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Economics so Simple Even a Politician Can Understand

Robert Heitner

Ref. No. 802011gv
Length 103,841 words

Summary

Economics So Simple, Even a Politician Can Understand’ is an easy to read book about economics containing many real life and a few anecdotal examples so that even readers with no background can easily understand economics. The book is based on the simple theory that if you have more money in your pocket, you and others are better off and what policies and conditions actually put more money in your pocket and which ones take more money out of your pocket. The book is finished and is about 104,000 words.

From The Book

Economics so Simple

Even a Politician Can Understand

Table of Contents

Introduction - Economics is Really Very Simple

The Most Important Law Page

1. The more money you have, you and others are better off 4

2. What factors increase and decrease your wealth 5

3. Prices – Higher you are poorer, lower you are richer 6

4. Wages – Higher you are richer and lower you are poorer 14

5. Taxes – Higher you are poorer and lower you are richer 17

6. Competition and being ‘free to choose’ 22

Other Economic Factors

1. A few economic laws 24

2. Property rights 34

3. Savings, investment capital & entrepreneurship 41

4. The rule of law 43

5. The failures of Communism and Socialism 45

6. Why some countries grow rich, while others get poorer 53

7. Decision making - pleasurable, payoff, or punch out 58

8. Walmart, Woolworth and monopolies 60

9. Politicians, media, disinformation and economics 66

10. Think tanks, universities, TV news & their polls, 69

studies and statistics

11. Conventional wisdom that is not so wise and often not true 71

Table of Contents – continued

Government and the Economy

1. Differences between you & the government 78

2. Two types of government spending - Infrastructure 83

and transfer payments

3. Infrastructure spending - Investments for the future or 85

overpriced pork?

4. Transfer payments - Compassion or subsidizing 88

unwanted behavior?

5. If the government spends it, you have to pay for it 91

6. Who spends your money most wisely? 93

7. Planning 108

8. Mandates 114

9. Government insurance programs 118

10. Public education 141

11. Health care 154

12. Government regulations - Protectors of society or a waste of 169 resources?

13. Government price fixing 177

14. Government stupidity cycles 179

15. Katrina 181

International Trade, Foreign Aid & Immigration

1. Foreign trade - History - Traders always prosper 187

2. Trade deficits and other mirages 191

3. Japan - Why it has prospered and why it has not 193

4. Rebutting some favorite protectionist arguments 195

5. Immigration 202

6. Foreign Aid, World Bank, IMF & UN 206

Conclusions - 213

6 Who spends money more wisely, you or government?

In July of 1998, the following real estate ad was placed in my local paper in rural New Jersey; 16 room brick home on 11+ acres featuring 8 king size bedrooms, 4 full baths, 7 original fireplaces, a new grand gourmet kitchen, wine cellar, pond and in ground pool for $519,000. Now if you wanted to spend 50% more and already owned the land, you could build a two hole outhouse with no heat or running water as the National Park Service had recently done in the neighboring Delaware National Recreation Area. The National Park Service had spent almost $800,000 on this lavish outhouse which did include some surrounding landscaping.

This example caused an outrage, especially after the Park Superintendent stated that the expenditure was defensible. Everyone knows that a two holer with no heat or running water should not cost almost $800,000. What about all the other government construction projects? Is this the exception or the rule? Earlier, in the chapter under government investments, we detailed the trolley line in Camden, New Jersey that cost $1.1 billion that served very few customers. Most people would not think another thing about that and certainly when the trolley line was built, there were no screams and squeals from the public at all, certainly nothing like the hubbub that occurred when people realized that they had spent almost $800,000 for an outhouse. If people did the rather simple math and realized that all commuters and almost all occasional riders on the trolley could have been given a $35,000 luxury sedan for less than one third of what the trolley line cost, there probably would have been an outcry.

Let us look at an example of state government construction. Also in the summer of 1998, an article in the New Jersey Herald told of a new bathhouse opening in Stokes State Forest in Sussex County, New Jersey. The new bathhouse, built on the foundations of the old bathhouse, cost $337,000 and was ‘6 years in the making’. The concrete block building had 5 toilets, 1 shower and 1 foot wash. Although this may be a bargain compared to the almost $800,000 the federal government spent on its outhouse, it is still outrageously expensive. In 1998, with $337,000, on land you already owned, you could build quite a nice house with 5 bathrooms, each with their own shower and surround those with many bedrooms, a gourmet kitchen and other rooms.

