How local councils blow money

Lets take a look at Glen Eira City Council and their annual budget.

Why the City of Glen Eira? Well they describe themselves as:

• "a low-rating and very low cost Council (e.g our budgeted cost of day-to-day services per property for 2006-2007 was 14% below the average of our peers"
  

And with that simple sweeping statement, the councillors reassure us that there is no need to worry that the money is spent well. Is spending it more efficiently than the other councils a good benchmark to use ?

I doubt it, but clearly its one of the few benchmarks that the council uses. And under their Strategy section of the budget, they openly admit that the sky is the limit when it comes to bigger budgets, bigger spending, more projects:

• Generate funds to renew and upgrade our ageing assets and community facilities
• Maintain essential services at not less than current levels
• Review every council service focussing on continuing improvement

with only one constraint:

• Keep day-to-day costs and rates below our peers.

Now this sounds all wonderful and dreamy in our social democracy. Yay-more services ! Continuing improvement !

But I contend that the council's strategy is as simple as possible - grow. Find new things to do, new ways to steal money, hire more people and do it slowly and steadily so nobody will scream.

You can see this mentality by the CEO's comments on this page:

If I said to you:
"You can keep your $1,000 — but you provide your own roads, your own footpaths, your own 200,000 item library service, your own senior citizen centres, you immunise our children, you check the safety of swimming pools and the hygiene of food shops, you operate 50 school crossings every morning and afternoon, you light the streets and fund the fire brigade, you take waste to recycling companies or the tip, you tend the parks, you provide maternal and child health for 400 babies a week, you deliver home care to 3,000 people, provide meals on wheels to 400 people, and so on..."

You would say:
"But I could not do any of that for $19 a week!"
And you would be right.

[sarcasm] Gee, we really owe him everything for taking our money and spending it for us, otherwise we would never be able to enjoy the things we like. [/sarcasm]

You've got to be kidding me. Are we supposed to accept his word that somehow council waves its magic wand and creates services and infrastructure that we wouldn't be able to achieve as individuals operating under a free market !?

I would take the $1000 and try my luck with the free market which innovates and succeeds at achieving economies of scale. Because there are 52,585 households, and 57,700 properties in total that pay rates. Averaged out at $1000 per property and whoah - $57.7 million a year ! I'm sure I could build a lot of roads and footpaths, collect the garbage and still have spare change. Once you trim the fat, get rid of street festivals and half the bureaucracy, people can keep a lot more of their money.

I've got to laugh at some of these costs, and how easily to money just flows through their fingers like water:

• Street tree data collection costs $100k
• Additional costs for street sweeping: $69k
• Water conservation measures at Council's nursing homes and pavillions: $100k
• Caulfield Park pavillion: $4.63m
  
  

There is something else very illustrative about the nature of councils as being very expansionist and ever-growing. The report mentions that all council officers were notified of key budget principles upon which the officers were to prepare their budgets, one of which is:

• New revenue sources to be identified where possible
  

Steal more money why dontcha ?! Speaking of which, check out the Parking Fees and Fines for all the councils below.

Glen Eira is no innocent, raking in $2.65m, but I've always known Stonnington($15m) and Port Philip($21m) were huge thieves and hate motorists with a vengeance.

The budget analysis shows that Glen Eira council spent $83m in 2006-07 and now plans to spend $89m in 2007-08.

On top of the rates they collect. They receive $14.4m in grants and subsidies. And how do they spend it ?

Well here is the full proof that when you get a central authority to tax and spend money, they establish huge administrative bureaucracies that cost an exorbitant amount to run and hire armies of paper pushers.

• Annual 2006-07 budget for salaries and wages: $38m
• Annual 2006-07 budget for salaries and wages: $41m

Glen Eira Council's only saving grace is that it is indeed significantly better than other neighboring councils. But it still receives an extravagant amount of money, hires armies of bureacrats and splurges on frills and unneeded items just so it can grow its budget every year.

