Greed Is Good

In Wall Street, Michael Douglas electrifies viewers with his passionate defense of greed.

While self-interest drives all us, the past year has amply demonstrated how excessive greed, unregulated greed, immoral greed can bring down not only a nation's, but the entire global economy.

As the new Obama administration moves to replace blind laissez-faire with reasonable regulations of banking, securities, mortgages, Wall Street, etc., it is time for the Commonwealth of Virginia to attack those purveyors of greed still among us - the payday lenders, the car title lenders, and others who similarly prey on those who are desperate or poorly informed about prudent borrowing.

Last year the General Assembly "regulated" payday lenders with toothless legislation such as limiting loans to $500 and having one loan at a time. Already these predators are bypassing those ineffectual laws by offering open-ended loans that are virtually unregulated and can have interest rates of over 450%. Payday lenders also worked hard to water down truth-in-lending requirements - no sense in telling unsuspecting borrowers about the bottomless pit. 

I doubt the payday lending industry will bring an entire economy to its knees in the same way the self-indulgent fools in the mortgage industry did, but there can be no doubt that payday lenders have no moral barometer when it comes to wrecking an individual's personal economy.

Since the payday loan industry is obviously based on excessive and immoral greed, and it cannot and will not regulate itself, now is time for the General Assembly to act. A basic consumer protection demands the state put a 36% cap on interest that may be charged. That is the same rate cap the state has for other types of small loans. It is reasonable. It protects the vulnerable. It is good policy.

Who should the General Assembly protect? The greed merchants or the people?

School House Rock

According to Education Week's Annual Quality Report, Virginia schools rank 4th in the nation with a grade of "B." Virginia is up from 5th place last year and trails only Maryland, Massachusetts, and New York. According to the report, Virginia ranks high in standards, accountability, and students' chances of success and was above the national average in all areas except funding equity where the Commonwealth got a "C+."

Funding disparity has long been an issue facing the General Assembly and is raised year after year by school boards and the Virginia Education Association. While the Virginia Constitution calls for the same quality education for each child, per pupil spending in wealthy areas like NOVA far outpaces that in rural communities such as those found in the Shenandoah Valley.

The Education Week report does highlight one area of concern for Virginia and many other states - a growing shortage of English as a Second Language (ESL) teachers. While this shortage hits some regions harder than others, the need is apparent in most school divisions. Harrisonburg schools, for example, have nearly two dozen languages spoken by students. Currently, Virginia has one ESL teacher for every 49 English language learners. Demand for ESL teachers is expected to increase by over 60% during the next five years.

Education Week's report is worth crowing about! It is good news for Virginia students, parents, and educators and signals there is no need for vouchers or tax credits for private schools. Especially in times of budget cuts, the state's commitment must be 100% for public education. Public dollars for public schools which meet the standards of public accountability.

Senator Emmett Hanger's Huntin' and Peckin'

Senator Emmett Hanger (R-Mount Solon) says he'll introduce legislation demanding Congress call a constitutional convention to consider a balanced budget amendment to the United States Constitution. Hanger believes the federal government needs to balance its budget or "... the economy will continue to deteriorate over time and we won't be the economic power we've historically been."

People can have various views about the wisdom of such an amendment. Many conservatives have long called for the federal government to balance the budget (bit of irony here as two of the biggest budget busters are darlings of conservatives: Ronald Reagan and George W. Bush). Some of these same folks also call for abolishing the Federal Reserve and returning to the gold standard. Others point to the need of the federal government to borrow in time of national emergency such as war (excuse me Adolph, can we take a few days off because we are out of money) or economic collapse (Obama's rescue plan). 

The truth is, Congress must have the flexibility in times of crisis, but Congress must also have the discipline to not spend like a drunken sailor (apologies to sailors). Recent attempts to bring that discipline resulted in the Graham-Rudman-Hollings Balanced Budget Act in 1985. When parts of that law were found unconstitutional, Congress pass the Budget Enforcement Act in 1990 which expired in 2002. Budgets were actually balanced in the late 1990s under President Clinton and a Republican controlled Congress.

