The New G.I. Bill

Senator Jim Webb (D-VA) introduced a bill seeking to update the original G.I. Bill from World War II. Formally called "the Post 9/11 Veterans Educational Assistance Act of 2008," it would increase the amount of educational assistance to service members who have enrolled after September 11, 2001. Members who have served three years of cumulative active duty service will be rewarded with a full ride to any public university in the nation. It would roughly double the benefit size under current law.

Morally, the bill would be a great way to support the troops fighting abroad.

However, there are several important points of consideration to keep in mind. First, this proposed legislation would increase recruits but decrease retention. Hence, it's not an outright net gain for the military. According to the Congressional Budget Office:

Educational benefits have been shown to raise the number of military recruits. Based on an analysis of the existing literature, CBO estimates that a 10 percent increase in educational benefits would result in an increase of about 1 percent in high-quality recruits. On that basis, CBO calculates that raising the educational benefits as proposed in S. 22 would result in a 16 percent increase in recruits...Literature on the effects of educational benefits on retention suggest that every $10,000 increase in educational benefits yields a reduction in retention of slightly more than 1 percentage point. CBO estimates that S. 22 (as modified) would more than double the present value of educational benefits for servicemembers at the first reenlistment point—from about $40,000 to over $90,000—implying a 16 percent decline in the reenlistment rate, from about 42 percent to about 36 percent.

Second, it would cost $52 billion over ten years in mandatory spending. In a case such as this, the monetary value doesn't solely imply whether it should or shouldn't become law. Obviously, it's a larger financial commitment from the government, but when the money is put on auto-pilot that's a concern. This bill would be the largest entitlement increase since Medicare Part D. Mandatory spending is already projected to grow at an alarming rate in the coming decades so adding a program with no mechanism to control growth is somewhat alarming.

Finally, this is not an "emergency" and shouldn't be tabled with war supplemental spending. Administration officials thought the war in Iraq would be short and relatively inexpensive. Originally estimating $50-$60 billion for the Iraq War, the Bush Administration planned the money would be budgeted as an emergency since it wouldn't be a reoccurring requirement. However, the war has now cost over a half a trillion dollars but hasn't changed how the war is budgeted even though its costs can easily be foreseen. This is problematic in itself, but to further include an entitlement program like the new GI bill within the emergency spending to avoid paygo rules and an outright vote on the floor is wrong. These are planned expenses that should be budgeted for.

While it's difficult to argue against more benefits for our veterans (as they certainly need them), the current process for passing this bill must be reconsidered. The bills effect on our current military size, its future unchecked growth, and its attachment to a emergency spending bill make it rough to swallow.

The Sheetz Melt

The Pennsylvania Supreme Court will hear Sheetz's appeal to sell beer (6-packs) at its stores throughout Pennsylvania. This will be an important case as it could likely affect the way Pennsylvania sells beer.

There are a lot of details that matter in this case but here's the basic gist. An Altoona Sheetz received a license from the PLCB, it expanded its dining area and kitchen and only wanted to sell the six-packs to-go rather them serve them in the restaurant portion. This didn't meet the PLCB's criteria for the license and confusion around interpretations of the liquor law pushed the dispute into court. In a similar but separate case, the Malt Beverage Distributors Association is suing Wegman's. Wegman's has received a restaurant license (as opposed to the eatery license like Sheetz wished to acquire) which allows them to sell wine and hard liquor.

Probably one of the more humorous quotes from the article:

"If Sheetz can sell beer, so can Wal-Mart and Costco and all the other big chains," she [Mary Lou Hogan, executive secretary and counsel for the Malt Beverage Distributors Association, which is battling Sheetz in the case] said. "You tell me what will happen to small businesses that try to compete with those giants."

This quote is largely based in absurdity. Amazing as it may sound, large retailers (including Wal-Mart and Costco) in other states are allowed to sell beer, and guess what...the small businesses and bars are still in business. Pretty shocking!

I opined yesterday on the PLCB's control of harder alcohol (which if it were a business--as it pretends to be--would be a monopoly). So today, I'll tackle the novelty of beer in Pennsylvania.

Not that alcohol should be free flowing, but the access to these beverages is significantly limited in Pennsylvania. Although not as tight as liquor and wine, cases of beer can be purchased only from distributors. This drastically controls supply which in turn affects the market price. Allowing more stores, chains and retailers to sell six-packs would be the best thing possible for Pennsylvania. Six packs are rare throughout the state and their costs are sufficiently marked up from their wholesale, per unit price. Therefore, you have limited options in Pennsylvania. You can either buy a smaller amount at a more convenient location (bar or eatery) for a higher price or buy it in bulk from a distributor at a price that's relatively cheaper per unit. For anyone who is reasonably economical, this portends a framework which favors overconsumption.

