Hitting the Ceiling

I’ve tried to make it a point to avoid politics on this blog, because, quite honestly, I’m trying to build up an audience for my forthcoming novels. It turns me off when my views are openly insulted on other author’s blogs, so rest easy knowing I will strive to not do that here.

The exception to my no-politics rule is when current events are extraordinarily important or affect me personally (see this earlier post). If I choose to be here in the arena of ideas, then I’d better be ready to stand my ground when it really counts.

If I hear the word “default” one more time, my head’s going to explode. Every time it’s mentioned, it’s coming from people who should damned well know better. Whether it’s politicians or news anchors — they should know that’s not going to happen. So they’re either ignorant, trying to scare us to further their own agendas, or haven’t the spine to stand up against the media narrative.

What we will see is a partial government shutdown. It’s not like we’re about to run out of money next week. You’re still paying taxes, right? So am I. That revenue is still flowing to DC.

The problem for them is there won’t be enough to cover all of our commitments. But you’d better believe there’s more than enough to cover our debt payments. And defense. And Social Security. And Medicare.

After those are paid for, there’s not much left. So a lot of (IMHO) non-essential functions will close up shop until this matter is settled: EPA, DOT, Education…the list goes on. Some of this is truly problematic, though: in my own experience it would be bad if FAA has no money to operate control towers and enroute centers. That would have serious economic ripple effects.

But what this will illustrate is the degree to which our government operates on borrowed money, and how much of our government wouldn’t be missed if we defund it. I’m convinced my kid’s schools would do just fine if the Education department went away tomorrow.

It’s not something we can fix overnight, but we’ve got to start now while we still have some choices. That’s why increasing the debt limit, which used to be frighteningly routine, has been turned into a budget fight. It had to be.

So how did we get here? Politics aside, it’s mostly math.

It starts with “baseline budgeting”, which DC foisted upon us in 1974. What that did was establish each year’s budget as the basis for next year’s, with a presumed rate of growth. Just like budgeting your home or business…

NOT.

That’s why, when party R wants to limit spending increases from 4% to 2%, party D screams “draconian cuts!”, when all they’ve really proposed is cutting the rate of growth. So if your boss gave you a $.50/hour raise instead of a full $1/hour, you still got a raise. Just not as much as you’d hoped for. Whatever it is, it’s not a cut.

Got that? Good.

What’s horrific about this is that it set up government spending as compounding interest. My wild-@$$ guess is that it’s grown anywhere from 4 to 5% year-over-year since this started. There are spikes in there, and it’s really taken off in the last two years. But I’d say 4.5% is a good approximation.

So, starting with 1974’s budget (about $699 Billion), apply 4.5% interest over 37 years, and you get a little over $3 Trillion here in 2011.

Which, oddly enough, is almost exactly where we find ourselves today. Math is kind of neat like that.

Votes matter. Ideology and party affiliation matters. But until Congress does away with baseline budgeting, this problem cannot be fixed for the long term.

UPDATE: As if on cue, a DC staffer flat out admits that it serves their purposes when we’re scared. Just remember TARP. And that we’ve been here before.

Never let a good crisis go to waste, huh?

Victory in Sight?

I certainly hope so.  This story from the Washington Post is encouraging. But it’s not like the CIA has a real great track record of predicting significant events, so let’s hold off on party plans for now.

A common memory from 9/11 is that everyone knew it was terrorism after the second plane hit. Being a former (not “ex”) Marine and military school grad, you can imagine that I follow defense matters pretty closely. It was crystal clear that not only were we at war, but it was almost certainly al Qaeda. And that meant we would be in Afghanistan soon.

It also seemed clear that achieving victory against such a thoroughly depraved enemy would require us to go places we never dreamed of. To do things we never thought we’d do. Our enemy, not being a stand-up army, meant we were going to have get really down and dirty.

They had to come to fear us more than death. How do you do that when they welcome death? We had to change their “hierarchy of needs”, so to speak. If waterboarding three captured AQ big-shots is the worst thing we had to do, then frankly I’m pleasantly surprised. Asymmetrical warfare puts us in the slop, with the pigs, because you can’t defeat people like that by punching in your own weight class. They’re not impressed by Patriot missile batteries or nuclear attack subs.

But you can bet Special Ops forces kicking down their door gets their attention. Can’t do that without knowing which door to kick down, which means you have to have really good human intel. Which takes us back to the pigs-in-the-slop analogy. It’s an ugly business, but necessary. The FBI didn’t bag John Gotti by infiltrating the local boy’s choir. They went where the bad guys were.

I can understand strong differences of opinion about our later excursion into Iraq, but am stunned that there are still people who refuse to understand how completely justified we were in going to the ‘Stan and rooting those people out. Here’s hoping we can bring our guys home soon after a job well done.

Semper Fi.

The Jet Set

So, El Presidente has decided it’s time to pile on those vile corporate jet owners.

Yawn. Not like it’s the first time or something.

I have a personal interest in this, being a well-heeled corporate jet owner middle-class slob who happens to work in the airplane business.

So what if a few millionaires don’t get a tax deduction for their fancy private jets? It’s just another loophole they shouldn’t have anyway. Big fat hairy deal, right?