Also, why on earth would it take the state 6 years to build a cement block latrine with a shower? In World War II, we were attacked on December 7th, 1941 and by August 1945 (3 and ¾ years), we had built massive war industries turning out planes, ships, tanks and other arms in massive quantities and fought endless battles over half the earth defeating the well armed and entrenched Germans and Japanese.

The bureaucrat who proudly proclaimed that the bathhouse ‘was 6 years in the making’, as if cement block latrines were like fine red wines that improve with age, is typical of the mindset in government that the longer something takes to build, the better it will be. This mindset seems to be that if more bureaucrats and politicians approve something and review the project, the better the result. Some people will state that World War II was very dangerous and had to be fought as fast as possible after we were attacked and this is very true. But what about the customers of the cement latrine in Stokes State Forest, who for years had to go in the woods and go dirty, while bureaucrats fiddled.

When the Northridge Earthquake in 1994 destroyed portions of the Santa Monica Freeway, under normal government construction procedures, the repairs would have taken more than five years. The governor of California at that time, Pete Wilson, in an emergency decree, repealed all the government construction procedures for this emergency repair project. With government red tape out of the way, the Freeway was repaired in 66 days. Basically, a repair period of sixty months was reduced two months by eliminating government red tape. Imagine what this reduction in the time of construction did for reducing the cost of the project. Imagine how many lives and how much time and convenience were saved by the users of the Santa Monica Freeway that did not have to wait 5 years to use their road again.

In August 2000, a thunderstorm stalled over Sparta, New Jersey and dumped 14 inches of rain in a little over 1 hour. This caused massive local flooding, including washing out a county road named Glen Road. Three years later, government officials proudly proclaimed that Glen Road will be repaired and open by November, which is November 2003. Although this is about 1 month less than it took us to defeat the Nazis in World War II, it is still an incredible amount of time. Glen Road was completely closed during this period causing many people detours and school buses to take detours that were less safe. Obviously, the safety and convenience of the people using Glen Road was much less important to the politicians than the safety and convenience of the people using the Santa Monica Freeway. The repair of Glen Road was much simpler than the repair of the Santa Monica Freeway, but it took 40 months instead of 2 months. This is a pretty clear example of the enormous burden and cost that government procedures and regulations put on society and our pocketbooks. During those 40 months that Glen Road was being repaired, endless politicians, bureaucrats and government workers were doing ‘stuff’ to fix Glen Road and all their salaries and benefits were coming out of your wallet for 40 months rather than two months, which needless to say greatly inflated the costs of this project, which left less money in your wallet.

Pork & Patronage

A Congressman is a pig. The only way to get his snout from the trough is to rap it sharply with a stick. – Henry Adams

Let us say that you operate a school. You have to pay for your school building and to operate that facility. You have labor costs for teachers, administrators, and maintenance personnel. If you hired a teacher, who never showed up for work, your costs would go up or the students would suffer from having fewer teachers. In the real world of free markets, if you had a salaried employee who rarely if ever showed up for work, that employee would be fired in a heartbeat.

However, businesses are not always able to operate freely. Most people have heard stories where organized crime extorts businesses with threats of violence and sometimes those threats are paid off by hiring a mob associate to a no show job. The person collects a salary, but does no work. Organized crime is not the only organization with no show jobs. When it comes to no show jobs, government and politicians make organized crime look like rank amateurs.

Politicians spend trillions of tax dollars each year. Thousands of companies, schools, charities, colleges and universities, and other organizations are lined up at the government trough very desirous of their ‘fair share’ of the massive government expenditures. Sometimes politicians give themselves no show jobs, but more often than not, the no show jobs are given to spouses, relatives, friends, and business associates, with kickbacks or gratuities of some sort going back to the politician or bureaucrat who arranged the no show job.

Let us look at a recent example. The March 30th, 2007 Star-Ledger of Newark, New Jersey has a front page headline telling of the indictment of State Senator Wayne Bryant for bribery and ‘brazen’ graft. The indictment stated how Senator Bryant had a job at the Gloucester County Board of Social Services for which he performed 15 hours of work over the last 5 years and was paid over $200,000 dollars, which works out to more than $13,000 per hour, which I am pretty sure is way more than Senator Bryant was worth. Senator Bryant also had no show teaching jobs at the scandal ridden (UMDNJ) University of Medicine and Dentistry of New Jersey and at Rutgers University in Camden. For the past five years, Senator Bryant averaged over $120,000 per year in salary for these three no work jobs. However, the salary was only a small portion of the taxpayer liability in this case. His pension went from $28,000 five years ago to over $81,000 now. Bryant, who is 59, would need to plunk down more than $650,000 for a $50,000 per year lifetime annuity. Also, New Jersey state pensions have cost of living increases, so the taxpayers would be on the hook for much more than the $650,000 to cover the future cost of living increases.

