The federal government has spent $800 billion more this year than it received in revenue. The full fiscal year deficit is expected to be about $1.5 trillion (which is even higher than last year’s). Surprise, the new health care law will cost $150 billion more than estimated just a few months ago.

Frankly, this is all you need to know, visualized for your viewing pleasure:

Debt doom

I’m reminded of a quote from my favorite political economist, Frederic Bastiat, from the mid 19th century:

Self-preservation and self-development are common aspirations among all people. And if everyone enjoyed the unrestricted use of his faculties and the free disposition of the fruits of his labor, social progress would be ceaseless, uninterrupted, and unfailing.

But there is also another tendency that is common among people. When they can, they wish to live and prosper at the expense of others. This is no rash accusation. Nor does it come from a gloomy and uncharitable spirit. The annals of history bear witness to the truth of it: the incessant wars, mass migrations, religious persecutions, universal slavery, dishonesty in commerce, and monopolies. This fatal desire has its origin in the very nature of man — in that primitive, universal, and insuppressible instinct that impels him to satisfy his desires with the least possible pain.

Man can live and satisfy his wants only by ceaseless labor; by the ceaseless application of his faculties to natural resources. This process is the origin of property.

But it is also true that a man may live and satisfy his wants by seizing and consuming the products of the labor of others. This process is the origin of plunder.

Now since man is naturally inclined to avoid pain — and since labor is pain in itself — it follows that men will resort to plunder whenever plunder is easier than work.

History shows this quite clearly. And under these conditions, neither religion nor morality can stop it.

When, then, does plunder stop? It stops when it becomes more painful and more dangerous than labor.

It is evident, then, that the proper purpose of law is to use the power of its collective force to stop this fatal tendency to plunder instead of to work. All the measures of the law should protect property and punish plunder.

But, generally, the law is made by one man or one class of men. And since law cannot operate without the sanction and support of a dominating force, this force must be entrusted to those who make the laws.

This fact, combined with the fatal tendency that exists in the heart of man to satisfy his wants with the least possible effort, explains the almost universal perversion of the law. Thus it is easy to understand how law, instead of checking injustice, becomes the invincible weapon of injustice. It is easy to understand why the law is used by the legislator to destroy in varying degrees among the rest of the people, their personal independence by slavery, their liberty by oppression, and their property by plunder. This is done for the benefit of the person who makes the law, and in proportion to the power that he holds.

Due to the near-complete collapse of state revenues, the cuts have (finally) been forthcoming. Public schools received per-pupil cuts of approximately $300 for the current fiscal year. State agencies have been ordered by the governor to cut 10% of their budgets. The cycle of layoffs and reduced revenues continues.

The result? Governor Granholm and the MEA have begun hyperventilating. This week they staged a massive lobbying effort to get legislators to increase taxes. Apparently they don’t require Economics 101 in teacher colleges.

On the city level, Grand Rapids has seen a similar decline in income tax revenues and property tax revenues will probably see declines due to historic drops in resale values of homes and commercial property. Immediately upon announcing the layoffs of 125 city employees, Mayor Heartwell called for a ballot question to raise taxes in the city. He claims there hasn’t been a tax increase in 15 years. Apparently the constant reduction of the personal income tax exemption, the added property tax bill “service fee,” and the increase in trash collection property tax don’t count as tax increases in the mayor’s book.

Oh, and don’t forget that The Rapid is coming back, probably in early 2010 to ask, again, for a tax increase to build the redundant and wasteful “Silver Line” bus service, to clog up Division during rush hour.

But the fiscal problems are just beginning, and there is very little sign that anyone is proposing real solutions. The “easy” way out, increasing taxes, will only work so much. They will run in to the law of diminishing returns. The speaker of the state house, Democrat Andy Dillon, apparently grew some huevos and bucked his MEA masters by proposing the pooling of all public school health plans into one statewide health plan. The MEA, fearing the loss of their money-laundering cash cow health plan MESSA, promptly went ape-sh*t. This illustrates the difficulty of real, substantive change at the state level. So many special interests peddling their influence (in the form of money) makes it nearly impossible to propose an innovative solution to the state’s structural budget problems.

Of course, then there are the unsustainable defined-benefit Ponzi public pension plans. They will fail. It’s just a matter of time. Even politicians can’t repeal the laws of compounding numbers. But I’m sure they will try.

But we should turn to the local level, where real people can have the most chance of affecting change. We can, as a city, choose to continue down the ultimately disastrous path of “the easy way out,” or we can have real, substantive change in how city government does business.

A quick overview of what’s going on at the local level: As state revenue declines, so does the state subsidy to cities called revenue sharing. Revenue sharing has been on the decline for several years. City leaders keep pointing to how much has been “lost,” but their complaints fall on deaf ears – or at least ears that understand that cities fall further back in line from other special interest groups.

