Honey Creek Resort Still Bleeding Dollars

A recent CR Gazette article reports that Iowa's state-owned Honey Creek Resort continues to be an albatross around the neck of Iowa taxpayers. According to the article: "The resort’s revenue fell $549,766 short of its budgeted revenue of $6.4 million, which was better than fiscal 2011 when Honey Creek missed its goals by nearly $645,071."

In 2006 the state issued $33.5 million in bonds (which means they borrowed $33.5 million) to partially pay for the new $58 million resort. Not to worry, taxpayers were assured, this beauty would pay for itself! (Picture a sweaty man with a bad combover, really wide tie and a plaid suit coat selling this idea to state officials.) The state could pay off the bonds with profits from the resort itself.

According to the rosy projections that the bond issue was sold with, the resort may suffer a small shortfall the first couple of years but should already be raking in a small $316,000 profit by the third year of operation.  Honey Creek is now in it's fourth year of operation and it ended FY2012 with a loss of $549,766.

That money has to come from elsewhere in the Iowa DNR's budget. The Gazette report again: "Revenue for fiscal 2012 did not cover bond payments and management fees for the resort, which caused the DNR to shift nearly $1.3 million from statewide conservation efforts to Honey Creek. More than $4.9 million in Resource Enhancement and Protection (REAP) funds have gone to Honey Creek since the resort opened."

So the DNR built a luxury resort to stimulate the economy (not its job), it has hemorrhaged money ever since, causing the DNR to pull millions of dollars away from the enhancement and protection of Iowas natural resources (its job). Only in the world of government does that make sense.

But surely things could turn around and the state could start earning enough to make Honey Creek self-suffient. Read my much-earlier post Privatize Honey Creek Resort to see why I still wouldn't like it.

The Ron Paul Plan

At a time when we are adding over a trillion dollars to our national debt every year, the Congressional Joint Select Committee on Deficit Reduction (a body designed to make the hard decisions that Congress itself has been too cowardly to make) is expected to recommend making about that much in spending reductions over ten years. When they’re driving us over a fiscal cliff I guess it’s nice to know that they’re at least thinking about downshifting. This laughable budget-cutting contrasts with the economic plan offered by Congressman and Republican presidential hopeful Dr. Ron Paul.

Dr. Paul’s detailed “Plan to Restore America” would cut $1 trillion from the federal budget during the first year of the Paul presidency and deliver a balanced budget by the third year. Paul’s plan would eliminate five do-nothing federal departments (Energy, HUD, Commerce, Interior, and Education) and reduce the federal workforce by 10%. It would block grant Medicaid and welfare to the states, allowing flexibility and cost-savings.

If you think such cuts are too much and would knock the federal budget back into the 1800’s, no such luck. Nationally syndicated columnist Jacob Sullum points out, “Paul's plan would not return the country to the 1990s, let alone the 19th century. It calls for total outlays of $2.9 trillion in 2015, which is about as much as the federal government spent as recently as 2003, adjusted for inflation.” They are substantial cuts, but not oppressive.

Ron Paul would extend the Bush tax cuts, lower the corporate tax rate to 15%, and abolish taxes on inheritance, capital gains and personal savings. Paul’s plan would repeal the job-crushing Obamacare, Dodd-Frank, and Sarbanes-Oxley laws and repeal many onerous regulations. It would audit the Federal Reserve and use free market techniques to strengthen the dollar and stabilize inflation. In a symbolic gesture, President Paul would take a salary of $39,336, the median income of the American worker.

You can read the plan in-depth at RonPaul2012.com. At a recent forum, Governor Branstad praised Ron Paul’s plan as “the boldest plan to reduce the federal deficit.” With the country careening ever closer to socio-economic collapse, if now isn’t the time for “bold plans” such as Dr. Paul proposes, when will be? I’ll vote for Ron Paul in the January 3rd Republican caucus.

Pennies from Heaven in Iowa

Here in my pastoral Iowa town of Monticello (pop. 3,796) there's been a small debate about getting a new terminal building for our airport.  I say a "small debate" because only a couple of people have spoken out against it at City Council meetings.  Why would the community be against it?

According to our local paper the Federal Aviation Administration will fund 95 percent of the new structure and the remaining 5 percent will come from private donations to the airport.  Perhaps the gist of the pro-terminal side of the debate can be summed up in the words of one member of the local Airport Board.  He said: “This is a ‘no brainer.’ It will cost the Monticello taxpayer nothing[.]”  [Emphasis added.]