All of this is complicated by entitlement programs like Social Security and by the politics of legislation where earmarks and pork barrel spending. To get a handle on wasteful spending, many have urged that the President have the power of line-item veto. The Republican controlled Congress gave this power, by simple legislation, to President Clinton. The Supreme Court held it was an unconstitutional violation of separation of powers and the line-item veto could only be granted by constitutional amendment.

So, would a balanced budget amendment be a good thing? Guess it depends! I am glad that Congress has the ability to respond with fiscal policy to our current deepening recession. But, it would would have been nice if Congress had said to President Bush, "Gee George, we just don't have a few extra trillions for your illegal war." Any proposed amendment would likely contain an ability of Congress to override its commands with a supermajority of 3/5s or 2/3s.

Is the idea of calling a constitutional convention a good one? We've never had a constitutional convention to propose amendments, so there are numerous unanswered questions. Article V of the Constitution says: "Congress... on the application of the legislatures of two thirds of the several states, shall call a convention for proposing amendments ..."

Some (there are many more) of these questions are:

• How timely does the "application of the legislatures" need to be? Does Congress have to respect such an application made two years ago? Twenty years ago? Or must the applications be within a term of Congress?
• Can a state legislature rescind an application?
• If (huge if) Congress did call a constitutional convention how would states be represented? Equally as in the Constitutional Convention that wrote the original document or by population similar to the House of Representatives?
• How would delegates to the convention be chosen? Appointed by the state legislature and/or governor or elected by the people of the state?
• Could Congress limit the scope of the convention to a balanced budget amendment or would the convention exercise its own authority and propose amendments on topics such as prayer in school or abortion? Could it rewrite the whole Constitution? If we look at record the Constitutional Convention in 1787, the convention would only be limited by what it thinks could potentially be ratified.

Although this method has never been used to propose a constitutional amendment, it may be used as political muscle to force Congress to act by either proposing an amendment itself (2/3s vote in each house), by passing legislation (like Graham-Rudman-Hollings), or by finding the political will to act more responsibly (at least until the current outrage passes).

Remember that proposing an amendment is the first step, as amendments must be ratified by 3/4s (currently 38) of the state legislatures (usual method) or at conventions held in each state (21st Amendment). Congress (or the national convention?) selects the method of ratification.

So, what is Senator Hanger's motive in introducing this "application" and pushing the idea. He has to know the odds of there actually being a constitutional convention are extremely long. Perhaps he feels like this is one way to push Congress into acting. Perhaps he hopes to generate public outrage about federal deficits and the growing federal debt.

Or perhaps all this is much closer to home. Senator Hanger remains an outcast within his own party, many of whom see him as too moderate. Some even call him gasp a liberal. Perhaps all of this is mostly about repairing the Senator's reputation and image among the right wing Republicans who will control the fate of his renomination in 2011. Perhaps it is politics 101 - saving his own seat?

Fishwick Exits

Democrat John Fishwick ended his quest for Attorney General yesterday. He cited his interest in representing regular folks and small businesses in state and federal cases. Fishwick said he'd pay campaign expenses and then return the remaining money to donors. He raised about $160,000.

Fishwick's highest profile case in recent months was the lawsuit brought by a W&L professor against the Virginia Lottery charging they continued selling tickets for prizes that were no longer available. The case brought him some celebrity, including a brief appearance on Dr. Phil.

Fishwick's exit leaves Delegate Steve Shannon of Fairfax as the only Democrat seeking the nomination. 

Counting Virginia's Corn

The media is filled with the stories about the projected deficits in Virginia's biennial budget. Facing shortfalls of about $3 billion over the two years, Governor Tim Kaine and the General Assembly will need sharp pencils to balance, as required by law, receipts and expenditures. Already hiring has been frozen, state employee raises have be delayed, and a variety of programs cut or delayed.

