State Loan Program That Rick Perry Touted Had To Be Bailed Out
Gov. Rick Perry has anchored his presidential campaign to his claims of creating jobs.
With no business record of his own, Perry must contrast his ability to create jobs with public money against the records of two front-runners, Mitt Romney and Herman Cain, who tout credentials as private employers.
His GOP opponents already have sniped at his gubernatorial record, saying Perry inflates his job-creation numbers and takes credit for a business climate he inherited. Perry’s efforts to create jobs and spur agribusinesses as the state’s agriculture commissioner during the 1990s might provide even more fodder for the opposition.
Over his eight years as Texas’ farmer-in-chief, Perry oversaw a loan guarantee program with so many defaults that the state had to stop guaranteeing bank loans to startups in agribusiness and eventually bailed out the program with taxpayer money.
The state auditor panned Perry’s claims of creating jobs and criticized Perry and his fellow board members at the Texas Agricultural Finance Authority for not following their own lending guidelines.
In some instances, the auditor said, Perry and the authority guaranteed loans to applicants with a negative net worth or too much debt. Citing growing debts, the auditor finally suggested that state officials consider dismantling the program.
Even as the first alarms were sounded, Perry defended the program, saying no taxpayer money was at risk, blaming others and claiming he had fixed it.
It only got worse.
By 2002, Perry’s successor, Agriculture Commissioner Susan Combs, a Republican, stopped making loans as the percentage of bad loans neared 30 percent.
By 2009, her successor, Agriculture Commissioner Todd Staples, also a Republican, asked the Legislature to pay off the loan guarantees with a $14.7 million appropriation. The finance authority could no longer afford the $541,000 to cover the annual interest on the bad debts, almost all of which dated back to Perry’s tenure.
“It’s bad,” Staples told the American-Statesman at the time. “Unfortunately, taxpayers are on the hook for something that happened as long ago as 1987.”
In effect, Perry, as governor, signed his own government bailout when he approved the 2009 appropriations bill.
The Perry campaign did not respond to questions about whether Perry, as president, would use public money in economic development programs and what lessons he learned from his experience guaranteeing risky business loans with public money.
Mired in partisan politics
When the Legislature created the Texas Agricultural Finance Authority in 1987, the intent was to boost the state’s agricultural economy by selling state-backed bonds to guarantee bank loans to entrepreneurs who could not get commercial loans. The goal was to create small businesses and jobs by processing — rather than simply growing — Texas agricultural products.
The program immediately got mired in partisan politics, with Agriculture Commissioner Jim Hightower, a Democrat, on one side, and the Republican members of the finance authority appointed by Gov. Bill Clements on the other.
The impasse ensured that no loans were made during Hightower’s term.
In 1990, Perry campaigned on a promise to create jobs and expand the rural economy by making loans to agribusiness startups that would process the state’s agricultural products.
Clements’ appointees to the finance authority board gave Perry, a board member, sole authority to guarantee loans before newly elected Gov. Ann Richards, a Democrat, could replace them.
Under the program, the state would guarantee 90 percent of a lender’s loan — up to a maximum of $5 million — to an applicant.
Entrepreneurs lined up for money to spin cotton into yarn, process meats, develop cotton insulation, market canna bulbs to wholesale nurseries and sell pinto beans as a ready-to-eat frozen meal, to name a few.
‘This has not cost Texans money’
Perry had made four loan guarantees for $5.8 million by the time the attorney general ruled that he had to share that authority with his fellow board members. Even then, Perry and his staff drove the decisions.
Mary Webb, a Richards appointee who joined the finance authority as chairwoman in 1992, said the part-time board members had to rely on Perry’s staff at the agriculture department when screening loan applications.
“They did the legwork,” she said. “We looked at the deals to see if they fit with the legislation: Would they create jobs and help the agriculture community?”
By the time Webb left the board in 1995, she said she knew a couple of loans were in trouble. She said she learned only later the scope of the problems with other loans.
The first loan guarantees were financed by selling $25 million in bonds.
Twice, in 1993 and 1995, Perry campaigned for voters to approve more bonding authority.
Perry claimed the first two years of the program had created 4,100 jobs and pumped $390 million into the economy by guaranteeing loans to 47 companies. He predicted more than 40,000 jobs could be created with the additional bonding authority.
