Unacceptable Performance by the Veterans Affairs Department

Here’s a Rudyard Kipling poem which isn’t as well known as some of his other ones:

There were thirty million English who talked of England’s might,
There were twenty broken troopers who lacked a bed for the night.
They had neither food nor money, they had neither service nor trade;
They were only shiftless soldiers, the last of the Light Brigade.

They felt that life was fleeting; they knew not that art was long,
That though they were dying of famine, they lived in deathless song.
They asked for a little money to keep the wolf from the door;
And the thirty million English sent twenty pounds and four !

They laid their heads together that were scarred and lined and grey;
Keen were the Russian sabres, but want was keener than they;
And an old Troop-Sergeant muttered, “Let us go to the man who writes
The things on Balaclava the kiddies at school recites.”

(read the whole poem here)

What reminded me of this poem?

This story.

Apparently, in 2012 the average time to complete a VA disability or pension claim was 262 days, up from 188 days in the prior year and far above the official target of 125 days. More at Nextgov.

I’m not very impressed with the excuses offered by the VA for this situation:

VA officials attribute the backlog, defined as claims in the system for more than 125 days, in part to higher demand by veterans returning from 10 years of wars in Iraq and Afghanistan with severe and complex injuries.

A Texas Veterans Commission official noted that the agency is caught in a “perfect storm” of claims from veterans of recent wars and those from aging Vietnam and Korea veterans whose disabilities are worsening.

But wasn’t this all predictable? Obviously wars cause injuries, and better battlefield medical attention means that more wounded soldiers will survive and hence need extended care. And wasn’t the higher claims rate “from aging Vietnam and Korea veterans” largely predictable from simple demographic analysis? I’m reminded of the saying about a British railroad from several decades ago:  “Despite its frequency and general regularity, Sunday morning seems to consistently catch this railroad by surprise.”

The above remark about the railroad notwithstanding, private enterprises generally seem to be able to deal with fluctuating demand and other problems quite well. There is almost always food in the supermarkets, despite droughts, crop failures, logistical problems, strikes, etc etc. The electricity is almost always on despite storms and electrical failures. And while businesses generally do a better problem than government at dealing with daunting arrays of problems, some government agencies do manage to deal with demand increases and fluctuations far better than the VA seems able to do with these disability claims. Somehow the FAA manages to conduct air traffic control safely and effectively despite the increased demand that occurs in holiday seasons and the varied and often nefarious effects of the weather. The military itself often manages to quickly deploy forces and equipment to far-distant locations. Why has the VA been unable to modify its processes to provide resolution of disability claims in a timely manner?

Sad and disturbing.

They are all lying.

I’ve tried to think about anything but the coming economic calamity but this column from the Daily Telegraph is too perceptive to ignore. Of course, the liars include most of the US media, press and TV. We have to get our news from the British media about American politics. The US media has become an arm of the Democratic party.

Must we assume now that no party that speaks the truth about the economic future has a chance of winning power in a national election? With the results of presidential contests in the United States and France as evidence, this would seem to be the only possible conclusion. Any political leader prepared to deceive the electorate into believing that government spending, and the vast system of services that it provides, can go on as before or that they will be able to resume as soon as this momentary emergency is over was propelled into office virtually by acclamation.
So universal has this rule turned out to be that parties and leaders who know better whose economic literacy is beyond question are now afraid even to hint at the fact which must eventually be faced. The promises that governments are making to their electorates are not just misleading: they are unforgivably dishonest.

I have not believed that Romney’s problem was one of poor communication or salesmanship. Certainly, the turnout numbers show that Obama’s organization made the most of a very intrusive data mining system. The possibility that the system of the campaign will become part of the political party’s permanent infrastructure is worrisome. I don’t want to be an alarmist but one feature of totalitarian governments, after the French Revolution, was the intrusion into daily life.

Of course, once in power all governments must deal with reality even if they have been elected on a systematic lie. As one ex-minister famously put it when he was released from the burden of office: “There’s no money left.” So that challenge must be met. How do you propose to go on providing the entitlements that you have sworn never to end, without any money? The victorious political parties of the Left have a ready answer to that one. They will raise taxes on the “rich”. In France and the United States, this is the formula that is being presented not only as an economic solution but also as a just social settlement, since the “rich” are inherently wicked and must have acquired their wealth by confiscating it from the poor.

