If the government wants to spend money on a program — presuming it’s unwilling to simply roll the printing presses — it must choose between two ways of acquiring the needed funds. It can borrow the money, or it can raise it through taxation. Neither source is ideal. The disadvantage of raising taxes is obvious. The disadvantage of borrowing stems from markets taking notice, and — if you do it often and irresponsibly enough — punishing you for it.
In Britain, Labour found a third way: i.e., writing very long-term contracts to private firms responsible for building and maintaining capital assets, in return for annual payments. Practically speaking, this mounts up to the same as borrowing — a contact, like debt, represents an obligation to make a stream of future payments. But legally speaking, it’s not the same, because in the U.K. contractual obligations are not accounted for in the same way as traditional debt.
The result? Since 1997, Britain’s Private Finance Initiative (PFI) has piled up billions of pounds of obligations that do not figure on the balance sheet. Simply adding up the future payments is naïve, because it ignores the time value of money, but the figure is illustrative nonetheless: it’s now 217 billion pounds over the next twenty five years. A better estimate is that, in today’s money, Britain’s PFI obligations amount to 124 billion pounds through 2041 — not an unsustainable sum on its own, but also not the kind of debt that’s wise to ignore.
Britain’s unions, suffice it to say, have never been fans of PFI, and now that the buzzards are circling over Labour and Gordon Brown’s spendthrift ways, they’re out for blood. In theory, this is because, as one union officer put it:
PFI is a flawed and expensive exercise that continues to consume billions of pounds in costly contracts for the enormous profit of private companies. This is money that could be better spent on frontline services for patients and clients.
Of course, it is union members who are responsible for providing those “frontline services,” so, in practice, the union is actually exercised about competition for the funds going toward these costly contracts. The unions are right to criticize the government’s failure to put PFI on the books, but wrong about most everything else. The next government in Britain will have a tough time retaining the good in PFI and discarding the bad.
But fixing PFI isn’t an isolated internal problem for Britain. As I’ve pointed out elsewhere, it’s got serious implications for Britain’s defenses. And, more broadly, it’s also an issue worth keeping an eye on in the context of U.S. fiscal policy. As the Obama administration’s budget bloats, the temptation to try a PFI-style trick in America will grow. Right now, the U.S.’s system of budgetary scoring makes it difficult to keep expenses off the books. But as the history of British Labour shows, a desire to spend combined with an unwillingness to pay can lead to all sorts of creative accounting concoctions, even in a country like Britain, formerly renowned for fiscal honesty.
And so it begins.
(I’ve been waiting for an opportunity to use that line)
Seriously, it would be interesting to know what they are saying privately.
Lots of damp armpits at the White House (and not just Michele’s), I’d bet.
The New York Times writers will take any opportunity to prove that they have not drunk the Kool-Aid, even if the stains around their lips has a decidedly grapey look to them.
No one cares, not in Obama land or outside.
Gallup has Obama at 65% approval today. Rasmussen has him at 57%. Hus Pollster average is above 60%. That’s high in anyone’s book.
The Dow is up 365 points as I write, in reaction to Geithner’s toxic-assets plan. And Obama has yet to fall short on any legislative effort. His stimulus passed. His omnibus passed. His budget — with new healthcare and energy and environment funding — will likewise pass.
So explain to me again how Obama is in trouble.
The good news for Number 1 is that very, very, very few people who do not have their minds made up even know the names of the columnists cited here, much less have familiarity with their general views or specific writings. This applies even more forecefull to the views of the Editorial Board. The actual news coverage, adjusted for the incompetance, thugishness, general buffunery and extreme leftism (across all areas of domestic and some of foreign policy) has been unsurprisingly generous. To that extent that the views of the columnists and opinion writers begin to permeate the news coverage (as Pete suggests they eventually will) and that coverage begins to trickle into the general news coverage (so excessively influenced by the NYT) that people come across and finally begins to converge with the reality of the damage that No. 1 is inflicting on people’s economic well being and prospects for the future the tide might really start to turn. Even at this point the polls are historically unremarkable.
The pertanet questions, however, are 1) whether the polls will go down fast enough to induce a sufficient number of Senate Dems to block a meaningfull portion of the monstrous agenda and 2) whether Republicans can come back with enough strength and a strong enough mandate to reverse most of the damage that will inevitably be done?
Frank Rich finally gets it, but he doesn’t know it, yet:
“Unless and until Barack Obama addresses the full depth of Americans’ anger with his full arsenal of policy smarts and political gifts, his presidency and, worse, our economy will be paralyzed.”
That’s just it. Obama has been addressing the situation with his “full arsenal of policy smarts and political gifts.” This IS Obama’s “A” game. Whaddya think?–That he’s been teasing us with his “B” game, all along?
Folks like Rich and Dowd and the NYTimes, not to mention Brooks and Buckley and Parker, et al., believe Obama to be a politically gifted genius, and while writing explanations like this, i.e. “until Obama deploys his full arsenal of smarts…”, they fail to see the truth of Obama–inexperienced and unqualified–as they cannot see with the wool over their eyes.
These criticisms aren’t surprising.
The Times wants Obama to lurch left faster on tax policy, economics, health care, etc., so it’s impatient with his pace. It’s not like Obama is refusing to pursue the Times desired policies in these areas – he’s just not going fast enough.
As far as Iraq is concerned, Obama’s run smack into the reality the existence of which the Times denied during W’s presidency – - – talking smack to gin up the left wing in a campaign is one thing, putting the nation at risk by following through is another.
And yet ….
the only apparent limitation Obama’s accepting in foreign policy is “I’m not going to have my fingerprints on a disaster.” To the extent Obama has continued Bush policy, it’s because doing otherwise would make Obama responsible for the bad things likely to follow.
With China, Iran, Israel, the Middle East, etc., he’s still willing to mouth all the silly platitudes which the Times applauds.
Forbes made the key point.
THIS IS THE O’S A-GAME, this is all he’s got, there is no corps in reserve ready to sweep all before him and claim the field.
And it’s only going to get worse, much, much worse.
Americans voted in the most radical candidate in American history, ————————————– and we’re all going to pay dearly for our epic blunder.
Obama is like the Pharoh ordering his army into the Red Sea in pursuit, too blind, too ego-maniacal to give a thought about that wall of water towering over his pursuing forces.
ALL OF US are going to see what becomes of false messiahs, ALL OF US, THE WHOLE WORLD is going to see what becomes of a man who holds himself out before the world as some sort of salvation figure.
#2, so is the economy now Obama’s? From this point forward will all of it be his (even though it was his on January 20th)? Can we now dispense with the “It’s Bush’s fault” whining and get to the action of governing?
Good points here (except Dave’s, of course; but let me know when he starts attributing the inevitable recession of the floodwaters in the Midwest to Obama’s galactic and growing popularity).
Peter Wehner is, as always, courteous and insightful.
As an aside, does anyone but me have the following unvarying reaction to Tom Friedman? “Speak for yourself, Shraggy.”
The scary thing about Friedman is that if he wasn’t writing (or whatever you call that) for the Times, and traveling the world playing golf and collecting his fictitious anecdotes, he would be teaching at some university, misinforming and confusing young malleable minds on a personal level. Better to have him nattering away on the less and less important pages of the NYT.
Obama’s performance without a teleprompter seems instructive. He is glib, even eloquent when scripted. He sounds the bumbling fool when there’s no teleprompter handy. The reason for all the false starts and bad appointments seems obvious to those of us not heavily invested in his celebrity. The NYT only regrets Obama is not moving us to the left fast enough. And they’re probably upset when he displays a penchant for inaction. They should have paid more attention to all those times he voted “present.”