He didn’t mention troubled loans as he touted the program’s virtues at a 1993 Capitol press conference: “We think that this Texas Ag Finance Authority is, without a doubt, one of the finest programs that the Texas Legislature, that the citizens of Texas have ever gone forward with.”
At another stop, Perry said, “We can truly say it has not cost the taxpayers of Texas any money.”
Voters turned him down in 1993, but Perry finally won an extra $200 million in bonding authority two years later.
“This is one of the few government programs that truly has worked,” Perry said. “This has not cost Texans money.”
In January 1997, State Auditor Lawrence Alwin first alerted state officials, saying Perry and the board had violated their own lending guidelines.
He said 10 of the 48 companies had defaulted, and six more were in trouble. The first bad loans were written off as uncollectible in 1995, according to records.
Alwin also debunked a $40,000 report by a state-paid consultant claiming the program had created or retained more than 5,000 jobs at a cost of $412 per job as well as contributing $600 million to the economy.
The consultant’s data, which Perry submitted to the Legislature, were “unverifiable, incomplete, untimely, and inconsistent” and based on unrealistic assumptions about job creation, Alwin concluded.
A year later, Alwin warned that the situation had gotten worse. The program was $5.7 million in the red because of bad loans.
The issue hit the newspapers.
Perry and his lieutenants defended the program.
Deputy Agriculture Commissioner Larry Soward told The Dallas Morning News that the audit reflected a number of bad loans made early in the program to farmers and ranchers trying their first business ventures.
“The business acumen of the people behind them might not have been as strong as possible,” Soward said.
But he insisted the program would rebound: “The fact that there is a negative balance does not mean the program is in trouble.”
Perry echoed a similar refrain in a guest column in the Amarillo Daily News.
“By their very nature, TAFA loans are considered higher risk. Because of this, some defaults were inevitable and a negative balance was expected in the early years of the program,” he wrote.
He blamed the problems on “some unfortunate decisions made by the previous TAFA board early in the program.”
Perry promised the problem was fixed. “Today, TAFA is on solid footing with a positive balance projected by 2010,” he wrote.
He reminded readers that the loans were funded by debt — commercial paper: “No taxpayer money has ever been used to make TAFA loans.”
In 1998, Perry was elected lieutenant governor, and Combs succeeded him as agriculture commissioner.
She talked of expanding the loan guarantee program to other borrowers beyond food and fiber processors. But she asked Alwin to do a follow-up audit.
His warning was prescient. He said a program that guaranteed loans to people who typically couldn’t qualify for commercial loans would have a hard time finding enough good loans to generate the income to offset the losses from the bad ones.
In 2002, Combs and the agricultural finance authority bowed to that reality, suspending any new loans.
Twenty-nine of 102 guaranteed loans defaulted, almost all of them during Perry’s tenure, according to the records provided this month by the agriculture department.
While the majority of the loans were in good standing, the majority of the original $25 million — $14.7 million — was bad debt. Just as the auditor warned, the income from the good loans could not generate enough cash to make the program self-sustaining.
“We hit a brick wall,” Staples said in 2009.
By: Laylan Copelin, American-Statesman Staff, Statesman.com, October 22, 2011
The GOP’s Latest Tax Gimmickry: Soak The Poor
It’s one of the strangest things in our politics: The only “big” ideas Republicans and conservatives seem to offer these days revolve around novel and sometimes bizarre ways of cutting taxes on rich people.
Given all the attention that Herman Cain’s nonsensical and regressive 9-9-9 tax plan has received, the Republican debates should have as their soundtrack that old Beatles song that droned on about the number nine.
Now, Texas Gov. Rick Perry hopes to pump up his campaign with a supposedly bold proposal to institute a flat tax, which would also deliver more money to the well-off. Perry plans to outline his proposal this week, but he has already touted it as a sure-fire way of “scrapping the 3 million words of the current tax code.”
There is absolutely nothing new about this idea, and candidates who pushed flat taxes in the past saw their campaigns flat-line, most prominently businessman Steve Forbes in 1996 and again in 2000. Politically, the idea falls apart rather quickly when middle-income voters realize that its main effect is to cut taxes on the financially privileged while usually raising them on Americans who have more modest incomes.
Note to Perry: Voters are shrewd in figuring out whether tax proposals really benefit them. That’s why raising taxes on millionaires — the exact opposite of what Cain and Perry want to do — wins support from a broad majority.