Wrong.

First of all, it’s not really a loophole any more than your mortgage interest deduction is a loophole. All it does is let bizjet buyers deduct the airplane’s loss in value sooner rather than later. It takes a bit of the sting out of laying down that kind of money. And believe me, bizjets have been depreciating at quite a clip lately.

Secondly, the revenue would amount to next to nothing. Chicken feed. Square-root of a donut hole. There are probably rounding errors in this year’s budget that amount to more money.

But it does allow El Presidente to paint all rich people as Scrooge McDuck or the Monopoly guy. Which is what he really wants — facts don’t matter when it’s so much easier to argue from emotion. And he’s counting on that working for most people. Hey, it got him elected so why not?

Color me unimpressed. If you’re interested in truth, here are some nuggets for your noggin:

Mr. Monopoly Guy decides he wants and/or needs a corporate jet for his business and/or personal use. Call it 50/50 (though most really are used for business…and if they’re not, so what? It’s not your money).

Obviously, somebody has to build the jet. That means jobs in Wichita, Savannah, or any number of other places. These are engineers, machinists, aircraft mechanics…highly skilled people in generally good-paying jobs.

He’s also got to hire at least a couple of pilots to fly the thing. That’s two more jobs.

Oh, and these things usually don’t come out of the factory ready to fly. Paint and interior often involves hiring another vendor. More jobs.

Even a brand-new jet requires maintenance, including annual inspections which can get quite expensive. That means he’s either got to hire his own staff or farm it out to yet another vendor. Either way, somebody’s getting paid to work that bird on a regular basis.

The jet needs fuel to go anywhere, and Jet-A ain’t cheap. Who’s gonna pump it? A whole network of airplane service stations called FBO’s (Fixed Base Operators), that’s who. And they employ large staffs of people, all over the country, who are there to take care of Mr. Monopoly Guy’s airplane wherever it may end up.

Suppose he wants to take the jet to Europe? Leaving the country is kind of a big deal and requires a lot of prior coordination with multiple agencies, which is typically not left up to the pilots. Like FBO’s, there are specialized companies full of highly-skilled people who do that stuff for a living.

All of these people get paid, in real money, and use it however they see fit. Just like Mr. Monopoly Guy, albeit on a smaller scale. Maybe Joe Mechanic buys a jetski instead of a bizjet. But take away their customers, and that’s a lot of people out of work who could’ve been spending their income on other pursuits. Trickle-down is real, and that’s how it works.

But these guys are loaded, right? They don’t really care if they lose a few hundred grand in tax deductions…maybe. Changing the rules in the middle of the game tends to make people spend cautiously.

This goes beyond just owners of fancy airplanes, it affects just about any other business endeavor where people choose to spend money. That means all of ’em.

Let’s examine El Presidente’s other strawman example, “best-selling authors”. I also take this one personally, only because I aspire to become one.

Unless your name is Clancy or Rowling and you’ve become your own franchise, here’s how writers make money: after months of sweating blood over your Great American Novel, your agent finally sells it to a publisher. That publisher pays an advance, which is payment against expected sales. If they’re confident it’ll sell big, your advance may be well into six figures (not usually the case, but I can dream).

That advance may be the only money the author ever sees (unless he does the indie e-book thing and keeps 70% of the monthly gross – yay Amazon!). If the book ends up selling more than what the advance was worth, only then will the author begin getting royalty payments. That can easily take over a year, so you’d better make that advance last a while.

So “rich” varies. A funny thing about rich people is they often have irregular incomes, so if they’re smart, they’re quite careful in how they allocate it. Actor Biff Studley might make $10 million this year and nothing the next. Same goes for Chas McHarvard, the hedge fund manager. At that level, it’s unpredictable. How else do you think so many celebrities end up flat broke and doing reality shows on VH1?

Nobody was ever offered a job by a poor man. If they were, it probably didn’t last very long.

Call to Action

Related to my last posting…if you have any interest in how NASA manages its affairs, contact your congresscritter.

Besides gutting Commercial Crew Development (CCDev), this would direct the agency to sink even more money down the rathole of Senate Space Launch System, a heavy-lift booster concept from the whiz-kid engineers senators from — ah, never mind. You can guess which states: if it has a NASA center, you’re getting warm. But if they have their way, it will surely end up much like the proverbial horse as designed by committee…and cost about a gazillion times more than whatever BS number they’re throwing out today.

With all the crazy-@$$ spending that DC desperately needs to cut, Commercial Crew is a paltry sum and would help actual businesses in an actual emerging industry. This is much the same concept as government contracts for Air Mail service that kick-started the airline industry in the 1920’s. It’s a safe bet that SpaceX will have human-capable hardware in orbit while Marshall is still trying to figure out how to put five grains of composite propellant into a four grain casing.

Sorry, had to say that for geek cred. Just using “ten pounds of crap into a five pound bag” doesn’t sound steely-eyed-missile-manly enough.

The take-away: ditch SLS, keep CCDev. One will save a lot of money while the other spends far less on something that will return far more. And it’ll get Americans into orbit, on American equipment, much sooner.