It's not the court's job to make this change. It's the Pennsylvania legislature that should be addressing these liquor laws and adapt them so they updated for a more modern time.

Monopoly

To hear the Pennsylvania Liquor Control Board (PLCB) talk, you'd think that they were completely transforming they way they do business.

For too long, this organization has been about us and what we want to accomplish as an agency, and we have lost sight of what matters most – our customers,” said Patrick “P.J.” Stapleton III, chairman of the Liquor Control Board. “Asking Pennsylvania wine experts from outside the agency to help us improve our wine programs is unprecedented. So this is a new day – a day when we put our customers first in every way.

Pennsylvania uses the PLCB as a way to monopolize liquor and wine. The PLCB runs over 600 stores statewide and has control over just about everything. They set the price on the shelf (which includes the 18% sales tax), determine what to sell, and how much of it to have; essentially, everything on the supply side of things.

In order to redefine themselves as more consumer-oriented, they are going to be implementing a more dynamic service plan. In addition, the PLCB wants to set up wine kiosks throughout the state. The problem is only one firm bid on the plan.

The PLCB will do anything to avoid relinquishing their central control over alcohol, and this in turn damages their ability to adapt to the demands of customers. Rather than look to privatize its sales or open the market up so individuals can pick the wine they actually want, the PLCB decided the best way to deal with consumer dissatisfaction is to open up little wine vending stands and provide expert recommendations for in-store wines. This is essentially a band-aid to a much bigger problem.

According to a recent editorial on the subject from the Patriot-News, the United States is the largest retail market in the world for wine. Thus, because Pennsylvania is one of the larger states, it provides an opportune market. Consumers have a devoted following to wine, but the PLCB cripples their ability to engage in such a hobby. They don't allow direct sales to consumers and their policies keep out-of-state wineries from participating in the market with their high licensing fees. This creates an extremely displeased consumer core and results in the loss of potential revenue for the state. The government was not meant to be a business.

Not only is the PLCB failing at what they do, but the strategy they are looking to implement to please customers is only going to further reveal the already existing problems with the system.

Pennsylvania Polka

A couple quick notes on Pennsylvania politics:

Recently, Representative Chris Carney endorsed Senator Clinton in the presidential race which isn't too surprising given how poorly Senator Obama performed in the district. People have jumped on the Clinton endorsement already, but given his options an Obama endorsement would have been far worse.

In addition, the heat is getting turned up on Carney as the fall election grows closer. Carney's seat has called a "toss up" so Republicans are beginning to open him up to attacks. For instance, on the FISA debate Carney has been trying to play the middle. Carney stated he supported the Senate FISA bill which isn't popular among fellow Democrats. In order to expose Carney and push the issue, Republican Whip Roy Blunt sent a letter to Carney requesting he sign the discharge petition which would send the Senate FISA bill to the House Floor. While Carney claimed he had never been asked to sign the petition, Blunt called his bluff even further:

I would also note that on March 14th, you signed a discharge petition on an immigration bill (H.R. 4088) without any request from our leadership. However, if a request from our leadership will help you make the decision to assist us in bringing
this legislation – which you have already suggested to the House Speaker is critical to protecting the country – to the floor, then I am happy to oblige.Please consider this letter to be my formal request that you sign the discharge petition to bring the Rockefeller-Bond FISA bill to the House floor.

Former Pennsylvania Senator Rick Santorum had an interesting column in the Philadelphia Inquirer. The piece focused on the failure of elected officials to properly address the "war on terrorism." Disagreeing over the government's communications tactics, Santorum argues that the conflict should more accurately framed as "Islamic Fascism" rather than simply terrorism. However, a recent Bush administration memo had deemed this rhetoric too harsh, and it was quickly curtailed after President Bush used it once in a public address. You'd think that John McCain's frequently use of "Islamic Fascism" would please Santorum, but Santorum has firmly stated he would vote for anyone but John McCain (even though he's seemingly reconciled).

Lastly, the Arthur Anderson-like Pennsylvania House Democratic Caucus coerced an intern to shred documents requested by a grand jury. Now, the prosecution will be hard pressed to prove that state employees received bonuses payed for by the taxpayers for political work they had performed.