Free money!  The federal government will pick up the tab. It's a common refrain all across the fruited plain.  It won't cost local taxpayers anything... unless they also happen to be live in the U.S. or have children who will.

The U.S. is already $14 trillion in debt and is borrowing another $3 million every minute.  That's $46,000 of debt for every man, woman and child in America.  If you include the unfunded liabilities for Social Security, Medicare and the Republican prescription drug entitlement, that number is much, much higher.  According to Strong America Now, "Americans born in the 1980′s and 1990′s could face an income tax rate of 60% just to cover the interest on our national debt."

President Obama and the Democrats say we can pay for government's constantly skyrocketing spending by increasing taxes on those dastardly rich people.  But, as Amy K. Frantz (writing for Iowa's own Tax Education Foundation) points out, already "the top 10 percent of tax returns paid 69.9 percent of all federal income taxes, and the top 25 percent of tax returns paid 86.3 percent of all federal income taxes."

A recent Wall Street Journal article cited by Frantz states that even if the Democrats placed a confiscatory top income tax of 100% on all millionaires and billionaires "[t]hat yields merely about $938 billion, which is sand on the beach amid the $4 trillion White House budget, a $1.65 trillion deficit, and spending at 25% as a share of the economy, a post-World War II record."

In a Washington Times article, Cato Institute senior fellow Richard W. Rahn concludes that to balance the budget through tax increases, "[T]he only way for the government to obtain significantly more revenue is to increase taxes greatly on the lower- and middle-income groups who now pay very little. But increasing tax rates on the upper-, middle- or lower-income groups will have the nasty side effects of further slowing economic growth and increasing unemployment."

What money the government can't tax or borrow to cover its spending it often prints out of thin air which causes inflation. U.S. Representative Ron Paul has called inflation the "hidden tax" since nobody really thinks about what causes it. Paul explains: "The inflation tax, while largely ignored, hurts middle-class and low-income Americans the most. Simply put, printing money to pay for federal spending dilutes the value of the dollar, which causes higher prices for goods and services. Inflation may be an indirect tax, but it is very real — the individuals who suffer most from cost of living increases certainly pay a 'tax.'” Those "individuals who suffer" higher prices include those lucky folks in Monticello or your community who got some "free" goody from the feds.

My point here is not that my community does or doesn't need a new airport terminal or that your community does or doesn't a new parking ramp or Earwax Museum.  The point is that we can no longer treat federal largess as manna from heaven that comes with no cost whatsoever.  It comes with the shackles of indebtedness that we are slapping on our children.  May they and God forgive our selfishness.

Report From The Tea Party

Thursday I attended my very first tax day tea party in my small town. A local business had hung a Gadsden flag and banner saying to gather there at noon on the 15th. By my count, there were about 20 of us down on Main Street carrying signs. That may not sound like many people, but the population of my town is only 3,600 and most folks were at work. (If I hadn't taken the day off work, I wouldn't have been there either.)

There were no major incidents, although one guy driving by did give us a "thumbs-down." A few cars and trucks honked in support. Mostly people just drove by trying to avoid eye contact though.

There were no "infiltrators" as several news organizations had warned. One guy showed up in a purple SEIU tee shirt and I wondered if he was there to start trouble. To my surprise, he just stood there with his child, holding a sign that read, "I love my country, but fear the gov't."

One gal, I'd say in her sixties, tried to give everyone a copy of the U.S. Constitution. She said she had distributed about 600 copies so far (not just on that day). Good for her!

I saw no hatred, malice or racism toward anyone, just concern about excessive taxation and government spending. These are my people.

Next stop: The Second Amendment March in Des Moines on Monday.

Honey Creek Money Pit

In July I reported to you on Honey Creek Resort in southern Iowa. I pointed out at that time that, in addition to diverting funds (about $58 million) from other more legitimate government projects, the state was creating a taxpayer assisted entity that would directly compete with private industry. I argued that the jobs "created" at Honey Creek were actually jobs stolen from around the state.

Now the Cedar Rapids Gazette reports that in its first 9 months of operation the resort lost $900,000. A state audit showed that between September 2008 and June 2009 Honey Creek had revenues of $3.1 million but expenses of almost $4 million.

In a separate piece, Gazette columnist Todd Dorman, who visited the resort last summer, said, "Although some lawmakers are talking about pulling the plug on state ownership, I’m withholding judgment until I see how a fully completed resort does this year in a slightly more stable economy." True enough. Plenty of businesses lost money in the last year. Unfortunately I'd be opposed to government ownership of the resort even if it posted a tidy profit, for the philosophical reasons listed above.