As revenue sharing declines, so have city income tax receipts. The city’s income tax revenue is down 14% (apparently year on year).

Not only has revenue been on the decline, the gigantic hydrogen bomb of the city’s pension system is preparing to detonate. The city’s 2010 fiscal plan (published before the layoffs were announced this week), is available here. One paragraph should stand out and set off all the alarm bells in the city:

In FY2007 our two pension retirement trusts were 110% and 120% funded.  Both employer and employee contribution levels were at or near the lowest possible levels.  This advantage was eliminated by the breathtaking decline of the financial markets over the past 18 months.  We now know that our retirement funds are significantly underfunded. This means that both employee and employer contributions must move dramatically higher.  Proposed changes to actuarial assumptions and plan provisions will freeze employee contributions at the bottom of the contribution range and provide additional time for the City to adjust to higher employer contributions.  Nonetheless, the employer share will go from 7.7% in to 9.29% in FY2010, and 13.62% in FY2011 for the General Pension and from an FY2010 rate of 0% to an estimated 23% in FY2011 for the Police/Fire Pension.  These percentages assume that we will be able to implement critical smoothing techniques that will mitigate the intense upward pressure on required contributions. The increase in employer funding requirements contributed to the FY2010 GOF operating deficit of $2.9 million.  Unless we see a significant increase in the market value of retirement plan assets over the next couple of years, the estimated pension contribution will continue to rise. (emphasis mine)

Translation: 2010 layoffs are just the beginning. Fiscal Year 2010 includes a pension contribution (as a percentage of salaries) for the police and fire employees of 0%. Yes, 0%. This will go from 0% to 23% (of salaries) in one year. A search of the fiscal plan shows that total personnel costs for police and fire are about $67 million. Let’s back out about 40% of that (just a wild guess) to come to actual base salary cost. We come up with about $40 million. Now,  re-read the above paragraph. The city is going from contributing $0 in the current fiscal year to the police and fire pension plan to (my estimate) of 23% of salaries in 2011 – or about $10 million. The increase in contributions for the other defined-benefit pension participants on the city’s payroll will increase from 9.29% this year to 13.62% next year. This is unsustainable.

The mayor’s solution? Raise taxes.

Lest I be declared someone who only points out problems and no solutions, here are a few suggestions:

1. Lay off all non-essential employees. This includes the “equal opportunity” department of five people.
2. Outsource information technology (IT) services.
3. Eliminate the Office of Children, Youth, and Families.
4. Convert all employees, now, to a defined-contribution retirement plan. NOW.
5. Eliminate the Downtown Development Authority. This entity sucks up about $17 million of local property tax revenue that would normally go to the city’s general operating fund. The DDA also currently owns the Van Andel Arena. Sell the arena, pay off the outstanding bonds, and use the excess to pay off some of the DeVos Place bonds. The DDA currently operates as a taxpayer-funded subsidy to developers, giving away free money to those who ask.
6. Implement a fire department response fee. Most (if not all) homeowners insurance plans offer coverage if you’re charged for fire department response.
7. Eliminate the city’s trash collection services. There is a special property tax levied for this. There are plenty of private trash haulers. Once the trash collection services are eliminated, go to voters and ask them if it’s ok to convert the current trash levy on property tax to a general fund levy so that it can be spent on other city services (including police).
8. Contact every citizen and ask them what their priorities are. Do you prefer Police and smooth roads, or do you prefer an equal opportunity department and subsidies for developers?

If serious, dramatic changes are not implemented, the city will go bankrupt. This has started to happen in other states. There is no chance in h*ll that the economy is going to return to anywhere near where it was at the peak of the last cycle in 2007 – at least not any time soon.

Tough choices need to be made now – if our politicians can stomach it.

If you live in Grand Rapids, East Grand Rapids, Kentwood, Walker, Wyoming, or Grandville, you get the pleasure of voting on the bloated and wasteful Interurban Transit Partnership (The Rapid) tax hike of 18%. Some interesting fact on The Rapid:

• Rapid buses carry an average of only six people at any given time
• Even as the numbers of passengers has increased, the cost of The Rapid on a per-passenger basis is also going up, meaning the Rapid is getting less efficient with time
• The Rapid’s web site misleads the public by under-reporting revenue by $18 million this year alone. Why do they hide the real cost of The Rapid?
• The average transit bus gets only 3.65 miles to the gallon and spews 50 times more pollution than a car. Rapid buses add pollution to the environment, they don’t reduce it!

You can read more information on the waste at The Rapid by checking out the Rapid No web site at www.RapidNo.org.

