Monday, April 25, 2011

Reaction by Heatland Institute to US Sup Court Refusing to Hear Whether President's Healthcare Plan Violates the US Constitution

NOTE - Earlier on Monday, the US Supreme Court turned down taking an expedited review of the Consitutionality of the President's Healthcare Reform law.

Reaction from Heartland Institute

They’re probably breaking out the champagne in the White House today, but it’s too soon to read negativity into the Court’s ruling.

“Normally, cases proceed from the trial court to federal courts of appeal and then to the Supreme Court, which isn’t required to take the case. It bypasses the normal process only rarely, when a case is ‘of such imperative public importance as to justify deviation from normal appellate practice.’

“The ruling at issue today came in a Virginia case, now on appeal to the Fourth Circuit Court of Appeals. But several other cases are now on appeal to the Third, Sixth, Ninth, and D.C. Circuit Courts of Appeal, where the constitutional arguments will be further developed and refined.

“Though the Virginia case is obviously of ‘imperative public importance,’ so are the other ones. On an issue of such obvious divisiveness, the Supreme Court was wise to allow input from across the United States before considering whether to take a case.”

Maureen Martin, J.D.
Senior Fellow for Legal Affairs
The Heartland Institute

Monday, April 18, 2011

Sen Kirk (R) on Stanard and Poor's Negative Outlook on US Debt and Fiscal Policy

SEN KIRK'S STATEMENT ON THE S&P's Negative Outlook on US Debt

The coming legislation on the Debt Limit offers the chance to save the dollar and our economy. If we miss this chance or if Congress sends the President a blank check, then the following quote from S&P is a stark warning for our future: 'We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013; if an agreement is not reached and meaningful implementation is not begun by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns.' "


President Calls PM Netanyahu on Start of Passover

Readout of the President's Call With Israeli Prime Minister Netanyahu

The President called Israeli Prime Minister Netanyahu today to convey his best wishes before the start of Passover. Noting that he would host a seder at the White House, the President recalled that the story of Passover is one of liberation and freedom, and expressed his hope that the Israeli people would be able to celebrate in peace. The two leaders also discussed U.S.-Israeli cooperation on counter-terrorism, how best to move forward in efforts to advance Middle East peace, and the recent violence near the Gaza strip.

Prime Minister Netanyahu expressed his deep appreciation for U.S. funding for the Iron Dome rocket and mortar defense system, which he noted has successfully intercepted several rockets aimed at Israeli communities. The President congratulated the Prime Minister on this impressive Israeli technological achievement and expressed his pride that Israeli-American cooperation made it possible. With the signing of the fiscal year 2011 budget appropriation, the President approved $205 million in U.S. funding for Iron Dome, which is above the annual package of Foreign Military Financing for Israel.

The President and the Prime Minister agreed to stay in close touch on the range of issues facing the United States and Israel.

Standard and Poors Issues Negative Rating on US Debt Due Largely to Unfunded Entitlements and No Firm Policy Approach to Fixing USA Debt

Standard and Poors Note on American Debt Downgrade issued April 18, 2011

We have affirmed our 'AAA/A-1+' sovereign credit rating on the United States of America.

The economy of the U.S. is flexible and highly diversified, the country's effective monetary policies have supported output growth while containing inflationary pressures, and a consistent global preference for the U.S. dollar over all other currencies gives the country unique external liquidity.

Because the U.S. has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable.

We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013; if an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer 'AAA' sovereigns.

Rating Action

On April 18, 2011, Standard & Poor's Ratings Services affirmed its 'AAA' long-term and 'A-1+' short-term sovereign credit ratings on the United States of America and revised its outlook on the long-term rating to negative from stable.


Our ratings on the U.S. rest on its high-income, highly diversified, and flexible economy, backed by a strong track record of prudent and credible monetary policy. The ratings also reflect our view of the unique advantages stemming from the dollar's preeminent place among world currencies. Although we believe these strengths currently outweigh what we consider to be the
U.S.'s meaningful economic and fiscal risks and large external debtor position, we now believe that they might not fully offset the credit risks over the next two years at the 'AAA' level.