Dorman also added the warning: "If the state’s going to own a resort, it needs to think more like a crafty entrepreneur than a drowsy bureaucrat." Here Dorman misses the point. Rather than trying to teach bureaucratic ducks to bark like entrepreneurial dogs*, why not just sell the thing to real entrepreneurs in the private market?

It might be hard to find willing buyers right now, however, since entrepreneurs tend to be more wise with their own money than the legislature is with ours.

*Not every metaphor I come up with can be a gem, people!

State Cuts 10%; Culver Fiddles

I couldn’t help but notice the irony in the title of O. Kay Henderson’s Radio Iowa report titled, “Agencies submit cuts; governor rides rails.” That sounds pretty similar to “Rome burns; Nero fiddles.”

I'm not saying that the current state budget cuts are as bad as Rome burning, of course. As far as I’m concerned they should cut the budget even more. But I do appreciate the irony in the fact that as current state services are being cut, Governor Culver is joyriding on a train, showing where he wants to dump even more taxpayer money to feed his railroad fetish.

Not wanting to prioritize, Culver made the 10% cut across-the-board. Cuts would include laying off 44 law enforcement officers (including 20 State Troopers, whose manpower was already at a 45 year low) and a fire inspector at the Dept. of Public Safety. The Quad City Times reports that the cuts will also have a “devastating impact” on the function of Iowa’s court system.

In terms of layoffs, the Department of Corrections will be the hardest hit with 515 jobs lost. "The impact will affect all departments in every level of service," said corrections officials. "A reduced workforce will create serious safety concerns for the public, staff and offenders within the maximum security facility. In line with the security concern is the closing of four towers."

Cops, courts and corrections sound like legitimate core functions of the state government to me. Should they really be cut at the exact same percentage as, say, the Department of Cultural Affairs or Iowa Public Television?

“The other neat thing we’re doing is we’ll be able to invest in the depots and modernize them,” Culver states in the Radio Iowa article. One such depot is the one in Osceola which is currently undergoing a $600,000 renovation. “And they’re bringing that historic place, you know, back to life,” said Culver.

Play your fiddle, Sir. Do you know "I’ve Been Working On the Railroad?"

Time To Wrap Iowa's Show Biz Giveaway

Just about everyone in Iowa knows that the Iowa Film Office (IFO) has been embroiled in scandal lately. The office issues tax credits to filmmakers who film in Iowa. By August, IFO had issued more than $31 million in such credits. Unfortunately, some filmmakers have used their money to buy themselves fancy cars, rather than hire Iowans, and the whole operation is shot through with accounting irregularities and poor record keeping.

The whole mess got so bad that Governor Culver actually had to put down his paddleball, amble over and fire somebody. Of course, Culver’s political rivals in the Republican Party are capitalizing on the scandal. They could run the IFO better, they contend. Other critics say that the IFO needs stricter oversight. But should IFO and other similar incentive programs exist at all?

There are nut-and-bolts reasons that indicate that they shouldn’t. A study by New Mexico State University found that for every dollar that N.M. spent on it’s film program, it got back 14 cents in tax revenue. (The state of N.M. claims it gets $1.50 back.) The Wisconsin Dept. of Commerce found that for every dollar that it invests in it’s film program, it gets back $1.70. For other economic development programs, the return on each dollar invested was said to be $161.

Victor Elias with the nonpartisan Child and Family Policy Center has studied Iowa’s film tax credit. He says that there is little evidence that the program does much of anything. “I couldn’t even figure out how many jobs this creates,” said Elias. “Whether they were full-time jobs or part-time jobs. And a film shoot only lasts for so long, so we’re not talking about permanent jobs.” $31 million is a lot of hard-earned taxpayer dollars to invest on hope alone.

Even if the incentive program was well-run and got a return on the investment, it (and special incentive programs for other industries) don’t really make sense. While it may now be customary for state and local governments to offer special goodies to get targeted businesses to relocate here, it comes at the expense of people and businesses who have already invested their time and money here.

According to Iowa’s Tax Education Foundation, Iowa has the highest corporate and personal income taxes among it’s neighboring states. Some have ranked Iowa as one of the worst states to start a business. Does it make sense to offer monetary incentives to get businesses to locate here, while simultaneously driving established businesses out?

It would make more sense to implement policies making the state attractive to new businesses and existing ones as well. Lowering state taxes and red tape would be conducive to all commerce in Iowa.

The bottom line is that there is no cash incentive that government can offer to new business that it didn’t first take away from the people and industry already here. The state needs to forget the bribes and just get out of the way.