All Kent County residents get to vote on the GRCC millage increase of 31%. The interesting part is that this property tax increase is permanent! It never expires.

Grand Rapids Residents Also get to vote on the Grand Rapids Public Schools operating millage. This tax is on non-homestead property only, but effects renters.

So, don’t forget to vote on Tuesday, no matter where you live in Kent County.

As you may know, The Rapid’s web site is at www.ridetherapid.org.

It has come to our attention that opposition to the tax increase is organized this year. Check out www.stoptherapid.org (also apparently at www.rapidno.org). Some of the facts surrounding The Rapid mirror what we’ve been saying for years. In short, it’s a horrible deal. From the website:

• “The average transit bus only gets 3.65 miles per gallon
• Transit buses spew 50 times more pollution and 279 times more soot than a passenger car.
• Each RAPID bus costs $9.40 per mile to operate. A typical car costs about $0.22 per mile to operate.
• For each passenger that rides a RAPID bus, the RAPID loses $5.82. Taxpayers (that’s us!) make up that amount to the tune of $30.7 million a year!”

Wow! 3.65 miles to the gallon? We knew it was a bad deal, but just how bad wasn’t this clear to us.

The best part of the site is the “This Pig Stinks!” campaign. We like it so much, we’ve added it to our menu at the right. This pig really does stink! We just hope the word gets out about this web site before the election. The taxpayers of Grand Rapids and the surrounding area need to understand the facts on The Rapid.

According to Sunday’s Grand Rapids Press, Secchia has resigned his position at 23 and is now campaigning for a new casino in downtown Grand Rapids. One wonders why the change of heart.

The idea is that the GR casino would be basically a funding mechanism for the government, paying for the local pools, museums, parks, etc. While the idea seems to be in the right place, we’re very skeptical of any government unit owning an running an enterprise that the private sector should. Each time one of these publically-owned enterprises comes into existence, it generally entails the creation of new bureaucracies and un-elected governance boards (such as the DDA, the money-losing Kent County Convention and Arena Authority, etc).

One is left to wonder, though, when Secchia makes a statement like this, “I’m talking about a casino like Detroit has, (but) owned by the city, county and local people who would share the profits…” Does Secchia plan to be one of the “local people” who shares the profits? Who would own the casino? Who would operate it? Will it be just another government boondoggle, like the current city-owned golf course?

The trend is continuing in favor of service industries. The construction, wholesale/retail trade and finance/insurance/real estate industries are expected to add the most jobs, with manufacturing staying stable with no growth anticipated.

But we’ll remind our readers that Governor Granholm wants to tax service industries more in favor of tax cuts for manufacturers. It doesn’t make much sense to increase the tax burden of those industries which are creating jobs, which will result in the creation of fewer jobs. The single business tax needs to be cut across the board, so all industries benefit. The lower the taxes, the more money employers will have to create jobs. It really is that simple.

Michigan has the nation’s worst economy and people are leaving the state. It’s time to get government out of the way so businesses can be allowed to create jobs.

Local unions, which have the responsibility of financing the cost of putting on the parade, simply didn’t have the money this year. They couldn’t come up with the necessary $25,000. Union leaders, however, promise to be back with a parade next year at a trimmed-down $10,000 cost.

According to Wikipedia, Labor Day started in the 1880′s, by organizations such as the Knights of Labor and the International Workingmen’s Association (which was led by Karl Marx himself).

We here are GRPundit don’t mourn the loss of the labor day parade.

The Commerce folks oppose the casino in Wayland because they think it will sap business from Grand Rapids. Nevermind the fact that there are already people who drive all the way to Mt. Pleasant currently. Keeping those folks closer to GR apparently doesn’t enter into their minds.

But the important thing to note in this article is that there are some business owners in town that are afraid to speak out in favor of the casino out of fear of repercussions. Unbelieveable.

Of course, the powers that be are up in arms. A local group, mostly consisting of business folks in Grand Rapids, calling themselves “23 is Enough,” referring to the 23 casinos in Michigan, is fighting the decision.

But that very name is the picture of hubris. 23 is enough? Says who? Certainly not the marketplace. This type of rhetoric is coming from the business community. We’ve never seen them have a campaign against taxes, saying “40% is enough.” Perhaps they should concern themselves less with a job-creating enterprise than with the job-killing enterprise of excessive taxation.

We look forward to another local casino. The more the better.

What does this mean? It makes for a depressed housing market (fewer homes are needed). So those of us who live in the city who are already hit with lower home values because of poor schools and high taxes, get squeezed even more.

What’s the solution? There’s still a lot of wasteful city government. Taxes should be reduced, both property and income tax, to attract businesses and homeowners. As people leave the city and property values decline, so does tax base growth, making the problem worse.

So, why should we stay in the city, again? Someone remind me.