The U.S. is among the most flexible high-income nations, with both adaptable labor markets and a long track record of openness to capital flows. In addition, its public sector uses a smaller share of national income than those of most 'AAA' rated countries--including its closest peers, the U.K., France, Germany, and Canada (all AAA/Stable/A-1+)--which implies greater
revenue flexibility.

Furthermore, the U.S. dollar is the world's most used currency, which provides the U.S. with unique external flexibility; the vast majority of U.S. trade flows and external liabilities are denominated in its own dollars. Recent depreciation of the currency has not materially affected this position, and we do not expect this to change in the medium term (see "Après Le Déluge, The U.S. Dollar Remains The Key International Currency," March 10, 2010, RatingsDirect).

Despite these exceptional strengths, we note the U.S.'s fiscal profile has deteriorated steadily during the past decade and, in our view, has worsened further as a result of the recent financial crisis and ensuing recession. Moreover, more than two years after the beginning of the recent crisis, U.S. policymakers have still not agreed on a strategy to reverse recent fiscal deterioration or address longer-term fiscal pressures.

In 2003-2008, the U.S.'s general (total) government deficit fluctuated between 2% and 5% of GDP. Already noticeably larger than that of most 'AAA' rated sovereigns, it ballooned to more than 11% in 2009 and has yet to recover.

On April 13, President Barack Obama laid out his Administration's medium-term fiscal consolidation plan, aimed at reducing the cumulative unified federal deficit by US$4 trillion in 12 years or less. A key component of the Administration's strategy is to work with Congressional leaders over the next two months to develop a commonly agreed upon program to reach this target. The President's proposals envision reducing the deficit via both spending cuts and revenue increases, and the adoption of a "debt failsafe" legislative mechanism that would trigger an across-the-board spending reduction if, by 2014, budget projections show that federal debt to GDP has not yet stabilized and is not expected to decline in the second half of the current decade.

The Obama Administration's proposed spending cuts include reducing non-security discretionary spending to levels similar to those proposed by the Fiscal Commission in December 2010, holding growth in base security (excluding war expenditure) spending below inflation, and further cost-control measures related to health care programs. Revenue would be increased via both tax reform and allowing the 2001 and 2003 income and estate tax cuts to expire in 2012 as currently scheduled--though only for high-income households. We note that the President advocated the latter proposal last year before agreeing with Republicans to extend the cuts beyond their previously scheduled 2011 expiration. The compromise agreed upon in December likely provides short-term support for the economic recovery, but we believe it also weakens the U.S.'s fiscal outlook and, in our view, reduces the likelihood that Congress will allow these tax cuts to expire in the near future. We also note that previously enacted legislative mechanisms meant to enforce budgetary discipline on future Congresses have not always succeeded.

Key members in the U.S. House of Representatives have also advocated fiscal tightening of a similar magnitude, US$4.4 trillion, during the coming 10 years, but via different methods. House Budget Committee Chairman Paul Ryan's plan seeks to balance the federal budget by 2040, in part by cutting non-defense spending. The plan also includes significantly reducing the scope
of Medicare and Medicaid, while bringing top individual and corporate tax rates lower than those under the 2001 and 2003 tax cuts.

We view President Obama's and Congressman Ryan's proposals as the starting point of a process aimed at broader engagement, which could result in substantial and lasting U.S. government fiscal consolidation. That said, we see the path to agreement as challenging because the gap between the parties remains wide. We believe there is a significant risk that Congressional negotiations could result in no agreement on a medium-term fiscal strategy until after the fall 2012 Congressional and Presidential elections. If so, the first budget proposal that could include related measures would be Budget 2014 (for the fiscal year beginning Oct. 1, 2013), and we believe a delay beyond that time is possible.