Iowa Getting Railroaded?

My three-year-old boy loves his Thomas the Tank Engine train set. I think that all kids (or at least all the boys) go through "the train stage," but they grow out of it. Those who don't outgrow it go into politics.

Iowa Governor Chet Culver, for instance, has been riding around in his own special choo-choo to promote expanded passenger rail service in Iowa. (Republican blogger Krusy Konservative points out that Iowa Interstate Railroad [IAIS] is letting Culver use their train and Culver's I-Jobs program is funding two railroad bridges for IAIS. Quid pro quo?)

Perhaps Culver foresees a future for himself as Iowa's own Sir Topham Hatt [pictured], Thomas' railroad controller. (The resemblance is uncanny.) But unlike the railways on the fictional Isle of Sodor, Culver's railroad plans will cost Iowa taxpayers some very real cash.

Spurring the current interest in rail travel is some $8 billion in federal "stimulus" funds slated to go toward high-speed and intercity passenger rail projects. Governors, at one time proud leaders of sovereign states, are fighting each other to snap up these scraps of borrowed money from beneath the federal table.

The purpose of these funds, according to Obama's Transportation Secretary Ray Lahood, is "to coerce people out of their cars," presumably lowering demand for those cars. This at a time when American automakers are being propped up with taxpayer money because their failure would have supposedly catastrophic effects on the U.S. economy. Does Obama's left hand know what the right one is doing?

Another reason is the supposed environmental benefits of rail travel. For the money, however, other means of public transportation are better. Buses average 206.6 passenger-miles per gallon of fuel, while intercity rail (Amtrak) gets 67 passenger-miles per gallon. Buses put out 50 grams of CO2 per passenger-mile while intercity rail puts out 186 grams per passenger-mile. Buses also would not require costly upgrades to the road system.

But back to Culver. He recently signed an agreement with Illinois Governor Pat Quinn to coordinate efforts to create passenger rail service from Chicago to Iowa City and Chicago to Dubuque. The necessary track improvements for the Iowa City route alone (not counting station construction) are estimated to cost Iowa about $32.5 million.

But this is an official estimate, which history shows is usually artificially low in order to garner public support for a project (and ridership estimates are usually inflated). Research by Public Interest Institute shows that urban passenger rail projects have averaged about 40% higher than the projected cost. That would put the price about $45.5 million.

It's unclear if the feds will give Iowa that much. Whatever wasn't paid with federal funds would probably be financed with state bonds (debt). There would be even more ongoing costs to Iowa taxpayers. The rail service would be run by that model of efficiency, Amtrak. On the East Coast (where Amtrak "works"), for instance, Amtrack's Boston to DC line LOSES $2.30 per passenger. Its Chicago to Detroit line loses $72 per passenger. States are expected to cover these loses in regional corridors.

The Iowa taxpayer would be adopting Amtrak and subsidizing its riders. According to Public Interest Institute, "the main patrons of high-speed trains will be the wealthy and downtown workers, such as bankers, lawyers, and government officials[...]." The working class will be paying for some affluent suburbanites to feel trendy and eco-friendly while spending their weekend in Chicago.

I have nothing against rail travel per se. If some smart entrepreneurs can figure out a way to provide affordable passenger rail service in Iowa, without hooking the taxpayer up to the milking-machine or putting my unborn grandchildren further in debt to the Chinese, I'd be all for it.

But in the mean time, if Governor Culver feels like joyriding on a train I suggest he head up to Boone Iowa, where he can ride on the Boone & Scenic Valley Railroad. A non-profit, this railroad is supported by voluntary contributions from Iowans, not taxation and public debt. And if he feels he absolutely must have his own railroad, for just a fraction of that $45.5 million I bet my son would sell him a Thomas & Friends Trackmaster set, slightly used.

Ron Paul & Senator Coburn On Economic "Bailout"

I would be remiss in my duties if I didn't write about the massive economic "bailout" that just passed through Congress. However, when I heard Senator Tom Coburn's (R-OK) speech I knew that he had put it more elequantly than I could. Rather than try to reinvent the wheel, here is Senator Coburn's speech:

Here is U.S. Representative Ron Paul's (R-TX) comments in the House:

October 3, 2008

"Madame Speaker, only in Washington could a bill demonstrably worse than its predecessor be brought back for another vote and actually expect to gain votes. That this bailout was initially defeated was a welcome surprise, but the power-brokers in Washington and on Wall Street could not allow that defeat to be permanent. It was most unfortunate that this monstrosity of a bill, loaded up with even more pork, was able to pass.