But the more interesting question is: Why are today’s Republicans so enthralled by tax gimmicks? Their party, after all, was once innovative in thinking about affirmative uses of government. The Grand Old Party instituted the Homestead Act and created land-grant colleges, the interstate highway system, student loans, the Pure Food and Drug Act and even a prescription drug benefit under Medicare.
It was Richard Nixon who supported laws establishing the Environmental Protection Agency and the Occupational Safety and Health Administration. In signing the OSHA bill, Nixon called it “one of the most important pieces of legislation, from the standpoint of 55 million people who will be covered by it, ever passed by the Congress of the United States, because it involves their lives.” Yes, government regulations save lives, a view now heretical in the GOP.
Republicans have boxed themselves into a rejection of both their own traditions and the idea that government can do any good. Thus they have confined themselves to endless fiddling with the tax code. Almost everything conservatives suggest these days is built around the single idea that if only government took less money away from the wealthy, all our problems would magically disappear.
There is a history to this. The Republican fixation on taxes dates to the mid-1970s, when supply-side economics began taking hold. The late Jude Wanniski, an editorial writer for the Wall Street Journal who campaigned indefatigably on behalf of lower marginal tax rates, came up with the “Two Santa Clauses” theory. He argued that if Democrats earned support by giving voters benefits through government programs, Republicans should play Santa by giving people tax cuts.
Wanniski sold his tax ideas to Jack Kemp, one of the most ebullient political figures of his generation, who in turn sold them to Ronald Reagan. Reagan made Kemp’s 30 percent tax cut (co-sponsored with Sen. Bill Roth) a centerpiece of his 1980 campaign. The political scientist Wilson Carey McWilliams perfectly described the result in a 1981 essay. “After years of learning that ‘you don’t shoot Santa Claus,’ ” he wrote, “the Republicans decided to nominate him.”
But Republicans have a problem now. In the Kemp-Reagan days, they were selling across-the-board tax cuts. Most of their benefits flowed to the rich, but almost everyone got a piece. Today, many Republicans complain resentfully that less prosperous Americans don’t pay enough in taxes — overlooking the fact that citizens who don’t pay income taxes still shell out a significant share of their earnings in payroll, sales and (directly or through their rents) property taxes.
Reagan’s optimism has thus been replaced by crabby put-downs of the less affluent. Perry said it directly in his announcement speech: “We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax.” Considering the other injustices in our society, this seems an odd and mean-spirited obsession.
“Tax the poor” is a lousy political slogan. That’s why Cain’s 9-9-9 plan and Perry’s flat tax are doomed to fail. Among conservatives, Santa Claus has given way to Scrooge.
By: E. J. Dionne, Opinion Writer, The Washington Post, October 21, 2011
Why Perry’s Backers Won’t Lay Off Romney’s Mormonism
Mitt Romney beats Rick Perry among all Republicans — men, women, young, old — except the “very conservative,” The Wall Street Journal‘s Gerald F. Seib observes. Perhaps that’s why Perry didn’t distance himself too much from Robert Jeffress, the Dallas preacher who called Mormonism a “cult.” And why, as The Daily Beast’s McKay Coppinsreports, another important minister who’s a big backer of Perry has been emailing supporters about the need to start “juxtaposing traditional Christianity to the false God of Mormonism.”
David Lane was in charge of raising money for the national prayer meeting in early August that was the unofficial kickoff to Perry’s presidential campaign. He was among the key Christian leaders who pushed Perry to run, Time‘s Amy Sullivan reports. On October 12, Dick Bott, head of the Chrstian talk Bott Radio Network, emailed Lane that he would be interviewing Jeffress, saying Jeffress was right to question Romney’s faith: “What would anyone think if a candidate were a Scientologist? … Shouldn’t they want to know what the implications were that may flow therefrom?”
On October 13, Lane replied: “Thank you for what you are doing and for your leadership. Getting out Dr. Jeffress message, juxtaposing traditional Christianity to the false god of Mormonism, is very important in the larger scheme of things … We owe Dr. Jeffress a big thank you.”
Coppins says the emails give reason to wonder whether Jeffress’s comments were “a deliberate strategic move by the campaign.” He notes that in other emails, Lane talks about talking with a “key Perry aide” about “the creation of a clarion call to Evangelical pastors and pews is critical and from my perspective is the key to the Primary.”