Sport rules - thats why you gotta keep the government out of it

Its not an intuitive argument and runs counter to what your average sports-mad pundit would think. But I'm going to attack this head on, especially since Kevin Rudd has yesterday committed himself (not to an asylum unfortunately) to spending our tax dollars and bidding for the right to host the 2018 World Cup.

Government sponsored sporting events sound like a really positive and inspiring idea, and masses of people can be swept up by the romantic ideas of big sporting events against foreign nations. People always conjur up patriotic and nationalistic imagery and sentiments when talking about the collective "we":

We oughtta get the Gran Prix !
We oughtta have the World Cup in 2018.
We oughtta get the Commonwealth Games !
We oughtta get the Olympics !

My beef is not with sport ... its with government being the main driver, the bidder, the financer and the organiser of massive sporting events. And that means every tax payer is forced to pay for an event, and no entrepreneurs are involved in organising the event and nobody is responsible in ensuring they run it efficiently and cost effectively with the ability to attract enough revenue from sponsorship, tv rights and ticket sales.

How do I know this for a fact ? Because if it were commercially viable, private bidders WOULD HAVE ALREADY raised the finance and put in a serious and aggressive bid to secure and run a sporting event !

The assumption that the State or Federal Government needs to bid and organise a sporting event is based on the idea that private operators are too stupid and incapable of running such events (even though the tennis, AFL, Rugby and A-League have proven otherwise).

So once you remove profit motives, what are you left with ? There is every incentive for the bureaucrats to hype up their event, inflate crowd attendance figures, screw up traffic and transport in the city, cover up the escalating costs and eventually run an event that wastes an incredible amount of resources.

Case in point - the Australian Grand Prix:

THE operators of the Australian Grand Prix have admitted they don't know how many people attend the race, and that the number of tickets they give away is kept a secret to avoid undermining the event.

....

But a freedom-of-information application by protest group Save Albert Park has revealed how that estimate is calculated and, it claims, inflated by as much as 45%, or 100,000 people.

In its finding, the tribunal said the corporation had admitted: "If the gross number of free tickets was to be released, this would give the impression that the event was being artificially enhanced by giveaway tickets, and so reduce the value of tickets sold and the likelihood of sponsorship."

The free tickets, however, are counted as "sold" and added, whether they are used or not, to the attendance "estimates".

As well, every person who visits the track — including drivers, car mechanics, grid girls, hospitality staff, and even race bosses — is included in crowd figure calculations.

It cost the state about $35 million last year and is tipped to cost around $40 million this year — around four times the $10.6 million spent in 2003.

Here's "modern" government for you

By "modern", I'm thinking of a totalitarian state similar to Orwell's 1984. Here in Victoria, we have a modern and progressive system of law. One of these aspects is that you shall not own or carry weapons, even for self-defence.

Well over in Britain, where they have one of the most "modern" governments on the planet, with more government surveillance, cameras, regulations and bureaucracy than any other state except North Korea, they also have laws against self-defence.

In Britain, the police, the military and the intelligence services are given new powers and a huge monopoly on violence and force, whilst individuals are stripped of their ability to look after their security and their lives.

Here is the consequence of such "modern" laws:

A shopkeeper could be charged with murder after an armed robber who tried to steal the day's takings was stabbed with his own knife during a struggle.

Tony Singh, 34, described as a hard-working family man who often works 13-hour days, was ambushed as he shut his shop on Sunday evening by Liam Kilroe, 25, a career criminal who was armed with a knife.

Mr Singh fought back and, after a fierce hand-to-hand struggle, Kilroe was seen by witnesses to stagger away clutching the knife to his chest. Kilroe was taken to hospital, where he died, and Mr Singh was detained by police. He is now waiting to discover whether he will be charged, and is on police bail until February 29 pending further inquiries.

Lancashire police confirmed that papers had been sent to the Crown Prosecution Service, which will decide whether Mr Singh should be charged with one of three offences: murder, manslaughter or assault.

