diligence of our assets. To Ken Salazar’s credit, part of Obama’s drilling plan is to conduct an inventory of our  resources.

Bobby Ryan, Chevron’s VP of global exploration, stated  on March 31, 2010: “We don’t have a good understanding  of the what the true potential is. Until you really get in there  with modern technology and evaluate it, you don’t really  know.”

The Interior Department’s current estimate of  economically recoverable reserves (assuming we don’t give  the leases away) in the areas covered under Obama’s plan  is 63 billion barrels of oil. What does that mean? Not even  a nine year supply for a nation that consumes 7 billion  barrels annually.

I’m not theologically opposed to offshore drilling, but  I am wary of making policy decisions that yield minimal  dividends down the road, especially when there are other  options.

American consumption appears to be stabilizing due  in large part to consumer awareness, improved automobile  standards, and increased ethanol use. American refineries  are operating well below capacity at a time when “margins  have bottomed out and there’s need to be a correction.   Demand is gone and not expected to return,” according to  Nathan Schaffer an industry analyst with PFC Energy.  (Wall Street Journal, April 9, 2010)

Just like off shore wind, there is a role for targeted  drilling after we complete the requisite due diligence.  The best way to protect future generations is to adjust  and decrease our oil consumption patterns.

In the meantime, wake up America and smell the  octane north and south of the border. Part of the answer  to our oil addiction is continue to import oil from the  same nations that provide us with hockey pucks, coffee,  and baseball players.

by Eric Epstein

In November 2006 Gov. Rendell’s Transportation Funding  and Reform Commission released its final report, and concluded  Pennsylvania would need an additional $1.7 billion per year -  in perpetuity - to maintain the state’s current infrastructure and mass transit systems.

Mr. Rendell’s budget proposal in February 2007 sought to fill the transportation funding gap with an unconstitutional Oil  Company Profits’ Tax, and the leasing of the Pennsylvania  Turnpike to an Australian or Spanish conglomerate. Both  initiatives were derailed.

With the passage of Act 44 of 2007, the Pennsylvania  Turnpike Commission (“ PTC”) expanded it’s road monopoly  by 58% (from 537 miles to 848 miles) by placing Interstate-80 (“I-80”) under the Commission’s control. Act 44 also fostered  a dependency between Pennsylvania’s transportation arteries  and the Turnpike Commission in as much as the PTC was  authorized to incur billions of dollars in bonded debt to   subsidize 39,530 miles of roadways under PennDOT’s  jurisdiction.

Much of the funding for Act 44 is predicated on assessing  tolls on I-80, yet the Pennsylvania General Assembly has no  authority to authorize   tolling of a federal highway. Any tolling  scheme must be approved by the Federal Highway  Administration (“FHA”).

However, the Federal Highway Administration rejected  Pennsylvania's plan to impose tolls on Interstate 80 on  September 11, 2008  based in part on questions about whether  the amount of money that would be paid by the Turnpike  Commission to PennDOT was an "objective market valuation"  of the highway. 

FHA official King W. Gee said there were also other  "weaknesses" in the application, including a lack of sufficient  traffic studies. According to former-U.S. Secretary of  Transportation Mary Peters, the application to implement  tolls along the I-80 corridor was denied because it did not meet technical and statutory requirements.

If I-80 tolling continues to be rejected, Act 44 will  generate only $450 million annually, less than one-fourth  the identified need of $1.7 billion.

Even if the FHA permits tolling on I-80, revenue  generation under Act 44 requires a 25% rate increase on  tolls on the existing Turnpike as well as annual increases  of 3%. As the details of Act 44 emerged, the Pittsburgh  Tribune-Review noted that the legislation contains no  restrictions on how high the PTC can raise tolls on either  the Turnpike or I-80.

Rural residents, businesses, and truckers along the  I-80 corridor are in large part opposed to tolling I-80  due to the localized economic hardship the assessments would create.