Bryant had lobbied for someone to be named dean of one of the UMDNJ schools and after that person was named dean, Bryant got his no show teaching job from that dean. The dean was also named in the indictment. Of course, Senator Bryant, who was chairman of the powerful state senate budget committee, had steered millions of dollars in state aid to the UMDNJ and Rutgers schools at which he obtained his no show jobs.

Is Senator Bryant an exception? Obviously, he got caught. As the indictment stated, he was brazen in his graft. Most people do not get jobs for themselves, but for their friends, relatives and business associates. Also, they steer contracts to their friends, relatives and business associates. People often do not get ‘no show’ jobs, but ‘no work’ jobs, where they actually show up, but do little or no work. Often government contracts are very lucrative, and if they can be steered to friends and relatives, that can mean money in the bank for the politician and bureaucrat. Legal fees and lobbying are also great methods of steering government largesse into the ‘right’ hands.

What does this mean to your wallet? How is this different than how the private sector works? First, in Senator Bryant’s case, taxpayers had to pay Senator Bryant about $600,000 out of their wallets over the last 5 years for basically no work. Then, if he had not gotten caught, taxpayers would be on the hook for probably another $750,000 or more for his increased pension benefits for performing no work. Now, if you operated a private school that received no government money, you could not afford to pay some politician for years a big salary and bigger pension benefits who did not show up for work. If Rutgers and the UMDNJ did not receive state funds, certainly their teaching costs would go down.

Let us look at another example of pork to politicians. Sharpe James, who was mayor of Newark, New Jersey for two decades and also a state senator recently retired, especially when his reelection chances looked dim. He is also under investigation for things like taking lavish trips to Rio de Janeiro at taxpayer expense. Upon retirement, he got a job teaching as head of the urban studies department at Essex County Community College at a salary of $150,000 per year. Newark is located in Essex County and the county college is located in Newark. Unlike some other cities that have been rejuvenated, Newark is dismal, with high crime, no shopping and very little private business, in spite of endless piles of state money and projects attempting to revitalize the city. What is Mr. James going to teach? This is how I did it and it did not work, so try something else. County colleges in New Jersey get about 1/3 of their money each from students, the county and the state. So taxpayers and students have to foot a huge bill to pay Mr. James and to get taught by someone who failed at what he did. It would be similar to a school hiring someone to teach aviation whose only accomplishments have been to build planes that do not fly.

Mayor James did very well for himself as mayor of Newark and a state senator. Besides lavish vacations in the world’s nicest destinations, James also owns a 50 plus foot yacht and has satisfied his fondness for Rolls Royces.

Politicians who retire either voluntarily or at the command of the voters when the lose reelection often get lucrative teaching jobs, where they get a salary and retirement benefits for very little work. Incumbents rarely lose elections in this country at any level, so a politician defeated for reelection is a failed politician. When Governor Florio was defeated for reelection in 1993, he got a teaching job. Several universities tried to hire the former Governor, who inherited a booming economy in New Jersey and turned it into one the worst performing economies in the country. He ended up teaching at Rutgers. The former governor also received numerous job offers from many law firms and he took a very lucrative position. Both Rutgers and the law firm probably made wise choices, not because the former governor was qualified for either position, but because of the political influence he brought to the table. The state of New Jersey spends billions of dollars per year, lots of it goes to higher education. Also, there are endless lawsuits and lots of government litigation where the influence of a former governor, even a failed one who lost reelection would be invaluable. Basically, Rutgers and the law firm were paying Governor Florio for his influence, not his skills.

For both Rutgers and the law firm, the need to purchase political influence was very important; but the purchasing of political influence is like a bribe. You are paying out money not for legal expertise or teaching expertise to help your clients or teach your students, but to gain access to the government and the money it spends and controls. This money is an added expense of doing business, and none of the expenditures to Governor Florio helped the customers of the law firm or Rutgers, it was just additional overhead.