Standard & Poor's takes no position on the mix of spending and revenue measures the Congress and the Administration might conclude are appropriate. But for any plan to be credible, we believe that it would need to secure support from a cross-section of leaders in both political parties.

If U.S. policymakers do agree on a fiscal consolidation strategy, we believe the experience of other countries highlights that implementation could take time. It could also generate significant political controversy, not just within Congress or between Congress and the Administration, but throughout the country. We therefore think that, assuming an agreement between Congress and the President, there is a reasonable chance that it would still take a number of years before the government reaches a fiscal position that stabilizes its debt burden. In addition, even if such measures are eventually put in place, the initiating policymakers or subsequently elected ones could decide to at least partially reverse fiscal consolidation.

In our baseline macroeconomic scenario of near 3% annual real growth, we expect the general government deficit to decline gradually but remain slightly higher than 6% of GDP in 2013. As a result, net general government debt would reach 84% of GDP by 2013. In our macroeconomic forecast's optimistic scenario (assuming near 4% annual real growth), the fiscal deficit would fall to 4.6% of GDP by 2013, but the U.S.'s net general government debt would still rise to almost 80% of GDP by 2013. In our pessimistic scenario (a mild, one-year double-dip recession in 2012), the deficit would be 9.1%, while net debt would surpass 90% by 2013. Even in our optimistic scenario, we believe the U.S.'s fiscal profile would be less robust than those of other 'AAA' rated sovereigns by 2013. (For all of the assumptions underpinning our three forecast scenarios, see "U.S. Risks To The Forecast: Oil We Have to Fear Is…," March 15, 2011, RatingsDirect.

Additional fiscal risks we see for the U.S. include the potential for further extraordinary official assistance to large players in the U.S. financial or other sectors, along with outlays related to various federal credit programs. We estimate that it could cost the U.S. government as much as 3.5% of GDP to appropriately capitalize and relaunch Fannie Mae and Freddie Mac, two financial institutions now under federal control, in addition to the 1% of GDP already invested (see "U.S. Government Cost To Resolve And Relaunch Fannie Mae And Freddie Mac Could Approach $700 Billion," Nov. 4, 2010, RatingsDirect). The potential for losses on federal direct and guaranteed loans (such as student loans) is another material fiscal risk, in our view. Most importantly, we believe the risks from the U.S. financial sector are higher than we considered them to be before 2008, as our downward revisions of our Banking Industry Country Risk Assessment (BICRA) on the U.S. to Group 3 from Group 2 in December 2009 and to Group 2 from Group 1 in December 2008 reflect (see "Banking Industry Country Risk Assessments," March 8, 2011, and "Banking Industry Country Risk Assessment: United States of America," Feb. 1, 2010, both on RatingsDirect). In line with these views, we now estimate the maximum aggregate, up-front fiscal cost to the U.S. government of resolving potential financial sector asset impairment in a stress scenario at 34% of GDP compared with our estimate of 26% in 2007.

Beyond the short- and medium-term fiscal challenges, we view the U.S.'s unfunded entitlement programs (such as Social Security, Medicare, and Medicaid) to be the main source of long-term fiscal pressure. These entitlements already account for almost half of federal spending (an estimated 42% in fiscal-year 2011), and we project that percentage to continue increasing as long as these entitlement programs remain as they currently exist (see "Global Aging 2010: In The U.S., Going Gray Will Cost A Lot More Green," Oct. 25, 2010, RatingsDirect). In addition, the U.S.'s net external debt level (as we narrowly define it), approaching 300% of current account receipts in 2011, demonstrates a high reliance on foreign financing. The U.S.'s external indebtedness by this measure is one of the highest of all the sovereigns we rate.