"The Federal Reserve has already injected hundreds of billions of dollars into US and world credit markets. The adjusted monetary base is up sharply, bank reserves have exploded, and the national debt is up almost half a trillion dollars over the past two weeks. Yet, we are still told that after all this intervention, all this inflation, that we still need an additional $700 billion bailout, otherwise the credit markets will seize and the economy will collapse. This is the same excuse that preceded previous bailouts, and undoubtedly we will hear it again in the future after this bailout fails.

"One of the most dangerous effects of this bailout is the incredibly elevated risk of moral hazard in the future. The worst performing financial services firms, even those who have been taken over by the government or have filed for bankruptcy, will find all of their poor decision-making rewarded. What incentive do Wall Street firms or any other large concerns have to make sound financial decisions, now that they see the federal government bailing out private companies to the tune of trillions of dollars? As Congress did with the legislation authorizing the Fannie and Freddie bailout, it proposes a solution that exacerbates and encourages the problematic behavior that led to this crisis in the first place.

"With deposit insurance increasing to $250,000 and banks able to set their reserves to zero, we will undoubtedly see future increases in unsound lending. No one in our society seems to understand that wealth is not created by government fiat, is not created by banks, and is not created through the manipulation of interest rates and provision of easy credit. A debt-based society cannot prosper and is doomed to fail, as debts must either be defaulted on or repaid, neither resolution of which presents this country with a pleasant view of the future. True wealth can only come about through savings, the deferral of present consumption in order to provide for a higher level of future consumption. Instead, our government through its own behavior and through its policies encourages us to live beyond our means, reducing existing capital and mortgaging our future to pay for present consumption.

"The money for this bailout does not just materialize out of thin air. The entire burden will be borne by the taxpayers, not now, because that is politically unacceptable, but in the future. This bailout will be paid for through the issuance of debt which we can only hope will be purchased by foreign creditors. The interest payments on that debt, which already take up a sizeable portion of federal expenditures, will rise, and our children and grandchildren will be burdened with increased taxes in order to pay that increased debt.

"As usual, Congress has show itself to be reactive rather than proactive. For years, many people have been warning about the housing bubble and the inevitable bust. Congress ignored the impending storm, and responded to this crisis with a poorly thought-out piece of legislation that will only further harm the economy. We ought to be ashamed."

Only Bob Barr Will CUT Federal Spending

As I write this, the U.S. Treasury lists the total public debt at $9.8 trillion. The amount held by the public (which means money the government owes to any entity outside the United States Government, such as individuals, corporations, state or local governments, or foreign governments) is $5.7 trillion. The Congressional Budget Office projects that number to increase to $7.9 trillion by the year 2018. These projections cannot predict every future war, natural disaster or economic "bailout" that could add further to the debt.

In short, the federal government is chin-deep in debt and sinking. What is needed now is bold action, forward-thinking leadership and tough decisions. Thankfully, both of the "big box" party candidates, Obama and McCain, are promising "change."

How do these two crafty politicos plan on getting the government out of this quicksand bed of debt? By increasing spending of course! A recent analysis of the spending proposals of the presidential candidates by the National Taxpayers Union (NTU) showed that McCain's proposals would boost federal spending by $92 billion per year. That IS a lot, but it's a paltry sum compared to Obama's planned $293 billion increase in annual spending.

Of the candidates researched by the NTU, only Libertarian Party candidate Bob Barr would actually CUT federal spending. A Barr presidency would cut annual spending by about $201 billion. The biggest savings would come from restructuring the mission of the military from imperial maintenance duties to actual national defense, closing many foreign bases while maintaining a strong military. The next largest savings would be from eliminating the federal Dept. of Education, putting education back in the hands of the states, localities and the people (as the Constitution stipulates).

"Both the McCain and Obama campaigns have tried to keep pace with the political issues of the day -- largely by responding with proposals for new programs and regulations that could reach deeper and deeper into taxpayers' pockets," NTU Foundation policy analyst Demian Brady said. "On the other side of the spectrum, Bob Barr's Libertarian philosophy is strongly reflected in a platform that is built upon cutting programs and slashing spending."

If you believe that during this fiscal crisis the federal government should be tightening its belt, rather than bellying up to the table for seconds, you need to vote for Bob Barr for president. When the spending increases of the two big box candidates necessitate tax increases down the road, hold on to your wallet! To avoid getting your pocket picked later, get your wallet out now and donate to Barr's campaign to close the book on the era of big government.