Lane stood by his comments in an email to “friends” after the story was posted, Real Clear Politics’ Scott Conroy reports. Lane pointed to a story in The New York Times about Romney’s role in his church and how he counseled a young alcoholic “Are you trying to improve, are you trying to do better? And if you are, then you’re a saint.” Lane said that belief was “not Christian.” He continued in his email, “If the secular Press’ bullying over the ‘cult issue’ fails to censor those voices who are calling into question the theological legitimacy of a ‘group sharing belief’ (political correctness for Cult), Romney is going to have to defend his and the Mormon’s ‘bizarre’ Articles of Faith.”
“Polling conducted for the Washington Post and ABC News, Gallup, and the Pew Research Center in recent months has shown between 20 and 25 percent of Americans say they either won’t vote for a Mormon or would be less likely to vote for one,” The Washington Post‘s Aaron Blake writes. Social conservative voters in Iowa — where Perry needs to do well in the caucuses — aren’t likely to vote for Romney. But Mormons were a quarter of the voters in Nevada’s caucuses in 2008; 95 percent of them voted for Romney. Politico’s Maggie Haberman observes that “The surest way for Perry to get a second look is for Romney’s negatives to go up — a fact his supporters seem to realize.” After all, as The Journal’s Seib notes, “60 percent of very conservative voters still say they have overall positive feelings about Mr. Romney.”
The Tea Party Chronicles
Raising Cain
Herman Cain, the former CEO of Godfather’s Pizza is rolling in dough and rising in the polls. A new national survey of primary voters by the Wall Street Journal and NBC News has the Hermanator in first place ahead of Mitt Romney and all the other Tea Party types. The question is whether working families will support Cain’s plan for a national sales tax to pay for lower taxes for bankers and billionaires? I don’t think so.
Don’t Know Much about History
The Tea Party takes its name from the Americans who dumped British tea into Boston Harbor to protest taxation without representation in 1773. The Tea Partyers profess great reverence for the founders but the Tea Party candidates are clueless about the founding of our nation. Tuesday Rick Perry placed the American Revolution in the 16th century which would have given our founders only a few years to get things rolling after Columbus came to town. Previously, Michele Bachmann described the founders as abolitionists, a portrayal which would have greatly surprised the hundreds of slaves owned by George Washington and Thomas Jefferson. By the way, Representative Bachmann, the Boston Tea Party, like the battles of Lexington and Concord, was in Massachusetts, not New Hampshire.
Greed is Good
Greed is good should be the motto for the Party of Tea, the party formerly known as the GOP. Tuesday, Every POT member of the United States Senate opposed the president’s proposal to reduce payroll taxes and provide tax breaks for small businesses which hire people without jobs. Why did the POT spit the bit on the issue that Americans care most about? Because Democrats would pay for the tax cuts for working families and small businesses by making millionaires and billionaires pay their fair share of taxes. Greed is good for the Tea Partyers and their billionaire buddies who bankroll their big budget campaigns. Because the POT blocks action in Washington on jobs, thousands of Americans occupy Wall Street and streets across the country to protest corporate greed. Will the numerical advantage that the 99 percent have triumph over the money muscle of the 1 percent. Yes, it will.
ObamaCares
Time magazine released a new national survey yesterday that shows Barack Obama beating all his POT challengers. The secret of the president’s success is Obama’s caring. A clear majority (57 percent) of likely voters believe that Barack Obama cares about the problems of people like themselves. It’s not surprising that Americans feel that the president cares about them when the Party of Tea goes out of its way to cut Medicare and Social Security benefits for seniors but fights to the death to protect federal tax freebies for bankers, billionaires, hedge fund managers, and corporate jet setters.
It’s about Time
The same Time magazine national survey indicates that two of every three Americans believe the rich should pay more taxes. Which explains why more than half (54 percent) of the likely voters have a favorable opinion of the protesters against corporate greed while only one of four people (27 percent) have a favorable opinion of the Tea Party. The Tea Party has been replaced by the new kid on the block. Far be it for me to give advice to Republicans but they better quickly take back their party from the extremists before voters dump the old GOP into the harbor with the Tea Party.
