Archive for April, 2010

The 10th Amendment

Saturday, April 17th, 2010
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.


Obama’s policies have awakened the masses.  The great awakening of 2010 has ignited a fever that promises to put the federal genie back into his bottle.  I hear people angrily grieve over the recent abominations coming from Washington.  The blogosphere is awash with condemnation of socialism in any form.  The Nationalization of business-after-business sends shock waves through Main Street.  Even the left leaning centrists find themselves taken aback at the speed and amplitude of the march towards the left coast of progressivism.

Minnesota has been a good federal citizen.  We pay our taxes to the Governor, and to the President.  We enjoy the finest health care, education, and recreational facilities, which are the envy of the world.  Ask yourself: Do the federal mandates on education improve our education institutions?  Do the federal mandates on healthcare improve our healthcare?  We let the feds bribe us with our own money to effectively downgrade our social systems. As a state, we have done poorly at taking the federal money.  Why?  The bribes are not a good deal.  Our social systems are not broken.  Our passive demeanor has cost dearly.  “Minnesota nice” needs to end when it comes to the Federal Government.

According to the Tax Foundation, in 2005 Minnesota paid $40.6B in federal taxes.  The feds only spent $31.1B within our border.  $9.5B left the state in the form of federal taxes.  Considering that the entire Minnesota budget flows on about $20B/year, this is a gargantuan hemorrhage of Main Street blood—i.e. money.

Which states win the battle for the federal dollar?

State Federal Profit
 Virginia     34,912.3
 District of Columbia     31,124.2
 Louisiana     19,064.7
 Maryland     17,542.3
 Alabama     17,385.5
 Mississippi     13,747.0
 Missouri     13,102.2
 Kentucky     12,649.7
 Tennessee     12,415.8
 Pennsylvania     11,563.3
 New Mexico     10,712.8
 South Carolina       9,333.2
 Arizona       8,650.5
 Oklahoma       8,064.8
 Ohio       7,577.1

Click on the link below for the list of winners and losers.


DC is #2 and is not even a state!  The Tax Foundation chose to provide the information this way.  You can effectively add DC to Maryland and Virginia and make this postage stamp-sized area an $83.6B hole draining the swamp.  And this is every single year!

From a Macro-Economic view, the hemorrhage on Minnesota’s main street is unsustainable.  Let’s look at it from the Balance Budget Multiplier point-of-view.

Balanced Budget Multiplier

Wikipedia defines a Balanced Budget this way…

A balanced budget is when there is neither a budget deficit nor a budget surplus—when revenues equal expenditure (“the accounts balance”).

Wikipedia further defines the Balanced Budget Multiplier thus…

Because of the multiplier effect, it is possible to change aggregate demand keeping a balanced budget. The Government increases its expenditures, balancing it by an increase in taxes. Since only part of the money taken away from households would have actually been used in the economy, the change in consumption expenditure will be smaller than the change in taxes. Therefore the money which would have been saved by households is instead injected into the economy, itself becoming part of the multiplier process. In general, a change in the balanced budget will change aggregate demand by an amount equal to the change in spending.

In more simplistic terms, when Uncle Sam runs a deficit, he spends more than he extracts from the public.  Over time, a deficit neutral budget is in equilibrium.  When Uncle Sam extracts more than he spends (never happens), a detrimental effect is imposed on the economy.  The more he spends, and extracts, the less you will be able to save—thus forcing consumption rather than saving.

Likewise, when Uncle Sam chooses to print money, you get a big multiplier effect from the initial spending, which does not require the extraction of a tax.  The Federal Reserve has the authority to issue more money and does so by giving it to the government to spend.  An economic benefit is the immediate result.  A continual expansion of the money supply will eventually result in inflation.  Left unchecked it will lead to hyper-inflation.

The effects are no different than the extravagant lifestyle you could experience by tapping out all your savings accounts and credit lines.  What a party!  Eventually the party will be over and the resulting debt will be crushing.