Mr Singh, who suffered injuries to his neck and back during the struggle and had to be treated in hospital, insisted yesterday that he had acted in self-defence. ...

(hat tip: Samizdata)

Hat tip to some top blogs

The UK now has its very own Libertarian Party which is terrific news for one of the most over-regulated, spied upon and screwed up economies on the planet.

Their website contains many useful links that led me to the following:

Burning our money:

"They spend 43% of our income, yet fail to deliver decent services. They promise prosperity, yet tax and regulate our economy into stasis. They talk up social justice, yet consign millions to welfare dependency.

Enough is enough. We the peasants demand our high-spending, high-living, conflicted politicos mend their ways."

The Burning Our Money Blog is supported by a separate BOM FACTFILE, containing useful charts, facts, and links.

And then there's Tim Worstall, who provides many insights that run against "conventional wisdom", with some illustrative posts as follows:

Why the record industry is screwed (hint, advice on how to recognise priate CDs….they’re better than the real ones) and a tip on how to get decent customer services.

And who points out "the triumphs of socialist agriculture:

An island rich in raw materials and with no shortage of trading partners despite a 45- year-old US embargo now produces less than half as much food as in 1959…

Sensible statement of the year

About time some sanity entered this issue ! Screw the apology, Warren Mundine has a much better idea for the aboriginal people. Give them a dose of wealth creating capitalism and property rights, instead of miserable poverty generating socialism.

Let us own homes: indigenous leaders

Patricia Karvelas and Natasha Robinson SENIOR Labor Aboriginal leader Warren Mundine has warned the Rudd Government not to touch the 99-year indigenous lease scheme.

....

....

SENIOR Labor Aboriginal leader Warren Mundine has warned the Rudd Government not to touch the 99-year lease scheme over communal indigenous land after the Government said it would investigate the "effectiveness" of the system.

Mr Mundine sternly warned that any change to the Howard government's home ownership initiative would wind back economic development on indigenous land and condemn Aborigines to poverty forever.

Mr Mundine, the former Labor president who first proposed the introduction of 99-year leases over community land, said it was time for Labor to abandon the communal land concept, which had done nothing but impoverish black communities.

Kevin Rudd, PR expert

Kevin Rudd (and his advisors) certainly know how to milk the media for some positive headlines without having to do any hard work or make any substantial changes.

It called symbolism. Yesterday was the epitome of symbolism. Saying "Sorry" to the aboriginal people for something called "the stolen generations" that happened a long time ago and which has bugger all to do with people today, who have not transgressed and done anything wrong.

Unless of course you are a bleeding heart socialist, and the existence of inequality is a crime in itself. In which case, we will always be guilty until you totally trample individual freedom and property rights, steal everything from every succesful and hard working individual and collectivise it - to make us all equal.

Back to the point of symbolism. First Kevin Rudd earned a few days of coverage when he went tosome climate change summit and he considered ratifying the Kyoto protocol, which never eventuated (for which I thank you Kevin !!).

After Kevin Rudd milked the headlines for about 7 consecutive days over this Sorry business, it seems the next item on the PR agenda is freezing politician's salaries for the next 18 months.

This might make Kevin seem like the squeaky clean PM, the man who is humble and won't use his position for privilege, and thats how the media is going to interpret it for us idiot sheeple.

But politicians salaries would not even account for 0.1% of government spending. And he isn't cutting it, he is only freezing it. Many politicians receive ridiculous superannuation and retirement benefits - usually millions. Its a great scam if you can get in on it.
But the real big bucks come at their spending power. Politicians can establish and operate massive bureaucracies that spend tens of billions. The Dept of Education, Centrelink and Dept of Health combined would eat up at least 1/4 of our GDP every year.

Is Kevin Rudd going to cut spending on these luxuries, especially given that spending has doubled under Howard ?