Let us also look at Governor McGreevy, another New Jersey Governor. Governor McGreevy, married with two children had to resign after it came to light that he had appointed his boyfriend to the head of New Jersey’s equivalent of homeland security. Needless to say, the governor’s boyfriend, who was not even a United States citizen and would be very hard pressed to get necessary security clearances was not qualified for the job. There also were other scandals clouding his administration. According to the April 19, 2007 Star-Ledger, the former governor has a job teaching at Kean University in Union, New Jersey. The first class he taught was Ethical and Legal Issues in Operating Globally. I guess since he hired his former, foreign boyfriend for a lucrative state job, he certainly has firsthand knowledge about his course topic. Also, like Senator Bryant, the former Governor is padding his future pension at taxpayer expense. Seriously, former politicians are not hired by colleges and universities for their teaching skills; they are overhead to bring fame and hopefully government largesse to the college or university.

Let us look at this from the perspective of the colleges. Paying Senator Bryant between $30,000 and $40,000 per year is a bargain to receive millions of dollars in additional state aid. Although the colleges are not on the hook for the whole pension costs, even if those are added in, it makes good economic sense to colleges and universities to bribe influential politicians with no show teaching jobs to receive millions in additional aid. The same holds true for Mayor James and Essex County Community College. I am sure many politicians look eagerly to retire with a $150,000 easy teaching gig for a few years that will handsomely increase pensions for the rest of their lives. Steering a few million extra dollars to the colleges where they wish to teach is very alluring and lucrative. New Jersey’s budget exceeds $30 billion, so a few extra million to various colleges and universities ‘to support higher education’ will never even be noticed. This setup is very good for the colleges and universities and really wonderful for the politicians who get to pad their salaries and pensions, but it is a real burden for tuition paying students and taxpayers, who both have to remove extra dollars from their wallets to give politicians lifestyles of the rich and famous for doing little or no work. Also, students and taxpayers will often be paying politician teachers who are not interested in teaching and may be incompetent or not interested in imparting any wisdom they may posses to the students.

If we look at a front page headline in the March 27th, 2007 of the Newark Star-Ledger, we see that three other Democrat members of the New Jersey legislature were handed subpoenas on $3.4 million in grants to organizations with whom the legislators had connections. State Senator Nicholas Scutari has steered funds to a charity called Community Access Unlimited where his wife works. State Senator Joseph Coniglio has help steer $1.6 million in grants to Hackensack University Medical Center. Coniglio also operates a plumbing business which had a $5,000 per month consulting contract with the hospital. Assemblyman Brian Stack has helped steer more than $200,000 in state grants to Union City Day Care, were his estranged wife makes a salary of more than $100,000 per year. I did not realize day care was so lucrative. These grants were made under a secretive legislative process called ‘Christmas Tree’ grants. As with Senator Bryant, these legislators are under investigation by a federal US Attorney. There is no state investigation of any of these activities. Also, two other non-profit groups are under investigation for contributing money to Democratic State Party Chairman and Assemblyman Joseph Cryan even though such contributions are in violation of federal tax law.

In the same March 27th Star-Ledger, there is another article about 14 government workers in Passaic County, who were mostly low level housing inspectors and case workers. The 14 were charged with bribery, extortion, and conspiracy for selling their offices for bribes as low as $50. Housing inspections and paperwork were fast tracked for bribes. Again, this was a federal investigation.

Are all states as corrupt as New Jersey and its politicians? Probably not. However, the corruption detailed in the prior paragraphs is widespread and helps to increase the costs of charities, hospitals, colleges, and any organizations that receive government funding. These increase costs all remove money from your wallet.

Let us look at another cost of government that does not exist in the free market. We are talking about pork and patronage jobs in government. When a political party wins an executive election such as the US President and any of the 50 Governorships, the new executive gets to fill a host of government patronage positions. These positions, such as department and cabinet heads, pay very well. Often, the people who fill these positions, are party faithful, people who worked hard to successfully elect their candidate and large contributors and fund raisers. Sometimes they are filled with members of the winner’s party who have been forcefully retired by the voters, i.e. they lost reelection. They often have little knowledge of the position they are filling or the department they are leading. Sometimes when there are more party faithful and large contributors seeking employment than there are patronage positions, the governor or president will just create additional patronage positions. These people often do little or no meaningful work; they just let the civil service employees working in their department do all the hard work.