The world is a big place.  I view the world from my corner.  And when government extracts it from me, and spends it elsewhere, I don’t enjoy the flow.  I liken the process to filling buckets.  If extracted from my bucket, and later spending it on my needs serves to refill my bucket.  I’m somewhat indifferent because my bucket remains full.  When my bucket is drained and used to fill other buckets, I’m no longer indifferent–I’m drained!  It is this final scenario facing Minnesota.  The US Government drains $9.5 Billion from our local economy each and every year.  The effect is crushing Main Street.  While some believe Secession is the only answer, Cessation, or stopping the drain, is the only answer within reach.

The Solution:

What’s the solution?  Stop the outflow of money.  We need to find and elect a Governor willing to challenge the federal government on their unconstitutional mandates.  Order the population to surrender their federally imposed tax to the Minnesota Treasury instead of to the IRS.  To the extent the Federal government demonstrates constitutional reasons for extracting a tax on Minnesotan’s, the Governor can write one check satisfying the obligation.  Meanwhile, the Governor can use the money collected to provide for the various constitutionally authorized activities within Minnesota.  State’s rights are real.  Education, Public Safety, Public Health, are all within the State’s authority to manage.  Using this method of collecting the tax, the federal genie can stay in his bottle and tend to the business authorized by the US Constitution.

Inspect This!

Friday, April 2nd, 2010

Minnesota has inspectors for just about every possible activity. The burden is inestimable at this time.

Dairy Inspectors
Health Care Facility Inspectors
Public and Charter School Inspectors
Electrical Inspectors
Rental Property Inspectors
Asbestos Inspectors
Building Inspectors
Fish Farm Inspectors
County Weed Inspectors
Ag Program Inspectors
Game & Fish Storage Inspectors
Lead Inspectors
Locomotive Inspectors
Manufactured Homes Inspectors
Meat Inspectors
Mine Inspectors
Municipal Waste Inspectors
Mutual Insurance Inspectors
Plumbing Inspectors
Motor Vehicle Inspectors
Water Conditioning Inspectors
Weed Inspectors
Wild Animal Inspectors


These are just a few of the mandates to ‘inspect’ found in the MN rules. I’m certain there are more layers of inspectors sanctioned by county and municipal boards all over the state. This begs the question… What constitutional mandate is satisfied by all these inspectors?

Well understood management principles teach us that decisions should be pressed down to the lowest level of responsibility. Relying on an inspector or supervisor’s review to identify and correct all possible mistakes is a futile and inefficient process. You cannot inspect every activity all of the time. But you can place the burden of compliance down to a level most capable of identifying and correcting problems. The installer of an apparatus is the party most likely to locate and fix a problem with the installation. Instead of laborious inspections, the state can provide assurance that the public is protected through insurance, minimum performance criteria, and warrantee expectations.

The state should never be performing activities that contribute to profitability. Food inspections in general are focused on bacteria and disease. Introducing infestations into the food supply can destroy entire truck loads of cargo and contaminate production lines. This is a profitability issue for the producer, the processor, the retailer, and the consumer. There is no need for a state inspection as the penalty for improper operation is a natural outcome. The interested parties have a natural incentive to produce disease-free products or face the consequences of loss due to negligence. Current reliance on the state inspection process provides a false sense of security at a very high price.

When possible, traditional ‘inspection’ processes can be implemented by a “peer review.” For example, an electrical, plumbing, or building inspection can be conducted by asking a knowledgeable party to review, criticize when necessary, and accept co-responsibility for adequate compliance. When appropriate, the peer review can be conducted on a sampling basis and possibly by an industry association funded by the interested parties.

To safeguard the public, providers of service or products should be expected to maintain insurance policies suitable to compensate injured parties, including state investigation and mitigation costs, in the event of failure. Insurance companies establish premiums based on risk. When appropriate, they can request or require the insured to submit to voluntary reviews to determine compliance and corresponding risk. Failure to conduct adequate oversight will induce onerous penalties, which provides a natural incentive for the parties to maintain compliance. The invisible hand of natural motivation is far superior to the state’s heavy boot at the throat of industry.

Each viable industry in Minnesota has a trade association—in some cases, many associations. These associations should develop suitable self-regulating criteria to eliminate the state’s mandate to ‘inspect.’ Individual failures should have implications for the whole industry. Once again we see how natural consequences provide incentive to self-regulate instead of relying on a false sense of security provided by over-worked state inspectors.