For example, on August 14, 2007, Norman S. Rich,  President and CEO of Weiss Markets, noted that all of  their 126 stores in Pennsylvania are supplied from a  distribution center in Milton, just 10 miles from route 80.  And 57 Weiss stores are supplied via I-80, six days a week  or the equivalent of 20,000 trips a year on the road. “If  the I-80 toll proposal matches the Pennsylvania Turnpike  rates, a round-trip truck run from Milton to Stroudsburg  would cost $62.” The cost of the haul has actually jumped  after the Turnpike Commission increased tolls by 25% in 2009 followed by a 3% bump this year. 

Who do you think is going to pay for the increased cost  of groceries?

Rick Geist, (R), the former Chairman of the House  Transportation Committee, pointed out Act 44’s slippery slope:
 

We have a massive transportation infrastructure problem in Pennsylvania that must be addressed. We’ve chosen to go $11  billion  into debt and give unprecedented power to the  Pennsylvania Turnpike Commission. I see this as an irresponsible deviation from the pay-as-you-go philosophy that Pennsylvania  has followed to pay for transportation.

Any antidote to the transportation funding crisis is going to be a difficult political pill to swallow. Among the solutions we  will have to consider include: abolishing the Turnpike Commission  and subsuming it into PennDOT; supplanting the Revenue Neutral  Reconciliation taxing protocol with PURTA to reestablish mass  transit funding; increasing pay-as-you-go at the gas pumps, and/or  raising vehicle fees.   

by Eric Epstein

Pennsylvania is the only state that does not impose an  excise tax on “smokeless” tobacco, cigars or pipe tobacco.  We were also one of the last states to join the cigarette  tobacco suits. Yet the public health costs, loss of revenue, and decreased worker productivity due to illnesses from  these products are well established.

Lip, gum, jaw, mouth, stomach and throat cancer are  among the documented afflictions that society pays for  as a result of the consumption of “niche” tobacco products.

“Smokeless” tobacco contains at least 28 known  cancer-causing chemicals including arsenic, benzene,  cadmium (used in car batteries), cyanide, formaldehyde  (used for embalming), lead (nerve poison agent),  polonium 210 (nuclear waste), and N-Nitrosamines  (cancer-causing agent). The University of Pittsburgh  found that “smokeless tobacco puts more nicotine into the bloodstream than cigarettes, people who ‘chew’ on  a regular basis often find it harder to quit than cigarette  smoking.”  

Especially disturbing is the rising level of “snuff”  use among young males. “For instance, in rural areas,  the rate of  smokeless tobacco usage was 10%  in 2005,  compared to 2% percent in large urban areas or 3.7%  in smaller urban areas. In addition, high school boys  (13.4%) use smokeless tobacco at  much higher rates  than high school girls (2.3%).” (CDC, “Youth Risk  ehavior Surveillance,” 2007).

The CDC suggested that Pennsylvania disperse over  $155 million annually on tobacco prevention and cessation  programs. We currently spend $31 million on these  programs due to funding decreases.

Frankly, it’s inexplicable that our society correctly  views obesity as an epidemic among young people, but  “smokeless” tobacco addiction is splashed to the side  of the baseball diamond.   

Why?

A year after legislation made cigarette, cigar, and  pipe smoking illegal in restaurants, office buildings,  schools, sports arenas, theaters, and bus and train  stations, big tobacco wanted to make sure it didn’t get burned again. The National Institute on Money in  State Politics reported that the tobacco industry donated $415,950 to Pennsylvania candidates and campaign  committees in 2008. By contrast, in 2006 the industry  only invested $161,455 on Pennsylvania politicians.  

Despite the medical facts on the ground and the economic exposure caused by “smokeless” tobacco,  cigar products, and pipe smoking, the legislature is  content to chew its cud .

This situation is a classic example of external  diseconomics when society pays more for a product  - in this case adverse health impacts - than the value  of output produced. An equitable solution is either  for the producer to internalize the costs or charge  consumers the full value for the consumption of the  products.

In other words, you can’t start a fire, watch it  burn, and charge admission while bystanders put the  fire out. Not imposing an excise tax on a public health  menace is a de facto subsidy. It’s the same logic that  allowed coal companies to walk from acid rain, black  lung, mine subsidence, and  contaminating thousand  of miles of Pennsylvania’s waterways.