If we go back to 1989, Governor Florio was elected governor of New Jersey. He imposed massive tax increases on the state, which as detailed before proved disastrous for the state economy and extremely unpopular with the overtaxed and increasingly unemployed electorate. In 1991 all 120 members of the New Jersey legislature were up for reelection. There was a comfortable Democrat majority in both houses prior to the election. The voters were extremely upset and after the election, there were massive veto proof Republican majorities in both houses. In early 1992, the New Jersey economy was in the tank. In spite of all the tax increases, the state was running a large deficit. Governor Florio and his treasurer were continuously stating how the budget had been cut to the bone. However, suddenly there were dozens of unemployed Democrat politicians. Governor Florio, calling on his environmentalism, recycled any defeated Democrat who desired a job into high paid patronage positions. At that time, the taxpayers and huge numbers of unemployed were having a tough time in New Jersey, unless you were a Democrat politician and the voters caused your unemployment; then Governor Florio came up with very generous unemployment benefits for you; a high paid patronage job.

Since the governor had been elected two years before, and had already fired the herds of patronage Republicans feeding at the public trough and replaced them with Democrats, he basically had to create additional patronage jobs for all the defeated Democrat legislators. Again, since these jobs were not necessary prior to the election, it can be assumed that they were not necessary after the election. However, even though the budget had supposedly been cut to the bone, there was plenty of money to pay all the salaries, benefits and generous pension benefits for these unemployed Democrats and all that money comes out of the wallets of taxpayers for which they obviously received very little benefit.

Sadly, the pork and patronage positions, quid pro quos for government grants, and political corruption is not unique to New Jersey, but it is unique to government. In the free market, you do not hire people to do no work. You do not have to bribe your supermarket to sell you fresh produce. You basically do not have the power to extort a company to hire you to a no show or no work job. In the free market, you have to provide a product or service that the customer desires at a price he is willing to pay. You do not have millions in other people’s money to give out as grants to extort favors from organizations and companies.

The above examples illustrate how when the government does things, they are done in a manner that is totally different from how a free market performs. Whether it is corruption, political favors for friends and relatives, patronage and pork, or just ponderous government procedures that take forever and have zillions of paper pushing bureaucrats adding endless time and expense to projects, anything performed by the government costs much more and takes much longer than if the same action were performed by the free market. Again, all this takes money out of your wallet and gives you nothing in return. It is like paying $599 for a television in one store when you could purchase the same television for $199 in another store.

Let us take a brief anecdotal look at ponderous government procedures mentioned in the above paragraph. My sister worked at a small lumber yard. They were a vendor for window quilts (thick quilt like material that rolls up into a container above your windows and rolls down to insulate your windows against the cold, sort of like window blinds). Picatinny Arsenal needed some parts for some window quilts they had on base and they found that this local lumber store could get the parts for them. They called the store and found that yes, the lumber store could get the parts. They said they would fax over their short form for purchase orders. This was a number of years ago in the time of thermal faxes (where faxes printed out on rolls of thermal paper). Soon, the people at the lumber yard thought their fax had gone berserk, as there were piled up rolls of thermal paper on the floor, with more continuing to come out of the fax. In reality, it was the Army’s short form for purchase orders. Needless to say, the item the army was ordering, which was very inexpensive costing only a few dollars, had to be marked up many times to cover the costs of having someone fill out the ‘short form’ purchase order.

The Garbage Police

The following story may be more appropriate for Saturday Night Live or some other comedy program. You will probably be skeptical, but all the following facts are true and did actually occur. More than 15 years ago, the state of New Jersey revamped its garbage policy. Counties were allowed to establish their own garbage monopolies for the disposal of garbage. Individuals, businesses, and towns could contract with any hauler to pick up their garbage, but any garbage picked up in the county had to be taken to the county operated landfill or incinerator. Most counties established garbage monopolies and borrowed huge amounts of money to build, buy, and establish their landfills or incinerators.

Since the counties had the force of law to ensure that all garbage picked up in the county had to be taken to the county landfill, there was absolutely no incentive to keep rates low. In fact, with this power, it made much more sense to raise rates through the roof, which is what many counties did. In Sussex County, the landfill was and still is operated by Sussex County Municipal Utilities Authority (SCMUA). By 1995, SCMUA was charging a $118 per ton tipping fee to haulers who disposed of their garbage at SCMUA’s landfill. At that time, landfills in Eastern Pennsylvania were charging $30 to $50 per ton and even a number of other county monopoly landfills in New Jersey were charging $50 to $60 per ton. A few landfills charged more than SCMUA’s $118 per ton. Needless to say, if you are a garbage hauler and you have a truck filled with many tons of garbage and you can save $50, $60, $70 and even $80 a ton by driving your truck to a different landfill, you have a powerful financial incentive to drive your truck to a different landfill. Since a fully loaded garbage truck can hold 30 tons of garbage, the hauler could save between $1500 and $2500 each time the truck is emptied. That is an enormous amount of money and it is easily worthwhile to have your truck drive many extra miles and even pay tolls to drive to a cheaper landfill. Needless to say, many haulers did just that even though it was against the law in New Jersey. SCMUA was losing about $3500 in revenue every time a garbage truck dumped its cargo out of the county. So SCMUA hired ‘garbage police’. The garbage police would tail garbage trucks and if the evil garbage hauler attempted to smuggle garbage out of the county, the evil hauler would be stopped by the garbage police.