No way, too many teachers unions, civil servants, nurses and journalists would go insane with bloodlust. Just look at how teachers are going on strike yet again.

Come on Kevin, wind back government, you promised to reduce the number of public servants, when will you deliver ?

The first thing you could do is get rid of the portfolio of Minister for Bags of The Environment. Maybe stop funding the ABC and SBS, they can survive on its own. And stop feeding the state governments so much GST revenue, they are funding each city council in Melbourne with $200m to burn on things like fireworks, festivals, administrators, bigger facilities, light bulb exchange programs and public works projects.

But if you want to save a cool $100 billion PER FREAKIN YEAR .. close Centrelink !

Why our banking and money system matters

The following graph should concern every single person out there very deeply. (courtesy of The Daily Reckoning)

“Few empirical regularities in economics are so well documented as the co-movement of money [supply] and inflation,” as Mervyn King, now governor at the Bank of England in London, said in a speech of late 2001.

“Over the 30-year horizon 1968-98,” King went on back in 2001, “the correlation coefficient between the growth rates of both narrow and broad money, on the one hand, and inflation on the other was 0.99″

The supply of money changes, and we get inflation as a result. The value of the paper currency, dollars, is diminished, their purchasing power, their value, everything about them. This has a massive impact on most people's lives, yet it goes largely unnoticed and gets little discussion outside of financial experts.

Your average punter out there feels strongly about a lot of issues, and my best guess is that the level of interest corresponds to the level of mainstream media coverage.

People are generally interested in footy, cricket, celebrities, gossip as well as news, weather, politics, "the environment" (very vaguely defined thing that it is) and maybe some economic reports - inflation, taxes, unemployment, interest rates, cost of living.

And people care very much about money.

And so they should. Capitalism is a moral philosophy, you should care about money, because savings are the result of foregone present consumption, in exchange for future consumption (whatever that may be). Savings are the product of work, of thrift, of allocating your time, your labor, your skills and your property towards productive means.

People use their savings to achieve very important things - food, shelter, clothing, energy and transport for starters. Raising your family, looking after their health and education are also important. This goes for all people, poor and rich, single or married, young or old.

So far, I haven't said anything too uncontroversial. Under free markets, when you forego consumption today, and save money, you should be able to use that money in the future and it should have a similar purchasing power. Also, everybody needs to use money, because it is a vital medium of exchange. Prices and money allow us to signal information, and it simplifies millions of transactions. We get to swap dollars for goods and services, and every transaction can be appraised and evaluated by people quite easily. $5 for a coke - bad deal. $7 lunch - good deal.

But inflation erodes the value of dollars. $50,000 for a house in 1968 - not cheap. $50,000 for a similar house in 1998 - very cheap.

We all know inflation exists. Prices going up SEEMS to be a fact of life. But so few people ask "why". We know why, its very straightforward. The Reserve Bank of Australia prints more currency, issues more unbacked credit and expands the supply of money.

The graph above shows that the notes in circulation grow over time, and almost perfectly match the inflation of prices. As well as the evidence, the theory backs it up.

Why is this a bad thing ? Can't people learn to live with rising prices ?

You sure can "learn" to live with rising prices. Economies learn all too well and change their behaviour for the worse.

Its not a good thing to have rising prices, because it discourages savings, and it hurts the poor people who have less savings.

It lowers the real rate of interest faced by borrowers, and encourages them to borrow more than they would normally. Fractional reserve banking, the practice that causes the expansion in the money supply, also motivates banks to issue new credit, not backed by reserves, to risky loans. This creates speculative bubbles, and is most probably the single cause of the boom-bust cycles according to the Austrian School of Economics.

Why stash away $10,000 under a mattress, or even in a vault, for the future, when you know it won't buy half as much in 10 years time ? Those who have worked 500 hours to build up enough savings for a holiday had better spend it now, because if left in cash, those savings won't pay for a holiday in 4 years time.