I see no sign of any recognition of reality yet by Obama or his government. The “fiscal cliff” negotiations, if they can be called that, have been a farce. The Republicans have allowed themselves to be maneuvered into secret negotiations which have been demagogued and which have set them up for blame for what is coming. They would have been far better advised to insist on open negotiations, on C-SPAN if necessary.

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Your Government Money At Work… On a Sports Car

I was out walking at night in River North when I came upon a cool looking sports car outside on the street. I hadn’t seen one of these before so I took a photo to look it up.

When I woke up in the morning and was reading my old-school paper copy of the Wall Street Journal, I saw on the front page of the finance section an article titled “Its Battery Drained, Fisker Hunts for Partner” with a picture of my Fisker Karma in color. Per the article:

Fisker Automotive, the troubled maker of a battery-powered sports car, is accelerating a global search for a strategic partner to keep its business going…Fisker has taken steps to reduce its cash use. In July, it halted production of its sole vehicle, the $110,000 Karma, to lower production costs. The Karma has been hobbled by recalls and quality problems.

Who thought that we needed another sports car, in a market glutted with them? Why the US Government, of course. Per wikipedia:

In 2010, the Department of Energy awarded Fisker a $529 million green-energy loan, primarily to assist the company in transitioning the Karma, which is assembled in Finland, into the American markets. Fisker collected nearly $200 million until February this year, when the government froze the loan because the company was failing to meet the government’s milestones

What is also apparently hurting Fisker is that they can’t obtain batteries from A123 Systems, Inc. Bizarrely, the Wall Street Journal didn’t even mention that NOT ONLY did the US government bankroll Fisker on their futile plan to create another un-neeed sports car, but they also bankrolled A123 Systems in their battery development, per Wikipedia:

The company received US$249 million grant from the Department of Energy for building battery production facilities. As of June 2012, $129M of the grant has been used to build the 550 MWh Livonia plant and the Romulus plant. Remaining untapped $120M grant’s expiry date has been extended from end of 2012 to end of 2014. The company laid off 125 workers in December 2011 as demand for partner Fisker’s automobiles has been slack.

It is astounding to me that the government decided to build up an entirely vertically integrated chain of industry in order to produce a sports car that is unreliable that no one apparently wants to buy. And yet this is likely one of the most tangible “products” that the stimulus package delivered.

Also I am still shaking my head that the normally OK WSJ (for main stream media) didn’t see the further lunacy beyond just Fisker’s imminent demise in that it was linked to the troubles of A123 Systems. A Wikipedia search like yours truly could have figured that out.

Back when I took courses on economics and socialism they spoke of the government’s inability to allocate capital as a core problem with top down socialism. This is exhibit A. It is one thing to prop up an already existing business like the auto industry or banks (not always a good idea) which needs restructuring or a short term cash infusion, but starting an integrated value chain industry from scratch is beyond a longshot, it is lunacy.

Cross posted at LITGM

The Municipal Bond “Storm” Is Still Coming

A while back there was a furor over analyst Merideth Whitney, who made a “call” that the Municipal Bond market had serious issues and would have an increasing number of defaults. This comment was cited as irresponsible by cities, bond underwriters, and others involved in the municipal funding business.

Many people have been gloating about the fact that these defaults haven’t occurred, such as this article in Bloomberg. The cities and states were bailed out by ultra low interest rates (ZIRP) and a demand for any sort of yield which made their bonds look good in comparison.

While our insane ZIRP has given a lifeline to many municipalities and states, the facts are plain to anyone with any fiscal sense.
1. Most states and municipalities are running annual deficits, meaning that they need to keep borrowing more money to keep functioning
2. Long term liabilities like pensions and medical care for staff (and the many unionized staffers) are continuing to grow and are gigantic relative to money set aside to pay them
3. Even if the state or municipality were to stop running an annual deficit, there is little capability to PAY DOWN this giant pile of debt

Detroit, long a leader in social ills, is now a leader in fiscal ills. To be fair, the city is a shambles, with a vast acreage to support, a huge flight of anyone in the upper or middle classes, and a history of corruption and failed leadership.