Of course in the real world, most people would be happy if their garbage was taken out of their county. Who is the real world really wants to hold on to their garbage? Who in the real world would want to pay for police to keep garbage in their county? When telling out of state relatives at a party that we had garbage police to keep garbage haulers from smuggling garbage out of the county, they looked at me like I had three heads.

During this period, I had written several ‘letters to the editor’ critical of SCMUA’s ‘wildly inefficient operations’. In the spring of 1995, the chairman of SCMUA responded to my critical letters with a letter of his own. In his letter, he made the amazing statement that “economically sound plans would rid this state of price-gouging and monopolistic practices.” Of course SCMUA was a monopoly with customers forced to come to its landfill by force of law and it charged a tipping fee that was price-gouging at its worst. The SCMUA chairman stated it was ‘outrageously unfair’ that I had no specifics that SCMUA’s landfill was ‘wildly inefficient’ and that it was incumbent upon me to visit their landfill operations, look them over, and if I could find no significant inefficiencies that I had to apologize for my ‘irresponsible utterances’. Of course, SCMUA’s chairman did not address the fact that SCMUA’s rates were almost 4 times those of Eastern Pennsylvania landfills and twice that of other county monopoly landfills in New Jersey and this fact proved his landfill to be ‘wildly inefficient’.

After a number of additional letters to the editor critical of SCMUA’s landfill operations, the operators invited me to the landfill for a tour. Not wanting to become part of the landfill, I convinced a friend and a reporter from the local paper to accompany me on the tour. Although a joke was made about dumping us in the landfill while we driving around the landfill in a SCMUA bus, they were mostly quite nice to me. I did find out some interesting things. The recycling process is extremely tedious, labor intensive and expensive. All the recyclables have to be separated. The plastics are especially hard, since they could only recycle number 1s and most number 2s. All the other plastics got dumped in the landfill.

We also toured SCMUA’s headquarters, which were located at the landfill site. It looked like a modest two story building from the outside, but the inside was quite different. It had keypad security to keep thieves out of numerous areas of the building. I can just see thieves breaking into SCMUA headquarters, breaking all their keypad security codes, to steal their highly valuable garbage secrets. While in the building, we took the elevator to the second floor. The interior of the elevator was completely mirrored, like you were in some fancy multi-storied casino in Atlantic City or Las Vegas. SCMUA’s ‘executives’ had large offices with fancy solid wood executive furniture. After this visit, I referred to SCMUA’s headquarters as the ‘Garbage-Mahal’ for its luxury.

What was the final outcome? SCMUA had borrowed $46 million to build their landfill infrastructure, the ‘Garbage-Mahal’ and their first landfill cell in 1988. It was to be paid off in 2013, even though the first cell was to be filled by 1998. By 1997, with the first cell almost full, they now owed $47 million. They owed more than they borrowed, even with the fact that the residents of Sussex County had paid about $40 million is excess tipping fees. This is their $115 to $120 per ton tipping fee in excess of the free market tipping fee of about $40 per ton.

In 1996 while SCMUA was charging $118 per ton in tipping fees, much larger Bergen County was charging $103.38 per ton. The New Jersey State Commission of Investigations characterized Bergen County operations in the following manner; “..There was profligate waste and patronage at the Bergen County Utilities Authority….The authority’s lavish spending cost taxpayers hundreds of millions of dollars.” Jersey City Mayor Bret Schundler had stated, “The county solid-waste authorities are the most patronage-ridden government entities in the state of New Jersey.”

During the mid 1990’s, the garbage haulers had sued, stating the forcing haulers to take their garbage to specified dumps violated the interstate commerce clause that had become part of the US Constitution. As this suit made its way through the courts, with the state continuing to lose, it was becoming obvious that in the not too distant future, counties would no longer be able to force haulers to go to their dumps and pay their sky high tipping fees. What did the county freeholders and county garbage monopoly operators do to prepare for this event? Like most politicians and bureaucrats, they prepared by praying that it would not happen and if it did that the tooth fairy would bail them out.