The only other alternative is to try and earn a return on your money by investing. So we witness massive speculative bubbles in the stock market, in both residential and commercial property, and other forms of investment. Many people move their money into these areas driven by a certain attitude. Not so much to take a risk, buy into a business, or a piece of land that you think will go up as demand for it goes up... but instead, to avoid inflation. To avoid having a pile of dollars that lose their value. At least property and shares go up in terms of their dollar price over the long run.

If you can invest a large chunk of your wealth in these sectors, then you might do alright out of this scheme. And the wealthier you are, the bigger the share of your wealth that can be protected against inflation by investing it.

But for the poor and the middle class, many of them do not have a large chunk of their wealth invested in assets. Even their typical biggest asset, their home, is often heavily leveraged with debt. Their standard of living is directly harmed, and the value of their savings deteriorates over time, because of inflation.

So what we need, is no more new money. The economy is currently "correcting" because of the excess money creation ever since Alan Greenspan took over as chairman of the Fed in the 1980s, and central banks around the world tried to print as much new money as the US to keep exchange rates stable and "target inflation".

We need sound banking now. Couple this with less taxes and less regulation, and you'll see an economy innovate in new ways, and prices for many goods and services actually drop. We've seen it with electronics, and other free markets. We should see it in housing, health, education and energy. But only if you vote for liberty and property rights, and reject government control of every activity, from defining and issuing the supply of money and medium of exchange, to spending and regulating our key industries.

UPDATE:
Here is the key to understanding why housing prices and share prices keep doubling, or more to the point, why the value of dollars keeps halving (Courtesy of Brookes News ):

• "From March 1996 — when Howard won his first election — to November 2007 bank deposits rose by 224 per cent and M1 by 200 per cent"

And the Daily Reckoning gives us proof that central banks around the world still haven't learnt their lessons:

• The People’s Bank of China is rumored to want money-supply growth of 15% per year, down from the current 18% plus;
• India’s broad M3 money-supply is rising 22.4% per year;
• Singapore’s money-supply increased by 14% in 2007;
• Britain’s broad M4 measure of money has expanded by 12.3% since Jan. ‘07;
• Western Europe is “enjoying” monetary inflation of 11.5% per year, three times the central bank’s target;
• Last year saw 16% money-supply growth in Australia, 13% in Canada, and 22% in Saudi Arabia;
• The US money-supply - if the Fed still reported M3 - is now guess-timated to be showing 15% annual expansion.

The printing presses are working over time !!

Meddling

One of these days, my pent up frustration and anger towards big government and social programs is going to boil over, and I am going to write a book called "Meddling".

Nothing quite as elaborate or nuanced as Alan Greenspan's "The Age of Turbulence". It doesn't have the same bold image as Obama's "Change we can believe in" motto. It doesn't even try to aspire to a positive and bold new outlook such as Kevin Rudd's "Fresh Thinking". I won't campaign for power or prestige, for leadership and for hordes of loyal party adherents.

Because this book will call a spade a spade. No more distortions of the English language. No more Orwellian doublespeak. No more attempts at summoning people to higher purpose, to a common destiny. And certainly no promises of unattainable dreams and fantasies.

This book will be deeply grounded in reality and plain English. We've got a lot of history to learn the basics from. We've got a lot of economic theories that have been put to the test on a massive scale, so if we took the time, we would see which ones clearly work best. We've had dozens of countries, trying the same ideas again and again, all with dismal results, and yet they vote in leaders to give em another try, and they call that "Fresh Thinking". Ha !

"Meddling" is simply a state of the modern world, where leftists, bureaucrats, career politicians, social workers, environmentalists and media personalities believe they have a valid say over how you should live your life, whether you are entitled to own property and how you may use it.

In this fantasy world, the individual is no longer trusted to make decisions for themselves, and people are not trusted to interact and trade with each other voluntarily.

