Honorable Friends,

Imagine that you are preparing to attend a dinner party. Before leaving the house, you furtively glance out the windows to ensure your stalker is not parked out front waiting for you. Despite your efforts, however, once you begin driving to your destination, the stalker pulls behind you and follows you to your destination. When you return home, the phone rings. You answer only to hear the stalker happily announce that you should come outside; she is parked in your driveway.

These are just a few of the disturbing incidents which led Eileen Mahony, a public policy consultant and board member of the People’s Press Collective, to file an ethics complaint against Centennial City Council member Sue Bosier. From the complaint, it seems Ms. Bosier solicited the political support of Ms. Mahony and met with refusal. Unwilling to take “No,” for an answer, the complaint alleges that Ms. Bosier attempted to pressure Ms. Mahony into compliance with what amounts to stalking behavior.

On Monday night, Centennial City Council met to determine whether to proceed with an ethics investigation. Ms. Bosier is no stranger to this process. In 2011, she received censure for ethics violations involving lying to police officers and stealing campaign yard signs. That incident apparently exhausted the City Council. While most of the members indicated they believed Ms. Bosier acted inappropriately, and even offered apologies to Ms. Mahony for having to suffer through such conduct from a public official, they declined to pursue any ethics investigation. Ethics, they explained, are just too much of a bother.

Seeming to recognize how absurd that sounds, Mayor Cathy Noon attempted to justify the Council’s position. She explained that, while the Council knows Ms. Bosier has a tendency to act inappropriately, the City’s ethics code is just too weak to have any substantive impact. Thus, ethics investigations are just too much of a bother to pursue. She went on to say that the Council has been meaning to change the ethics code for about two years, but just has not ever gotten around to doing it. She then again offered apologies and moved on with business.

Undoubtedly, Mayor Noon’s is correct that the Centennial City Council’s ethics code is weak and ineffectual. The Council has apparently known this for two years. Why, then, the Council has done nothing to change it despite knowing that at least one of their members consistently exhibits appallingly unprofessional behavior is a mystery.

In the digital era, a time when so much of human behavior is instant, unrecorded, and unseen, ethics have become more important than ever before. Since the Enron disaster and then the economic crisis, the public has continually called for stronger ethics rules for both the government and private sectors. Private businesses, law offices, and government agencies, appreciative of the public concern, are all trying desperately to maintain, or even strengthen, strict codes of ethics, accountability, and transparency. In Centennial, however, ethics are merely inconvenient and bothersome.

If you believe that ethics actually do matter; that our public officials should be held to high standards of conduct, and that our citizens should be able to count on our governing bodies to enforce those standards, then I encourage you to contact the Centennial City Council. Tell the members that ethics should not be dismissed as too inconvenient to consider.

•  Do you think Dan Maes should step aside as the Republican nominee for governor?
• Why or why not?
• If he did step aside, who do you think the vacancy committee should consider in his stead and why?

Honorable Friends:

Your government is lying to you. We are not in economic recovery. We are merely experiencing a cash bubble through printing—inflation—and every day that bubble is in greater danger of bursting. When it does, the American people will face national bankruptcy.

The following video comes to me on the recommendation of Gerald Celente, director of the Trends Research Institute, and The Trends Journal. For those of you who have not already subscribed to his journal, he is one of the best economic forecasters in the world.

To my friends in the Tea Party, this is why you are marching. Simply getting Republicans elected will not be enough to save this nation from economic collapse. Any politician, Democrat or Republican, who does not understand what is in this video must go.

In addition to Mr. Celente, this documentary, "Meltup," features some of the best economic experts available including:

• Peter Schiff, Austrian School economist, bestselling author of Crash Proof, owner of Euro Pacific Capital, former economic advisor to Ron Paul, and current candidate for U.S. Senate in Connecticut
• Dr. Ron Paul, Congressman from Texas , former presidential Candidate, bestselling author and voice of the Austrian School economists on Capitol Hill
• Marc Faber, renowned Austrian School economist.
• Jim Rogers, investor, author, and financial commentator
• Tom Woods, historian, bestselling author, and senior fellow at the Ludwig von Mises Institute.
• And several others.

