Simon Johnson Confirms the New House Budget Committee has a Bad Start

November 8, 2010 Leave a comment

Seems like it is very hard to find a fiscal conservative who will take on the continuing problem of the “too big to fail banks” and failure to confront escalating Medicare (the program we all love) costs.

Only in American could self-styled “fiscal conservatives” say that “America is eager for an adult conversation on the threat of debt,” but then decline to discuss the first order problem that has brought us here and threatens us going forward: Dangerous systemic risk brought on by the reckless behavior of big banks. No “fiscal conservatives” showed up for the legislative fight to rein in big banks – none, and now Spencer Bachus (presumptive incoming chair of House Financial Services) says that restrictions on big banks should be further lifted (quoted in the FT today, p.15).

We can reasonably draw only one conclusion: Paul Ryan and his colleagues are not real fiscal conservatives.  This is further confirmed by the following:

1. Paul Ryan’s main short-term suggestion in his FT piece today is: Cut taxes.  Anywhere else in the world you would be laughed out of the room for suggesting this as the first step towards bringing a government’s fiscal house to order.

2. For concrete proposals on spending cuts, Mr. Ryan refers us to the Republican “Pledge to America“.  But that Pledge has no such detail on anything that would make a first-order difference, i.e., add all their proposals together and it wouldn’t even make a noticeable dent in the government debt path.  If a politician can’t summarize his main suggestions in an op ed, there are no real suggestions.

3. Mr. Ryan is right to bring up the need to make small adjustments to Social Security; this has been done before and makes sense. But the major budget buster in the CBO baseline, as you get out to 2030, is Medicare.  What exactly is Mr. Ryan proposing in terms of controlling those costs? On current demographic and technology projections – with the existing cost structure – even if you cut benefits substantially, Medicare becomes unaffordable.  Who will be squeezed over time – beneficiaries, providers, or payers – and how exactly? This will be a tough and emotional conversation – the lobbies here are almost as powerful as banks – but Mr. Ryan is not even starting us in the right direction.

via Paul Ryan Is Not A Fiscal Conservative « The Baseline Scenario.

Filed under Economy, Finance, National

No One Really Wants to Cut Spending, Just Taxes

November 7, 2010 Leave a comment

This explains pretty much a pattern for both political parties–calling for spending cuts, but never the political sensitive programs.  This means that it will be very hard for the parties to get together to overcome unemployment and make a long-term plan to draw down the deficit.

…despite their professed commitment to cut government spending, most Republicans in Congress refuse to propose specifics that would actually cut spending in any significant way. Recognizing the extreme unpopularity of cutting Social Security and Medicare, and the aversion of their base to military cuts, these self-styled fiscal conservatives often take entitlement and defense spending off the table, removing nearly 60 percent of the federal budget from scrutiny. Of the remaining spending, another sizable portion goes to debt payments — which are untouchable — and most Republicans also take homeland security and other security spending off the table, leaving only a small fraction of the total federal budget from which to find cuts.

Despite this stark reality, Republicans still try to claim the mantle of fiscal responsibility, and are forced to fumble, hem and haw when pressed on how they would actually cut spending.

via ThinkProgress » Pawlenty Inadvertently Explains How House Republicans Are ‘Lying To You’ About Spending Cuts.

Filed under Economy, Finance, National, Politics

Coral Gables Finance Department Audit–Symptoms of Mismanagement and Indifference

October 23, 2010 Leave a comment

The Finance Department of the city of Coral Gables was treated in an article in the Coral Gables Gazette on September.

Also, in a letter to the CGGazette, a former candidate for commissioner calls for the resignation of the Finance Department head.

The Finance Department problems are clearly revealed in the recently concluded report of the internal auditor of the city of Coral Gables.  The audit process was initiated in 2009, a first round of comments and recommendations was submitted for review and responded to by the Finance Department.  Subsequently, the city’s Internal Auditor prepared rebutal statements for unfulfilled recommendations and submitted the final report to management in September 2010.

The internal functional review of operations by the city of Coral Gables Chief Compliance Auditor (who works for the city manager)  confirms

  • dramatic dysfunctional management oversight ofoperations and control over the city budget, income and expenditures;
  • a persistent failure to review and balance accounts on time and correctly;
  • incomplete standard financial controls to avoid possible misuse or malversion of funds;
  • incomplete department-wide  information coverage and access via the EDEN software;
  • serious deficiencies in communications between management and staff and among departments;
  • defects in the EDEN financial module that the Finance Department hasn’t resolved;
  • consistent failure of management to supervise and give oversight to accounting review and information flows;
  • inadequate oversight over maintain current and consistent information flows among departments;
  • lack of efficient, integrated use of the IT systems of the city, among many others.

One may conclude that there is a top down management culture and weak communications within the Finance Department among staff and supervisors. The EDEN accounting software is incomplete, not fully applied and subject to incomplete supervision by the IT Department and the Finance Department supervisors.  The audit raised claims by both departments that the other is to blame for the break down in accounting.  This shifting of blame has led to an obvious failure to communicate from bottom to top between the two departments.

There are too many issues to discuss in a single posting and I hope to expand on this in coming days.

Filed under Coral Gables, Finance, Management

What Think the Candidates? (Part 2)

October 8, 2010 Leave a comment

The taxpayers of Coral Gables are still waiting for the views on the city’s budget, taxes, spending, salaries and pensions of numerous candidates for city office of commissioner or mayor .

Must we assume for now that they are all complacent about of the budget and associated taxes?

Filed under Budget, Coral Gables, Taxes and Fees

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