While thus far U.S. policymakers have been unable to agree on a fiscal consolidation strategy, the U.S.'s closest 'AAA' rated peers have already begun implementing theirs. The U.K., for example, suffered a recession almost twice as severe as that in the U.S. (U.K. GDP declined 4.9% in real terms in 2009, while the U.S.'s dropped 2.6%). In addition, the U.K.'s net general government indebtedness has risen in tandem with that of the U.S. since 2007. In June 2010, the U.K. began to implement a fiscal consolidation plan that we believe credibly sets the country's general government deficit on a medium-term downward path, retreating below 5% of GDP by 2013.

We also expect that by 2013, France's austerity program, which it is already implementing, will reduce that country's deficit, which never rose to the levels of the U.S. or U.K. during the recent recession, to slightly below the U.K. deficit. Germany, which suffered a recession of similar magnitude to that in the U.K. (but has enjoyed a much stronger recovery), enacted a constitutional limit on fiscal deficits in 2009 and we believe its general government deficit was already at 3% of GDP last year and will likely decrease further. Meanwhile, Canada, the only sovereign of the peer group to suffer no major financial institution failures requiring direct government assistance during the crisis, enjoys by far the lowest net general government debt of the five peers (we estimate it at 34% of GDP this year), largely because of an unbroken string of balanced-or-better general government budgetary outturns from 1997 through 2008. Canada's general government deficit never exceeded 4% of GDP during the recent recession, and we believe it will likely return to less than 0.5% of GDP by 2013.


The negative outlook on our rating on the U.S. sovereign signals that we believe there is at least a one-in-three likelihood that we could lower our long-term rating on the U.S. within two years. The outlook reflects our view of the increased risk that the political negotiations over when and how to address both the medium- and long-term fiscal challenges will persist until at least after national elections in 2012.

Some compromise that achieves agreement on a comprehensive budgetary consolidation program--containing deficit reduction measures in amounts near those recently proposed, and combined with meaningful steps toward implementation by 2013--is our baseline assumption and could lead us to revise the outlook back to stable. Alternatively, the lack of such an agreement or a significant further fiscal deterioration for any reason could lead us to lower the rating.

Thursday, April 14, 2011

Lt Gov Simon Urges Passage of SB-630, Education Reform Bill

SPRINGFIELD – April 14, 2011. Lt. Governor Sheila Simon will testify today before the Senate Education Committee in support of SB 630, a sweeping education reform bill that promotes excellent teaching, weights teacher performance in retention, provides more transparency in contract negotiations and introduces new steps prior to a strike.

As the Governor’s point person on education reform, Simon commended Sen. Kimberly Lightford’s Education Reform Workgroup for bringing education and business stakeholders to the table to reach this consensus bill, which has the potential to improve education for all Illinois students.

Simon said: “The next wave of education reform required all of us -- teachers, administrators, community members and policymakers -- to rethink business as usual. The result is a meaningful reform bill that will help us weed out bad teachers and seed new ones. It puts students first, while also preserving the collective bargaining rights of their greatest advocates. The process behind and the passage of this bill will make Illinois a model for the rest of the nation.”


Former President George W Bush Speaks at Judson University’s Inaugural World Leaders Forum

(Elgin, Ill. - April 14, 2011) More than 1,300 area business leaders and dignitaries visited Judson University in Elgin on Wednesday, April 13, joining students, staff and faculty for the Christian school's inaugural World Leaders Forum.

A central message to the evening's main event was the value of personal principles regarding faith and freedom. In his keynote address, 43rd President of the United States George W. Bush encouraged the crowd of professionals to follow their principles.

"Principles last forever," said the President. "I say I came to Washington with a set of principles and I've left Washington with those same principles still in place."

President Bush spoke candidly with the audience, often using anecdotes included in his recent memoir, Decision Points, to illustrate lessons on leadership he learned through his presidency.

"Be ready to make decisions," Bush said adamantly to the group of local leaders and entrepreneurs. "A set of values that won't change is essential when leading an organization in the midst of a changing environment."