The National Inflation Association has done a fine job in producing "Meltup." Our liquid fuels crisis, the manipulations and fraud in the precious metals markets, the debt problems and the looming threat of dollar collapse through inflation are all covered in detail. As Celente points out, we are on the verge of the second American Revolution. This video will give you a better understanding of what we face, and what the Tea Party and its supporters MUST achieve if it is to be successful.

I read through some of “The Budget and Economic Outlook: Fiscal Years 2010 – 2020″, published by the Congressional Budget Office (CBO) in January 2010, by Doug Elemndorf, Director of the CBO. Fascinating stuff… really… if you’re into horror stories.

Given all of the recent talk about sovereign debt, potential downgrades of various countries’ credit ratings, etc., I thought I’d take a cursory view of the United States Budget projections with respect to our ability to service our own debt. I have my own theories as to what our current situation is and what our prognosis is going forward (not good), but for this post, I’m going to simply look at one aspect of our current fiscal policy – debt service.

Loosely speaking, your “debt service coverage ratio” measures your ability to make payments on your debt by comparing your payments against your income. In the classic case, the payments consist of the amortization of both interest and principal. For example, when someone applies for a mortgage, the bank will typically look at the cost of the principal + interest + taxes and divide that by your income. They’ll want to see a ratio of less than a certain amount, say 32% or whatever. That ratio will help determine if you are making enough money to afford the particular loan you are trying to qualify for. Most people who have bought a house should follow that example pretty well, having gone through it.

Thinking that this is a reasonable way to look at finances, I wondered how the federal government’s interest payments compares to its income. This first graph shows the percentage of the government’s projected income that will go to pay interest from 2010 – 2020 (all data directly from the CBO report). Note that this is interest only and does not include repayment of principal.

It looks like the amount of income that will go to pay interest on our federal debt ranges between 17% and 24%. Now that doesn’t sound anything like Greece, so maybe we’re not in that bad of shape.  But let’s take a look at some of the CBO’s assumptions in this projection:  inflation will never rise above 2.0%, GDP will increase to 5.6%, unemployment will drop to 5.0%, the Ten Year Treasury will only increase from 3.6% to 5.5%, the Bush tax cuts are allowed to expire (taxes are raised), and the Alternative Minimum Tax “fix” is no longer fixed (i.e. AMT taxes hit more people in the middle class than ever.)  In other words, the perfect economy plus some increased taxes.

This is in spite of flooding the market with trillions of dollars in fiat currency during a time of decreasing production (the classic definition of inflation is more money chasing less goods), monetizing a large chunk of the debt, and  continuing to spend more money than the government takes in by an average of $600 billion every year over the next decade (again, according to the CBO).

Call me a chicken-little, doom and gloom actuary, but I don’t think that this makes a lot of sense.  While I hope things go well, let’s do a little sensitivity testing.  What if, due to some of the above mentioned facts, inflation actually goes above 2%? Not an unreasonable question. Or what if, in continuing to sell more Treasuries to pay for our ongoing deficit spending, we have to increase rates more than anticipated to continue to attract buyers? Or what if the Fed needs to raise interest rates more than the modest amount assumed in these projections in order to try to keep inflation down?

All of these sorts of very plausible “what-if’s” would cause rates to increase more than the CBO’s projection. Let’s say that interest rates go up 2% or 4% more than the rosy CBO scenario suggests. What will happen to our “debt service ratio?” Remember the power of compound interest folks and look at the next graph. The red line shows rates up by 2%. The blue line shows rates up by 4%.

Not a pretty picture.  If rates go up 4% more than expected, then the debt service jumps from averaging 20% of revenue to 40% of revenue.  Carefully consider what that means. In order to get that ratio from 40% back down to 20%, the tax revenue would have to be DOUBLED. Tax revenues, to my knowledge, have never been doubled. The other alternative would be that the government would have to cut enough other expenses out of the budget to make room to pay for the additional cost of the interest payments. I have never known the government to implement a 20% across the board cut.  In fact, they’re rioting in Greece, literally burning bodies in the street, due to that country’s austerity plan, whose cuts are not even close to 20%.