Just another week in Pennsylvania!

Don't Smoke That Tobacco Tax For Too Long, You Might Run Out Money

At the beginning of the week, Pennsylvania Governor Ed Rendell urged action on "PA ABC." He stated:

The budget office did a thorough analysis that shows program costs and demonstrates to the taxpayers of Pennsylvania and their elected leaders that this is a financially responsible plan. With the additional revenues from the proposed 10-cents-per-pack increase in the cigarette tax and the first-time-ever tax on smokeless and other tobacco products, we will be able to fully fund this program. This analysis answers the argument from critics that the bill does not have adequate funding. We do. Now all we need is the political will to get this done.

"PA ABC" stands for Pennsylvania Access to Basic Care program which aims at covering those without health insurance in Pennsylvania. The actual insurance delivered from PA ABC would come from a private provider and be targeted at small businesses. Since many uninsured Pennsylvanians have a full time job, getting the small businesses and employees on board would be a step towards insuring the estimated 767,000 uninsured.

Budget Secretary Michael Masch recently confirmed that PA ABC was sustainable over a 10 year window. The House bill that was already passed directed $120 million in additional revenue to be placed into an account specifically for PA ABC. The Budget Office estimated that outlays for PA ABC would increase from $501 million in its first year to $1.1 billion in its fifth year. In that time, an additional 272,000 individuals would be covered.

There are three primary sources of revenue:

• $.10 per-pack increase on cigarettes
• $.36 per-unit increase on chewing tobacco and cigars
• Redirection of a portion of the state's current Uncompensated Care payments for hospitals
  

The Governor has stated that the first two sources (both of the tobacco taxes) would be sufficient in providing the initial $120 million a year. However, the whole system seems like a big bait-and-switch.

Primarily, the cigarette tax in Pennsylvania has been a declining source of revenue. If you look at the final monthly revenue statements from the previous five fiscal years, the revenue contributed from the cigarette tax to the general fund has nominally declined.

2006-2007	$778,000
2005-2006	$769,900
2004-2005	$844,700
2003-2004	$837,400
2002-2003	$830,900

No one, including Secretary Masch, expects the cigarette tax to grow over time as a source of revenue, but they haven't been upfront about the reliability problems associated with the tobacco tax. Even at the federal level, tobacco tax revenue is acknowledged to be declining, yet Congress continues to try and hitch SCHIP and other new expenditures to its proverbial wagon. As these taxes at the federal and state level continue to get tacked on (both acting independent of each other), cigarette prices will increase and more smokers will quit. This will only cause the revenue to dry up in a shorter time period. A tobacco tax is a popular target, and pretending this revenue is reliable isn't an accurate assessment.

It's very deceptive to tackle this large new initiative (which is scheduled to expand drastically even during its first five years) with a "false" source of revenue . During the last four decades, per capita health care spending has grown much more rapidly than per capita GDP. In fact, health care costs present the single largest factor in our the nation's fiscal future. Therefore, sounding the financially stable bell on something like this seems premature.

There is one optimistic way to look at this approach. If more smokers quit because of the levied tax, that inherently means less state expenditures for health problems related to smoking. However, in the aggregate, it's pretty obvious: health care costs are going to rise while two of the dedicated revenue sources for PA ABC decline.

This is an extremely large commitment for Pennsylvania that will be realized down the road. While the state is running a surplus and the cigarette tax is still capable of being milked, a program like this is quite appetizing. Of any health care proposal, focusing on cost saving measures is imperative. Cost saving measures not only translate into reduced outlays for the state, but if you drive down the market price in the process, there will be more of an individual incentive to purchase insurance as it requires proportionately less disposable income. Not only does PA ABC in its current design fail to implement cost savings, it's initially dependent on a regressive and diminishing tax source.

When close to 1 million people--all representing future financial obligations for the state of Pennsylvania--are proposed being added to a new government program, one would hope it'd receive more honesty and attention than the half-hearted truths that behoove it's current status.

Every Taxpayer Visits Washington DC Sometime

Senator Tom Coburn has a great Op-Ed in the Washington Times today about Washington D.C.'s metro system. After already receiving over $1 billion in federal funding, Washington Metropolitan Area Transit Authority (WMATA) is seeking $1.5 billion for infrastructure improvements. The federal government is the gravy train that keeps on giving!