While we certainly can't blame today's budget woes on Virginia's two-year budgeting process, the current situation highlights the potential hazards of trying to write a budget with a long time horizon. After all, every family I know looks at their finances on a yearly basis. Businesses do so as well. That doesn't mean a family or business is failing to plan long term. It does mean they are balancing (hopefully) the books each year. In doing so they can plan to save or spend for bigger projects over time - that kitchen renovation has been put off until next year!

So, why does the Commonwealth use a biennial budget process? The practice dates back to the days when the General Assembly met every other year. During the 1970s the General Assembly began meeting every year but they kept the two-year budget cycle. So in a long session (even years) the Governor and General Assembly enacts a biennial budget. The next year, during a short session, the Governor and General Assembly amend the budget to reflect changes in projected revenues or expenditure needs during the past year. Huh? They are working on the two-year budget every year... is that right?

If this process seems clumsy and confusing to you, then join the crowd. Along with Delegate Albert Pollard (D-99), Delegate Chris Saxman (R-20) will introduce legislation to move Virginia to an annual budget. They cite greater accountability and transparency as key advantages of an annual budget. For example, when the biennial budget promises state employees a 4% raise it gets spread in some fashion over the two years - it could be 2% in each year or 1/2% in the first and 3 1/2% in the second. Geez, I'd like the 3 1/2% in the first year - with compounding getting the money sooner rather than later would be lots better for me. Perhaps legislators have incentives to give raises based on something else - like their election cycle?

Pollard and Saxman also point to real-time numbers that are now available to budget writers. In the "old days," information on tax receipts and expenditures were often months behind so perhaps a two-year cycle made since. It isn't a valid reason today. Pollard has these and other reasons for changing to an annual budget detailed on his website.

One other reason for changing Virginia's budgeting process may be found in the cycle of electing the Governor. Virginia Governors cannot serve consecutive terms. With the current biennial budget, a Governor enters office with at least one strike against him or her.

To illustrate, Governor Kaine took office in January 2006, too late to propose his own budget. So the new Governor was mostly locked into the budget proposed by his predecessor, in this case, Mark Warner. Warner and Kaine are both Democrats and were probably on the same page on many budget issues. Kaine could offer changes, but the point is that he was to a great extent locked in to the two-year budget (he could also offer amendments at the short session) presented by the previous guy. The next budget cycle the Governor has the luxury of proposing, helping to enact, and carrying out "his" budget. Of course, in late 2009 Governor Kaine will propose a two-year budget that will be enacted after he is out of office and will be carried out by his successor. So, changing to an annual budget may shift power to the Governor - a good thing?

Putting Virginia on an annual budget seems like a good idea to this bird. It is common sense and easier to understand for most citizens. It is more transparent. It is more accountable. It may allow a Governor to better match governing priorities with campaign promises. But don't believe for a minute that it will eliminate all the smoke and mirrors that are typically part of the state budget - like saying they funded a 4% raise for teachers but started it in December (when teachers' contracts start in August) or failing to provide funding for the actual number of teachers employed. Guess that falsely claiming credit or saying one thing while doing another is just part of politics!

Walk on the Wild(er) Side

Doug Wilder has joined the blogosphere. The former Virginia Governor (the first African-American elected as governor) and mayor of the City of Richmond, has a new job - blogger. Doug's blog is aptly called Wilder Visions. From his introductory post:

Leaving office as Richmond’s first popularly-elected Mayor in 60 years, I am confident that our City is moving in the right direction. The public overwhelmingly has likewise agreed. Just before the election, 81% of citizens surveyed in a City Council poll said the City was moving in the right direction.

The people are always ahead of politicians. Citizens provide the support for the vision and impetus for government – fighting crime, protecting the river, improving schools, and so on.

I know that we all want our government and our City to succeed and achieve even greater heights.

I will continue to live in the City I love, and will maintain an active voice. To that end, I will be starting a new blog called www.WilderVisions.com that will cover a variety of both local and national topics.

Welcome Doug. Welcome Governor Wilder. Welcome Mayor Wilder. 

New Year's Greetings

Happy New Year!