Although we assess a user fee on everything from  gasoline to gambling, “niche” tobacco products are  viewed as emerging industries that we daresn't snuff out.  Without a dedicated user fee, somebody other than   producer and consumer is picking up the tab for medical bills and reduced worker productivity. That somebody  is the rate payer and taxpayer. Pennsylvania spends  $5.12 billion dollars annually on health care costs linked  to tobacco related diseases.

We need to ensure this “niche” growth engine  shoulders a fair share of the burden for the damages it  causes. However, any excise tax on this industry in the  hands of this legislature and this governor is a risky  proposition as evinced by the table games Wam-a-thon.  Moreover, revenue streams created by assessing these  products must be dedicated to education, cessation, and  medical offsets. Suffice to say it will be up the next  Governor to strike the proper balance between risk and  reward for “just a pinch between your check an gum.”

by Eric J. Epstein

“Stimulus” is a short-term shot-in-the-arm that causes  a response. Government is a long-term  proposition. The  immediate results of the  American Recovery and  Reinvestment Act (“ARRA”) are mixed. The long term recipe  for this nation’s economic health requires personal and  societal discipline.

On the bright side of the stimulus equation the Market  is up, December retail sales increased by 2.8%, the  manufacturing sector grew for the last five months of 2009, and factory employment showed improvement.

Roads were paved, bridges built, and jobs created. And most die-in-the-wool conservative politicians scarfed up  stimulus money to back fill or finance state and local debt  just like their liberal brethren.

However, the structural deficit that is modern American  government will not be cured by the ARRA, arrested by  gimmicks or reversed by Fox television. Stimulus dough  will not reinvent government.

The malaise is far from rectified. Maybe unemployment has crested at 10.1%, but it will take years for employment to rebound to pre-recession levels. Local, state, and federal  deficit mountains have not been capped.  We simply switched  debt from a state to federal pocket.

This crisis is not about debating the Keynesian model.  Administrations from FDR to Reagan to George W. have  employed Keynesian injections to refuel the economy.

Our woes extend to the twin challenges of retooling an  aging infrastructure and paying down deficits. We need to  stabilize spending, address debt, and recognize that  conservatives and liberals got us into this mess. As we move  from stimulus shock to debt awareness mode, we will also  require consistency and accountability.

None of the doomsday projections blanketing the air  and audio waves provide a historical context. Many folks  seem to have forgotten the role of the Bush Administration  during their daily rants, and affix blame solely on the  shoulders of Mr. Obama’s 12 month administration.

Mr. Bush actually inherited a balanced budget before  going on a spending spree. Former Treasury Secretary Paul  O'Neill attempted to send a pre-recession flare. He warned  Mr. Bush that the growing budget deficit was poison for the  economy. Dick Cheney quashed Mr. O’Neill, and lectured the secretary on the finer points of priorities: "You know, Paul,  Reagan proved deficits don't matter. We won the midterms (congressional elections). This is our due."

Where was the tea party when Mr. Cheney announced  - on behalf ot the Republican Party - that debt didn’t matter?

O’Neill was fired in December 2002, but as Chris  Edwards of the Cato Institute noted last month, the price  we are paying for political economics goes beyond liberal bashing:

In total Bush increased spending by an average of 4.9% (after adjusting for inflation) per year, the highest by any president  since Johnson. Excluding interest payments, the increase  under Bush was 5.6% per year in real terms, nearly  matching LBJ. And - for those who think Bush only increased  spending on wars - non-interest, non-defense spending increased 5.4% annually in real dollars, which is the highest since Nixon.

It’s bad enough when consumers live off of debt. It’s worse  when conservative vice presidents argue government debt doesn’t matter. As history has clearly demonstrated, both parties are to blame for the mess we’re in.

I’ve been bemoaning budget deficits my entire career, and  proudly stand behind the bipartisan efforts of the Concord Coalition.

Ok, so stimulus loans patched a hole in a wooden tire. What  to do we  next? We educate and preach with missionary zeal that  debt matters. Debt awareness can not be a fad. It has to be a  public awareness campaign. We all need to pledge to be balanced  budget hawks.