Coburn correctly identifies the biggest problems with D.C.'s metro system and, more importantly, notes that taxpayers who will never step foot on a D.C. metro car are the largest subsidizers of this service. One of the more striking points of the Op-Ed:

Any member of Congress who can't find a little fat in the federal budget is out of touch with the real-world budget choices families face every day. In the real world, Americans tighten their belts in tough times and spend less in some areas if they have to spend more in other areas. Dismissing an additional $1.5 billion for the Metro as a blip in the budget is precisely the mentality that has caused Congress to rack up a $600 billion annual deficit this year and a long-term debt of nearly $10 trillion. I make no apologies for opposing this reckless status quo culture of spending that puts the interests of career politicians ahead of the next generation.

While Coburn may simply be against further funding for WMATA out of principle, he at least appears to be willing to compromise on the funding so long as Congress can identify other areas of the budget to cut. However, instead of proposing spending cuts to offset the desired metro funding, Congress wants to have it both ways. In their view, the extra funding is only a little part of the federal revenue pie. After all, $1.5 billion is so small when compared with the $3 trillion budget, right? Few difficult decisions are every forced by the government. Coburn's assesment is accurate in regards to WMATA and also accurate in regards to the lack of fiscal responsibility.

A Dwindling Majority

The Times Tribune identified today that Republicans in Pennsylvania's 10th Congressional district now make up less than 50% of registered voters.

Regarding The Economy

The U.S. has seemingly avoided a recession. The technical definition of a recession is two consecutive quarters of declining GDP growth. The new economic numbers from the BEA show that the U.S. GDP growth stabilized at 0.6% for the first quarter of 2008. After real GDP growth dropped from 4.9% in the third quarter of 2007 to 0.6% in the final quarter of 2007, many analysts began using the word "recession" quite freely. However, the economic numbers prove that the U.S. economy was resilient and avoided technical classification as a recession.

It's As If They're Mind Readers

After yesterday's post, today's Post-Gazette editorial discusses the real air quality problem in Pittsburgh. I'm surprised they didn't work smoking in there somehow.

Get That Smoke Out Of Here

The Pittsburgh Post-Gazette has been on a rampage of late as it tries to push for Pennsylvania to ban indoor smoking. Two recent editorials (here and here) have been aimed at strong arming this ban into action. They even go so far as to say:

If our legislators don't get this done, Pennsylvania's new slogan will have to be "America's Ashtray."

Pittsburgh may well become "America's Ashtray," but it has won't be because of individual smoking preferences. The American Lung Associated recently released their State of the Air report and for the first time ever a city outside of California topped one of the lists: Pittsburgh earned the dubious honor.

The press release for the State of the Air report notes:

Pittsburgh moved to the top of the list of cities most polluted by short-term levels of particle pollution, a deadly cocktail of ash, soot, diesel exhaust, chemicals, metals and aerosols that can spike dangerously for hours to weeks on end.

Notice that absent from this list of air pollutant factors is cigarette smoking. Although the Pittsburgh Post-Gazette might be working to ban smoking indoors, it might benefit them to step outside because that's where the real air problem lies.

Personally, I don't smoke nor do I necessarily enjoy the smoke in a restaurant or bar. However, we as individuals have the decision making capacity to not return to an establishment if we don't like the smoking. Smokers have as much of a right to smoke as us nonsmokers have to not smoke. Now, that right shouldn't necessarily guarantee them the ability to smoke inside a public venue, but if a bar or restaurant owner permits smoking then smokers should go ahead and do so.

The medical research on smoking is pretty clear in demonstrating the negatively health impacts. Even secondhand smoke is harmful. Just because smoking has these effects though does not justify banning all smoking indoors. For instance, you can go into McDonalds and buy a Big Mac and fries even though you know it contains an unhealthy amount of calories and trans fats. However, it should be your personal preference what goes into your mouth. This fried meal certainly inversely affect one's health; yet, I think few people would accept banning Big Macs. It would make more sense to go somewhere else and enjoy a healthier alternative rather than imposing an overarching ban.

Being respectful of other people's personal preferences is part of living in a democracy. The government's hand should not be invoked to remove this behavior. People like myself enjoy nonsmoking environments, and surprisingly enough the market responds to these preferences. The Post-Gazette's Editorial makes it seem as if there are no choices for nonsmokers, but nothing could be further from the truth. Smoke Free Pennsylvania already offers a comprehensive list of local nonsmoking places. As more people continue to quit smoking, more venues will cater to this preference. It's not rocket science; it's the power of the market. This may not be the answer that those seeking an indoor ban may be after, but it's at least respectful of other's lifestyle choices.