What list do you think the following information is from?

1. Boeing - $12 Billion
2. Northrup Grumman - $8.3 Billion
3. Lockheed Martin - $7.9 Billion
…
16. Cal-Tech - $1.2 Billion
22. University of California System - $845 Million
52. Stanford University - $359 Million

If you said the list is from the Top 100 Contracters for the Federal Government in 2007, you’d be right. 

Why are Cal-Tech, the UCs, and my alma mater Stanford on the list?  Cal-Tech’s funding comes from NASA while the UCs and Stanford are funded largely by the Department of Energy. 

What’s it going to?  UC gets $235 Million to run Lawrence Livermore National Laboratory (byline: “Science and National Interest”) and $197 Million to run Lawrence Berkeley National Laboratory.  Stanford gets $359 Million to run Stanford Linear Accelerator Center.

You can find out all of the above and much, much more from usaspending.gov.  Highly recommended.

Consider this: If you divide the $146 Billion of total Federal contracts budget by 300 Million Americans, it works out to costing ~$486 dollars per person.  Boeing’s $12 Billion in contracts is 8% of the total, so everyone in America - all 300 Million - effectively paid Boeing about $39 this year.  By comparison, every American only gave Stanford about $1.26 each.

Whether you think Boeing got too much, Stanford got too little, or none of the above, you’ll hopefully think something when you explore the site.

Extra Bonus Fun:
 - Each contractor has a nice little pie-chart that shows how the % of their contracts that were ‘competitive’, with multiple bids, etc.
 - I have only looked at the $146 Billion in contracts.  There’s another section called ‘Assistance’ (Grants) that is twice as big, at $290 Billion.

p.s. thanks to Brad for the link

Leon Gaumond Jr, the Town Administrator of (my hometown) West Boylston, MA, passed along a brief article from the Massachusetts Municipal Association (MMA) about expected Massachusetts budget deficits in 2008:

… she [Massachusett’s Governer’s Budget Chief Leslie Kirwan] is pegging the state’s structural shortfall for next year at $1.3 billion, and possibly higher.

At the Nov. 13 meeting of the Local Government Advisory Commission, local officials told Gov. Deval Patrick that structural budget shortfalls are expected to be widespread in municipalities again next year, leaving cities and towns with few options other than cutting services or asking voters to approve property tax increases.

Why the budget shortfall despite projected 3.8% “revenue growth” (tax collection)?  Predictably:

Growth in basic government costs, mainly related to health care and other uncontrollable fixed costs, are expected to outpace revenue by a wide margin next year, leaving hard-to-close shortfalls.

None of the above even makes me blink.  Of course cost increases are “uncontrollable.” (State-regulated healthcare hasn’t kicked in yet?)  Of course local property taxes will go up.  Of course.

Of course we will continue to have problems as we continue to do the following:

The biggest challenge to state and local officials for fiscal 2009 is fixing the Lottery-funded municipal aid program (Additional Assistance and Lottery distributions) that provides $1.3 billion to help balance local budgets and ease over-reliance on the property tax. The Lottery shortfall for fiscal 2008 is expected to exceed $100 million, with little hope for recovery in fiscal 2009.

What’s wrong with using lottery proceeds to fund municipal aid?  It’s not sustainable.  You’re funding a government service from the tax proceeds of something completely unrelated.  Government services don’t work unless you fund them from taxes on the beneficiaries.  We should not “ease an over-reliance on the property tax” by digging up tax revenue from something else;  those local property taxes — or local sales tax or local-whatever taxes — need to be adequate to cover whatever services the citizens request.  If those local taxes aren’t enough, don’t tax something else.  Crazy idea that the government needs to charge you for the benefits you receive.

And: even if you call the Lottery a ’sin tax’ or say that a state-run, legalized monopoly on the Lottery system helps ‘protect’ the poor-that-use-it from sleazy(er) gambling operators … using the lottery proceeds to do anything but promote-gambling is unsustainable.  Does MA really want to be in that business?

And: even given such fiscal mismanagement, municipal bonds - even those just above junk - are still far more secure than Aaa corporate bonds.

The MMA article is a fun, quick read.  How do you fix this?

I’m certainly no financial whiz, but I never knew-until-today that municipal bonds, corporate bonds, and other financial instruments are rated on scales relative to their type rather than one all-encompassing scale.   e.g. “An A rated muni has the same chance of default as AA/AA- rated corporate and a AA+ rated CDO.” (quote from David Einhorn’s 10-19-2007 prepared remaks.)

I suppose it’s not that surprising that these things are rated on different scales given their different underlying variables (default, recovery rates, etc).  I just didn’t realize it happened.  I thought an A was an A.

Einhorn makes this difference especially noteworthy when he writes: “Moody’s noted the 10-year cumulative default rate for all investment grade Moody’s-rated municipal bonds, including bonds one notch above junk, is about half the rate for Aaa rated corporate bonds.”  Next time I look at Munis, I’ll give them a little more credit. (pun intended)

Regarding the rest of Einhorn’s paper: I agree with Einhorn’s criticisms of the ratings-hegemony held by the major agencies because of their exclusion from Reg FD (they get privileged information from the investments they’re being paid to rate without having to disclose it like everyone else).  Doesn’t seem like the current system is built to produce the most accurate ratings.

Sometimes (and lately more often), I look at America and think: “If this were happening in another country, we’d be outraged.”

(p.s. thanks to JCHP for passing along the paper.)