Of course, the state eventually ran out of courts from which to appeal its hopeless case. New Jersey spent millions in their fruitless legal appeals and the haulers could then take their garbage wherever they wanted. SCMUA immediately reduced it rate to $58 per ton, so it would not lose all its business. Obviously, SCMUA’s chairman had stated just the prior year in his letter to the editor to me that it was incumbent upon me to go their landfill and find any inefficiencies and now they dropped their tipping fee by more than $50 per ton. Either SCMUA’s chairman was lying through his teeth the prior year, or SCMUA was now losing thousands of dollars every time a garbage truck showed up to dump its garbage. Of course SCMUA’s chairman never had to try and explain whether he was lying or SCMUA was now losing millions of dollars a year.

After, the court ruling had allowed haulers to take their garbage wherever they wanted, and SCMUA had to lower its rates, needless to say, its revenues did not cover its costs and the Sussex County Freeholders had to kick in property tax dollars to subsidize the landfill operations. In 1998, the SCMUA landfill administrator whined that neighboring Warren County was ‘stealing’ garbage from SCMUA’s landfill by charging too little and that it had cost his landfill and Sussex County residents $1 million. Of course, since SCMUA could not cover its costs, Sussex County taxpayers did have to make up its shortfall. Only in a garbage fantasy land of government monopolies can low prices cost taxpayers money. Basically, SCMUA’s administrator needed victims to pay high prices at his landfill to keep his inefficient operation from going under.

After the court ruled against the county garbage monopolies, an article appeared in the December 19th, 1996 New Jersey Herald newspaper. The article stated that SCMUA was studying the idea of regional drop-off trash centers. SCMUA stated that their ‘convenience’ center at their landfill took in almost 400 tons of garbage last year at 6 cents a pound and generated nearly $1.3 million in revenues.

Obviously, SCMUA was having a little trouble with their math. 400 tons at 2000 pounds per ton equals 800,000 pounds of garbage. At 6 cents per pound times 800,000 pounds of garbage equals $48,000. That is significantly different from ‘nearly $1.3 million’. Needless to say, the reporter should have been able to detect that much of an error. However, this is instructive that everything you read in the paper is not correct or even close and that figures from the government and government authorities and commissions are often erroneous and designed to make the government, politicians and bureaucrats look better.

Another thing about this little story; SCMUA characterized their garbage drop-off as a ‘convenience center’. Only a government bureaucrat would characterize having people carting smelly garbage around in their cars, SUVs and trucks to a landfill site to save very few dollars as convenient.

After the court ruling, most county garbage monopolies were in danger of going under since they could no longer force haulers to be price-gouged at the county monopoly landfills and incinerators. They were looking for the tooth fairy and they found one; the taxpayers of New Jersey. The state government, making sure that the most extravagant and wasteful solid waste authorities were bailed out covered the $1.5 billion in debt run up by the county authorities. This means that every man, woman and child in New Jersey had to fork over almost $500 to bail out these authorities. Of course, this was grossly unfair, as some counties had borrowed way more than others. It was really unfair to a couple of counties. Hunterdon County for example had never set up a solid waste authority, so had no debt to be bailed out. They had a transfer station. At one point they had a contract to dispose of their garbage for $51 a ton in Pennsylvania, which included the tipping fees and the transportation and tolls to get the garbage to the Pennsylvania landfill. The residents of Hunterdon County saved tens of millions in reduced tipping fees over the years, but had to come up with many millions to bail out all the other solid-waste authorities in other counties.

In conclusion, SCMUA’s employees are still riding in their mirrored elevator in their secure building. SCMUA is still probably not covering its costs, but keeps issuing new debt to open up new landfill cells to accept more garbage. The state government probably had good intentions when it set up it garbage flow laws and created county garbage monopolies, but since the legislators knew nothing of garbage, landfills, and economics, but were well versed in pork and patronage, the results of what actually happened should have been of no surprise to anyone. Government authorities and commissions are repositories for pork, patronage and waste, even if they have nothing to do with landfills or incinerators.