If this isn’t enough to make your head explode, consider that raising interest rates causes the cost of capital to go up, plus the aforementioned tax increases cause economic growth to be stunted, and total tax revenues don’t meet the rosy projections in the CBO’s baseline scenario.  For example, due to the recession, federal revenues dropped by 1% from 2007 to 2008. They dropped by 17% from 2008 to 2009. During the previous recession, revenues dropped by 2% in 2001, 7% more in 2002 and an additional 4% in 2003.

What happens if tax revenues fall 10% short of the CBO’s projections in 2010 because a 2% or 4% unanticipated rise in interest rates holds the economy down.  This is not unreasonable. After 2010 I assume that revenues will continue to grow going forward at the CBO’s assumed growth rate.  This is just a one year hiccup. Here’s the result:

Or what happens if the one year hiccup is a 20% shortfall in tax revenues from the CBO’s projections because a 2% or 4% unanticipated rise in interest rates holds the economy down.  Debt service of over 50%, that’s what:

So, according to the CBO’s rosy baseline scenario, we are adding an average of $600bil per year to our debt by spending $600bil per year more than we collect in tax revenue. The graphs above are simple “what-if’s” given some very plausible scenarios. The results would be catastrophic.

Still don’t think that whole Greece thing could happen here?

Honorable Friends,

In its recent opinion , Dallman v. Ritter, the Colorado Supreme Court overturned Amendment 54 saying that it was "unconstitutionally vague, disproportional, overbroad, or otherwise infirm. Indeed, we find the Amendment’s deficiencies so pervasive that we must nullify the Amendment in its entirety."

As you may recall, Amendment 54 of the Colorado Constitution would have prevented those with no bid government contracts and their families from making campaign contributions for the duration of the contract and for two years thereafter. Supporters claimed it was intended to prevent the appearance of corruption in no bid government contracts. It was passed by voters in 2008.

If you have been a long time reader of the People’s Press Collective or Slapstick Politics, you may also recall that I advised against voting for this amendment, correctly predicting that its restrictions went too far and trampled first amendment rights. I am pleased to see that the Court agreed with me.

Never let it be said, however, the Conservatives are monolithic in their thinking. Many of my colleagues here at the PPC and other prominent conservatives supported this amendment. Though I was unable to join in their enthusiasm for the complete amendment, their stated goal of improving transparency in government is laudable. Indeed, the amendment contained one provision requiring that the state maintain a database of no bid contracts which the public can access and inspect at will. This alone would have addressed issues of transparency adequately, without any of the constitutional problems the rest of the amendment causes. It is also the section of the Amendment the Court found least objectionable. With minimal redrafting, it could be reenacted on its own. Jon Caldara of the Independence Institute has called for the legislature to do just that. Given that this was the only Amendment the voters actually passed in 2008, the legislature would be wise to heed his advice.

Last night in Boulder, the University of Colorado hosted a debate between Karl Rove and Howard Dean. The People’s Press Collective attended as credentialed media–and was subject to the same “first 5 minutes only” rule for all the media stipulated by the speakers’ contract.

The mood was fairly temperate given the subject matters debated–health care reform, foreign policy (including nuclear disarmament of North Korea and Iran, and the Iraq War), the current political climate, etc.–and the mere presence of Rove in the bastion of liberal progressivism: the People’s Republic of Boulder. The generally well-behaved crowd (Ward Churchill would be disappointed) felt incredibly more balanced than audiences earlier in the decade who made it impossible to hear speakers like Charlton Heston, Ann Coulter, or Ward Connerly. Catcalls, boos, whistles, and hissing were at a minimum. There were several points of generous applause for both speakers, though Dean earned the loudest support and laughter over the course of the night. He was attacking Dems for not being progressive enough, something sure to earn the backing of the far-left in Boulder.

Boulder’s Daily Camera saw the debate as decidedly more hostile, and though it was clearly partisan in nature, Rove and Dean came off as being comfortable in their apparently playful combativeness (they’ve debated in this format before).

There was really nothing new presented in the debate, and since the event featured none of the usual raucous lefty grandstanding, it appeared that even in Boulder that there may be a considerable amount of political burnout. Neither Rove nor Dean went through the motions, but one had the feeling that the passion level never rose much above a sparring back-and-forth.

Here are a few photos, and check out the live Tweets from the event (the only thing we were permitted to do after the 5 minutes were up):