By: Brad Bannon, U. S. News and World Report, October 13, 2011
In Seach Of Human Liberty And Equality, The Constitution Is Inherently Progressive
Progressives disagree strongly with tea party views on government, taxation, public spending, regulations and social welfare policies. But we credit the movement for focusing public debate on our nation’s history, the Constitution and the core beliefs that shape American life.
This conversation is long overdue — and too often dominated by narrow interpretations of what makes America great.
Since our nation’s founding, progressives have drawn on the Declaration of Independence’s inspirational values of human liberty and equality in their own search for social justice and freedom. They take to heart the constitutional promise that “We the People” are the ultimate source of political power and legitimacy and that a strong national government is necessary to “establish justice, … provide for the common defense, promote the general welfare and secure the blessings of liberty.”
Successive generations of progressives worked to turn these values into practice and give meaning to the American dream, by creating full equality and citizenship under law and expanding the right to vote. We sought to ensure that our national government has the power and resources necessary to protect our people, develop our economy and secure a better life for all Americans.
As progressives, we believe in using the ingenuity of the private sector and the positive power of government to advance common purposes and increase freedom and opportunity. This framework of mutually reinforcing public, private and individual actions has served us well for more than two centuries. It is the essence of the constitutional promise of a never-ending search for “a more perfect union.”
Coupled with basic beliefs in fair play, openness, cooperation and human dignity, it is this progressive vision that in the past century helped build the strongest economy in history and allowed millions to move out of poverty and into the middle class. It is the basis for American peace and prosperity as well as greater global cooperation in the postwar era.
So why do conservatives continue to insist that progressives are opposed to constitutional values and American traditions? Primarily because progressives since the late 19th century rejected the conservative interpretation of the Constitution as an unchangeable document that endorses laissez-faire capitalism and prohibits government efforts to provide a better existence for all Americans.
Progressives rightly charge that conservatives often mask social Darwinism and a dog-eat-dog mentality in a cloak of liberty, ignoring the needs of the least well-off and the nation as a whole.
As President Franklin D. Roosevelt said in his 1944 address to Congress, “We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. ‘Necessitous men are not free men.’ People who are hungry and out of a job are the stuff of which dictatorships are made.”
Yet according to modern conservative constitutional theory, the entire Progressive, New Deal and Great Society eras were aberrations from American norms. Conservatives label the strong measures taken in the 20th century to protect all Americans and expand opportunity — workplace regulations, safe food and drug laws, unemployment insurance, the minimum wage, limits on work hours, the progressive income tax, civil rights legislation, environmental laws, increased public education and other social welfare provisions — as illegitimate.
Leading conservatives, like Texas Gov. Rick Perry, claim that Social Security and Medicare are unconstitutional. Sen. Mike Lee (R-Utah) even argues that national child labor laws violate the Constitution.
They lash out at democratically enacted laws like the Affordable Care Act and claim prudent regulations, including oversight of polluters and Wall Street banks, violate the rights of business.
This is a profound misreading of U.S. history and a bizarre interpretation of what makes America exceptional.
There are few Americans today who believe America was at its best before the nation reined in the robber barons; created the weekend; banned child labor; established national parks; expanded voting rights; provided assistance to the sick, elderly and poor; and asked the wealthy to pay a small share of their income for national purposes.
A nation committed to human freedom does not stand by idly while its citizens suffer from economic deprivation or lack of opportunity. A great nation like ours puts forth a helping hand to those in need. It offers assistance to those seeking to turn their talents, dreams and ambitions into a meaningful and secure life.
America’s greatest export is our democratic vision of government. Two centuries ago, when our Founding Fathers met in Philadelphia to craft the Constitution, government of the people, by the people and for the people was a radical experiment.
Our original Constitution was not perfect. It wrote women and minorities out and condoned an abhorrent system of slavery. But the story of America has also been the story of a good nation, conceived in liberty and equality, eventually welcoming every American into the arms of democracy, protecting their freedoms and expanding their economic opportunities.
Today, entire continents follow America’s example. Americans are justifiably proud for giving the world the gift of modern democracy and demonstrating how to turn an abstract vision of democracy into reality.
The advancements we made collectively over the years to fulfill these founding promises are essential to a progressive vision of the American idea. The continued search for genuine freedom, equality and opportunity for all people is a foundational goal that everyone — progressives and conservatives alike — should cherish and protect.
By: John Podesta and John Halpin, Center For American Progress, Published in Politico, October 10, 2011
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