Let us now look at an egregious example of federal pork called the Bridge to Nowhere. This bridge would connect the town of Ketchikan, Alaska, population 8,900 to Gravina Island, population 50. Gravina Island has the Ketchikan International Airport and about 50 residents. Gravina Island is connected now to Ketchikan by a ferry that runs every 15 to 30 minutes in summer. There are only about 10 commercial flights into Ketchikan Airport each day in summer. The bridge was allocated $223,000,000 in 2005 in the pork laden transportation bill. Senator Tom Coburn, Republican of Oklahoma put forth an amendment to transfer funds from this bridge to help repair the Interstate 10 bridge across Lake Pontchartrain in Louisiana that had been severely damaged by Hurricane Katrina. The amendment would have directed only $75 million to the Interstate 10 bridge in Louisiana, the remaining $148 million would have been returned to Alaska to use as they saw fit. Senator Ted Stevens, Republican of Alaska threw a hissy fit, practically crying on the floor of the Senate and threatened to resign if this pork was taken away. He was more emotional about the threat of removing pork from his state than about the war on Islamic Fundamentalists, the War in Iraq, Immigration, the Social Security crisis or any other issue. Pork fat not only rules on Emeril’s cooking show, it also rules in Congress.

Let us take another look at this bridge. In an earlier chapter, almost all the riders on a light rail line in New Jersey going from Camden to Trenton could be given an new Lexus luxury vehicle and money to maintain the car for far less than it cost to build and operate the light rail line. Sadly, that light rail line is an unbelievable bargain compared to the Bridge to Nowhere. Every man, woman, child and infant on Gravina Island could be given a two million dollar yacht and two $75,000 loaded Lexus LS 460s, one on Gravina Island and one in Ketchikan and it would still cost less than half of what the Bridge to Nowhere will cost the taxpayers. This is totally absurd. Let us see how the Senate voted on this issue. If you think bi-partisanship is dead, you are dead wrong. The Senate voted 82 to 15 to defeat Senator Coburn’s amendment. When it comes to outrageous pork barrel spending, that is something where Democrats and Republicans agree wholeheartedly.

When looking at a map, this bridge makes even less sense. There are practically no roads on Gravina Island. Even Ketchikan has no roads leading into or out of the town, except for two short roads that dead end in the wilderness several miles outside of the town. Any cars must be shipped into Ketchikan and if you wish to leave on a driving trip, you must put your car on a ferry to get out of Ketchikan. However, large cruise ships ply Ketchikan harbor and the strait between Ketchikan and Gravina Island, so this near useless bridge has to be extremely high over the water to allow the ever taller cruise ships to sail underneath the proposed bridge. So an expensive auto bridge between Gravina Island and Ketchikan is pure useless pork, but it passed the Senate 82 to 15 even when its ‘porkiness’ had been illustrated by Senator Coburn.

Of course, Alaska’s only member of the House, Republican Representative Don Young should not go without blame in this shameful episode. The 18 term Congressman has been a King of Pork and has given Alaska more pork per capita than any other state in the country. Four times since 2003, Congressman Young has been named ‘Porker of Month’ by the Citizens Against Government Waste, either solely or sharing the award with other members of Congress. This is quite an achievement.

A recent incident illustrates how important pork for Alaska is for Representative Young. Republican Representative Scott Garrett of New Jersey offered an amendment to eliminate $33.9 million for the Alaska Native Education Equity program from an education bill. Representative Young was furious. Young stated the following “If we continue this, we will be called biting one another, very much like the mink in my state that kill their own. There is always another day when those who bite will be killed too, and I am very good at that.” Here Young threatens to cut pork for New Jersey and Representative Garrett’s district in particular, if his pork for Alaska is cut. Young went on, “I have been able to represent my state better than New Jersey. I would suggest New Jersey ought to elect some new congressman, I would suggest, respectfully, that can do the job. I believe that’s really true. If they can’t do the job, they should elect somebody new.”

Here Congressman Young states that the people of New Jersey’s 5th congressional district should elect somebody new, not because he is wrong on the War on Terror, the War in Iraq, immigration, Social Security, Health Care or any other substantive issue, but because he issued an amendment to remove some pork from Alaska, which again has more pork per capita than any other state. And these Congressmen were both from the same party, Republicans.

However, in a true show of true bipartisanship, the House rejected Representative Garrett’s amendment 95 to 335. Pork rules. Since Alaska received $1.87 in government spending for each tax dollar sent to Washington, second only behind New Mexico and New Jersey received only 55 cents for each dollar sent to Washington, ranked dead last by a wide margin, Representative Garrett does have a reason to complain.

About The Author

I am 57 years old. I have a degree in Economics from Clarkson University. I ran for county Freeholder twice in the 1990’s, losing the second time by just 1%. I have had hundreds of ‘letters to the editor’ published on topics political and economic.

Copyright 2008-2009, Robert Heitner (Expires February 19, 2009)

To request information on this author or a manuscript contact the listed agent or e-mail: dbooth@authorlink.com

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