The city is down to its last bullet, and reliant on state aid. Per this article,

Detroit had its bond ratings cut deeper into noninvestment-grade territory by Moody’s Investors Service, citing a cash crisis that may mean bankruptcy or default in the next 12 to 24 months.

“These downgrades reflect the city’s ongoing precariously narrow cash position and a weakened state oversight framework,” Moody’s analysts Genevieve Nolan and Henrietta Chang said in a statement from the New York-based credit-scoring company. The downgrades affect $8.2 billion in Detroit debt, according to David Jacobson, a Moody’s spokesman.

Who owns that $8.2 Billion in Detroit debt and what are they thinking right now? They can’t be assuming that Detroit will pay them back – Detroit can’t cover their CURRENT obligations and is shrinking rapidly – much less would they be able to ever pay down this debt.

In reality they are likely counting on other groups to bail out Detroit, whether it is the state of Michigan, or the Federal Government, because Detroit itself as a stand alone entity shouldn’t be able to finance a night out on the town, much less support $8.2 billion in debt. This game made winners of some with Greek debt, for instance (buy on the cheap during distress and wait for the German taxpayers to pick up the tab) and absolutely could be the right strategy right now, as well.

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Reports of the economy’s demise are premature, but not by much.

UPDATE: The publication of this column by Amity Schlaes adds a bit of prophecy to my concerns expressed here.

Will 2013 be 1937? This is the question many analysts are posing as the stock market has dropped after the U.S. election. On Nov. 16, they noted that industrial production, a crucial figure, dropped as well.

In this case, “1937” means a market drop similar to the one after the re-election of another Democratic president, Franklin D. Roosevelt, in 1936.

If I could be more worried about the future, this column might do it. Read it.

Russ Douthat’s column in the NY Times today points out a few problems with the left’s gloating about winning the election. I apologize for my pessimism but I can’t help looking at the facts beneath the surface.

The first comment beneath this article confirms my belief that the left ignores economics and is solely concerned about social issues and “stuff.”

The ideas that Republicans championed in the last election could have easily been heard at a segregated lunch counter in the ’50s. Suspicion about immigrants, fears about socialism, the subservience of women, back-of-the-bus-style racism, and disgust at the very thought of homosexuals were cornerstones of the Republican ethos. If there was an underlying wholesomeness in their belief in God, family, and tradition, I couldn’t detect it over the din of hateful, destructive rhetoric aimed at the majority of ordinary Americans.

The re-election of Barack Obama has ended the possibility of a serious effort to deal with out of control spending and debt in this country. The “fiscal cliff” is coming soon and there is speculation that one side or the other will “cave” in negotiations. It doesn’t really matter as no serious proposal is under consideration. The tax rates on the top 2% of incomes don’t matter. It’s not worth the trouble for Republicans to defend these tax rates for a group that may not even vote for them.

The whole world cartel of spending is coming to an end and it may not just involve national bankruptcy. It may be the end of an era, maybe of democracy which seems to be incapable of managing debt. An article in Der Spiegel sounds to me like a prediction of the future.

In the midst of this confusing crisis, which has already lasted more than five years, former German Chancellor Helmut Schmidt addressed the question of who had “gotten almost the entire world into so much trouble.” The longer the search for answers lasted, the more disconcerting the questions arising from the answers became. Is it possible that we are not experiencing a crisis, but rather a transformation of our economic system that feels like an unending crisis, and that waiting for it to end is hopeless? Is it possible that we are waiting for the world to conform to our worldview once again, but that it would be smarter to adjust our worldview to conform to the world? Is it possible that financial markets will never become servants of the markets for goods again? Is it possible that Western countries can no longer get rid of their debt, because democracies can’t manage money? And is it possible that even Helmut Schmidt ought to be saying to himself: I too am responsible for getting the world into a fix?

The answer will not be pleasant to consider. We may have run the course on modern national financial competence. Japan, twenty years ago, was a warning we did not heed. Stimulus, as in spending billions on infrastructure, did not work. Japan had a real estate bubble and the response was to try to reflate the bubble. It failed.

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