He also discussed the need to build strong relationships to better understand leaders with other views and experiences. As the president, Bush said he met many times with world leaders like Russian President Vladimir Putin and Chinese Paramount Leader Hu Jintao to better understand their perspectives and learn their concerns.

President Bush used his description of the oval office to demonstrate many of the principles that helped shape and guide him as a leader. Paintings selected for his office of George Washington and Abraham Lincoln; the desk at which he worked that had once been used by Franklin D. Roosevelt and John F. Kennedy; the carpet that graced the floor all played a part in demonstrating his leadership while in office.

Former Speaker of the House Dennis Hastert was among the dignitaries who attended the event. Bush frequently referenced Hastert's leadership and support when they were on Capitol Hill together during most of President Bush's time in the White House.

"A lot of the things that President Bush talked about I lived along with him, whether it's 9/11 or tax cuts or all these things. So it was interesting to get his perspective," Hastert said following the event. "Of course I've read his book but these are the things that are inbred. My background and college education was probably a lot like these students at Judson. Certain values, certain ideals you want to set forth. I never dreamed I was ever going to be in politics. I never dreamed I would be a member of Congress. I never dreamed I was going to be Speaker of the House, but I think the values you have, if you work hard and are true to those values and your goals, it's amazing what can happen. I think that is probably what's happened with the President as well."

President Bush was presented with a painting titled “President Bush” by Vitaly Mikhailov, which was commissioned by Judson University and John Carlson of La Gallerie in St. Charles, Ill. The painting was commissioned with the hope that it would one day reside in President Bush’s presidential library, which will be located on the campus of Southern Methodist University in Dallas, Texas.

Earlier in the evening President Bush received another significant gift while attended a VIP Reception along with 225 business leaders and sponsors of the World Leaders Forum. During the reception, Elgin Mayor Ed Schock presented President Bush with a 100-year-old Elgin men’s pocket watch, which Schock said has more meaning since the famous watches were once produced in Elgin. Following the reception formalities VIP guests were given the opportunity to meet and have a photo with the former president.

After President Bush's keynote address, Judson trustee Carol Thompson moderated a formal question and answer session in which the president responded to questions from Judson students, staff and faculty. A panel of entrepreneurs also answered questions submitted from the Judson community which were moderated by Judson's Dean of the School of Leadership and Business, Dr. Tom Berliner. Nathan Latka of Lujure Media, Lisa Canning of The Institute of Arts Entrepreneurship, and Kraig Kleeman of Blaire Group shared wisdom and guiding principles of entrepreneurship and leadership that helped them become successful.

When asked about balancing ethics and profits during the moderated question and answer session for accomplished entrepreneurs, panelist Kraig Kleeman of Blaire Group contributed to that idea stating, "Ethics versus profits is an issue on the minds of the American people since the recent economic downturn. When I think about ethics versus profits, AGI, Lehman Brothers, and many other corporate names come to mind. Greed is a catalyst for financial meltdown. Entrepreneurs can never ever trade ethics for profit. Never. Never. Never. End of story."

The evening ended with Judson University President Dr. Jerry B. Cain thanking the audience for taking part in the university’s first World Leaders Forum.
“Hearing from President Bush tonight mirrored what I found when reading his memoir,” said Cain in a statement following the ceremony. “Here is a man worthy to be president who demonstrated that faith and values influence our decisions and choices. I want Judson University students and the community to feel a sense of pride and confidence from this event. This inaugural World Leaders Forum demonstrates how Judson offers quality learning experiences that complement our excellent academics and serve to instill the values and principles of a Christian education in our students and in the leaders of tomorrow.”

Cain also promised the audience that information will soon be released regarding the speaker and date for World Leaders Forum 2012. The Forum, which has been established to begin an endowment fund for Judson's new entrepreneurial program, will bring recognized world leaders to Judson and the surrounding community annually. In the last 130 years, only eight presidents have visited the Elgin community. The administrators at Judson hope that through the World Leaders Forum, visits from presidents and world leaders will be a regular occurrence.