Your speech, your religion, your driving and smoking behaviour, your workplace habits, your personal relationships, your mobile phone contract, your medical insurance, your education and the roads you use are better decided by somebody else. That somebody else is of course empowered by the state to regulate, tax and punish.

For anybody who appreciates liberty as a goal in itself, the single biggest cause of frustration seems to be the general attitudes towards the status quo, the mainstream media perspectives, and generally how people react to news events that involve government.

Rather than discuss and question the very presence of government, its involvement, the way it meddles with private individuals, most people either support this form of meddling, or they oppose it, because they believe that their method of meddling is a superior one.

Person A: We oughta have bigger baby bonuses!
Person B: No we shouldn't, there are too many people in the cities, we should impose a baby tax !

Person A: I know better, I'm a real leader, I'm in touch with the people, I know what families need, times are tough, raising children is expensive, people should vote for me !
Person B: No you're wrong! Our taxes should be spent on other priorities, having children is harmful to the environment and causes overpopulation !

Person A: No you're wrong!
Person B:No you're wrong!.

And that sums it up. Nobody steps into this kind of discussion, slaps the 2 idiots, and injects a sensible and rational opinion into the discussion.

"You're both arrogant idiots ! Why can't private family decisions be made by the people involved without a 3rd party meddling and telling a couple what they should or shouldn't do ? Its none of your damn business, you don't even know the thousands of prospective parents out there, you can't speak on their behalf and can't tell them whats the right decision, so its best you stay out of it."

Now think about every aspect of our life, from the food we like, the clothes we wear, the place we work, your family values, your social circles, your religious values, your driving abilities, how you work and save, how you use your leisure.

Nobody in their right mind thinks that some random human, can decide whats best for you in all of the above areas, that would make you as happy and prosperous as having you decide for yourself.

Humans make mistakes. And government is a procedure where instead of governing yourself, your own decisions, your own property, you allow other humans (politicians, bureaucrats, social workers, police, public teachers, doctors, the tax office) make decisions for you.. AND EVERYBODY else. You've created a" system", designed, implemented, administered and run by other human beings who make mistakes. They make mistakes that affect the entire population.

Instead of allowing an elderly wheelchair-bound man with a painful disease take marijuana, the police force think they know better. Instead of a hard working individual keeping his pay, the ATO rips out 1/3rd of it. Instead of a petrol station being able to sell cheap petrol to customers, the ATO steps in and forces them to charge nearly double, so they can extort some money out of it and empower the government to spend it on pet projects.

Instead of a homeowner arming himself to defend his property, because he lives in a risky neighborhood and has been assaulted and robbed before, the police don't allow him to own firearms. The basic template is that instead of a free choice being made by an individual, in pursuit of his own welfare and happiness, agents of the state intervene and use coercion, force or the threat of imprisonment to stop that choice.

And on and on. So many decisions, that could have been made by individuals, rightly or wrongly, are blocked, cancelled annulled. Even if they were wrong decisions, like taking hard drugs, or driving recklessly, the individual who made that decision gets to face the consequences. Its called responsibility, its taught at schools but we do not adhere to it in the real world.

Risks and rewards are "socialised". Even if you word hard, the government won't allow you to save. Even if you are the laziest person in the country, the government will give you a welfare cheque so you don't go hungry or without shelter. Those kind of fears usually motivate people to work - remove the risk, you remove the incentive. As cruel as it sounds, a dose of reality does push people to make the most of the situation.

Multiply those examples by the entire population and across all areas of life and you start to be sympathetic to the idea that we are over-governed. There is too much regulation, too much meddling. There are thousands of pages of legislation just for our tax code. It would be very easy to write an Encylopaedia of Meddling.

On holiday

I'm in Japan for the next couple of weeks, so until then, enjoy some happy snaps of the local language - Engrish.

Oh yeah, I read you loud and clear - nothing like Johnny Walker Green Label.

Whoah, whats going on here ?

Hmm, what to get that special loved one... is she totally awesome and beefy ?