Gov Quinn's Statement on the Education Reform Bill

CHICAGO – April 14, 2011. Governor Pat Quinn today issued a statement regarding the introduction of comprehensive education reform legislation.

“Education reform has been one of the top priorities for my administration. This bill helps us make sure that we have the best teachers in our classrooms and assures effective teacher performance. This bill today is the result of a collaborative effort between my administration, the Legislature and many education groups. I am proud of the method and hard work that has produced this legislation. I commend Sen. Lightford for her leadership and her tireless work on this reform. I also thank my education advocate Lieutenant Governor Sheila Simon for her dedication to our students. I would also like to extend my appreciation to all of the legislators, teachers and education groups who helped put this together.

“In the last two years, I have signed legislation passed by the General Assembly enacting more education reforms than our state has seen in the last two decades. This continues the comprehensive education reform effort in our state, and I urge legislators to support our students by supporting this plan.”

Monday, April 11, 2011

Comptroller's Report: Revenues Are Up, but Illinois' Financial Challenge Remains as Challenging as Ever

Controller Judy Baar Topinka notes in her April edition of the Comptroller's quarterly, that actions taken in the first three quarters of fiscal year 2011 have allowed the state of Illinois to gain revenue and avoid financial catastrophe in the short term. But a massive bill backlog and substantial long-term challenges remain.

She notes, at the end of March, the office of the Comptroller had $4.515 billion in unpaid bills with some vouchers dating back to October 2010. The Comptroller's office is at two prioritize critical payments such as debt service and other funding vital to the operation of state programs such as general state aid to school districts.

The report goes on to note that further adding to the backlog is the ongoing need to prioritize Medicaid disbursements in order to receive increased federal stimulus match funding. The federal share of Medicaid payments dropped from 59% to 57% in April. And it will fall to 50% after June 30. Therefore the state is expediting payments on medical bills in order to gain as much of the federal match as possible while time allows. This means others who have been waiting to have their bills paid continue to wait.

The backlog in bills would be even more substantial if not for the $3.7 billion in pension funding bonds issued in March, which was used to pay the majority of the states obligations to the retirement system in fiscal year 2011.

As the report notes, the combination of tobacco bond proceeds, the tax amnesty program and the increase in tax rates led to general funds revenue increase of $1.536 billion, a 7.3% increase. Individual income tax receipts grew by $1.057 billion, through nine months. Corporate income tax revenue increase by $240 million, a 27.6% increase. And the states tax amnesty program contributed $36 million in individual income tax receipts and $215 million in corporate income tax revenue.

SALES TAX: as the report notes, an improving economy increased sales tax revenues by $414 million although $164 million of that was due to the tax amnesty.

GENERAL FUNDS SPENDING: Gen. fund spending increased by $2.45 billion, or 11.3% in the first three quarters of fiscal year 2011. Through nine months of fiscal year 2011 base expenditures have increased by $2.45 billion.

Of this amount, healthcare and family services had the largest increase in vouchers presented for payment among the major agencies, with $537 million. Vouchers presented by the state Board of Education were down $250 million to the first three quarters of the fiscal year. The teachers retirement system of higher education are down $660 million, and $67 million respectively year to date as a larger share of this year's pension payments were funded directly by bond proceeds.

UPCOMING CHALLENGES: the state still has to pay back $1.3 billion from the July 2010 short-term borrowing over the next three months. While that amount is lower than what was outstanding at this time last year, the state shifted over $2 billion in Medicaid spending to other state funds in the fourth quarter of fiscal year 2010 which cannot be repeated this time around.

So while the states tax revenues have grown, the state's bill backlog is not likely to decrease significantly from the current levels, or the levels seen at the end of fiscal year 2010 if the current trends continue.

Thus while the state is collecting some additional dollars, the fiscal challenge of operating the state remains as daunting as ever.